BEARING FRUIT

Mexico 2017 | ECONOMY | INTERVIEW

TBY talks to Ildefonso Guajardo, Secretary of Economy, on Mexico remaining an attractive destination for FDI and the relevance and importance of SMEs.

Ildefonso Guajardo
BIOGRAPHY
Ildefonso Guajardo Villarreal was born in Monterrey, Nuevo León, in 1957. He obtained his degree in economics at the Autonomous University of Nuevo Leon, and later did graduate studies in economics at Arizona State University and the University of Pennsylvania. He was Chief Economist of the Brazil Section, and Associate Economist in the Fiscal Affairs Department at the IMF (1988-1991) before becoming Director of the North American Free Trade Agreement Affairs Office, based at the Embassy of Mexico in Washington, DC (1994). He was appointed Secretary of Economy in 2012, having held a number of government positions, including at the Foreign Affairs Ministry, the Minister of Tourist Development, and the Industrial Development Ministry.

What are your strategies to continue attracting foreign investment to Mexico?

FDI decisions gather a multitude of variables, and they reflect a company's intent for growth and long-term strategy to achieve their goals. These decisions are often made with 20-30 years' projections, and not with a four-year-term view. The uncertainty linked to the beginning of President Trump's administration caused companies and markets to quickly react to every statement or tweet from the president, as was seen on the peso's performance during the first semester of 2017. In parallel, we saw a few US companies announcing their intention to withdraw part of their investment from Mexico. However, Mexico keeps working to remain an attractive destination for FDI, by enhancing competitiveness, improving the business environment, increasing trade diversification, implementing structural reforms in key sectors, and improving infrastructure across the country. Our efforts have borne fruit, and most companies have maintained their plans of investment in Mexico. Actually, during 1Q2017 Mexico received USD8 billion in FDI, the highest record for a similar period since 1999.

President Trump has frequently talked about renegotiating NAFTA to get a better deal for the US. What is Mexico's position toward these declarations?

NAFTA has been a successful agreement that came to strengthen and deepen Mexico's productive integration with the US and Canada for the sake of North America's competitiveness. After 23 years of enforcement, NAFTA's revision comes timely, since it is of utmost importance to include new disciplines (e-commerce, telecommunications, energy, intellectual property) to better adjust to the 21st century economy. Mexico is willing to jointly construct the architecture of a better NAFTA, respecting some basic pillars of the negotiation: not to reverse the progress achieved so far (e.g. we will not accept to renegotiate tariffs on imports or quotas); NAFTA's revision should not be based on the idea that the agreement has only been beneficial to one of the signing partners, as NAFTA has brought benefits to all its parties; and we must maintain a trilateral perspective, under a “win-win-win” vision. Thus, NAFTA's modernization opens up a range of opportunities to strengthen North America, and lays the ground to make it more prosperous, sustainable and inclusive.

The government has helped over 50,000 SMEs through the National Institute of Entrepreneurship. What is the relevance of SMEs and their integration into productive value chains for the development of the economy?

MSMEs are the backbone of Mexico's economic activity, accounting for a substantial amount of job creation (77%), and making an important contribution the country's GDP (more than half). Supporting SMEs is a priority for Mexico, and we have undertaken several actions to support them. Under President Enrique Peña Nieto's administration, we created the National Institute of Entrepreneurs (INADEM) to strengthen SMEs, promote their competitiveness, and help them to adapt to the new international market trends through financial aid and technological training policies. Moreover, for the first time ever, we established a national strategy to support SMEs by promoting a set of structural reforms in strategic sectors like telecommunications, finance, competition, and energy. All of them are aimed at widening the range of goods and services for SMEs at cheaper costs, impacting positively on their competitiveness. Worldwide, SMEs face a complex challenge, in a constant demand for specialization and business models' innovation. Therefore, allowing SMEs to become global providers requires leveling the playing field for them in terms of eliminating tariff and non-tariff barriers to trade-; facilitating innovation transfer; and encouraging their involvement in services provision of manufacturing processes. Mexico is also working on these fields in favor of SMEs.