EconomyFinancialCompanies are no longer just looking for cheap labor...

Companies are no longer just looking for cheap labor to invest in Mexico, now they need guarantees

The good news for the manufacturing sector in Mexico has come even though the world is going through difficult economic situations as a result of the pandemic. The T-MEC and nearshoring have given the country the necessary push to be in the top 10 of the exporting countries of products derived from this activity.

In 2021 alone, the sector attracted foreign direct investment from this sector for 12.56 billion dollars, according to data from the analysis firm Statista.

But for this growth to be sustainable over time, the country must trace firm paths that allow companies to be given certainty.

“There is a realignment in the trends of globalization. Twenty or 25 years ago it was important to go to places where it was produced cheaply and efficiently. But now investors are looking above all for effectiveness, certainty in their value chains and the possibility of having access to cheap, clean and sustained energy,” explained Alejandra Palacios, former president of the Federal Commission for Economic Competition (Cofece), during her speech. participation in the postcovid Competitiveness panel, within the framework of the Inter.Mx Expansión Summit 2022.

Renewable energy, the new investment attraction magnet

“There is concern in Mexico because the rules of the game have been changed,” added Palacios.

These modifications have made access to energy “the Achilles heel” of Mexico, which can scare away international companies mainly because most global companies have new emission reduction goals in their operations, so they seek to establish themselves in territories that allow them to comply with them. But since there is no certainty about the regulatory framework on the matter, Palacios said, instability is generated in the value chains.

One more problem, added to the obstacles to access renewable energy at affordable prices, are the distribution mechanisms.

So far, attempts have been few and isolated. Jesús Carrillo, director of Sustainable Economy at the Mexican Institute for Competitiveness (IMCO), cited the case of the Sonora solar park, operated by the Federal Electricity Commission (CFE), which, although it is an ambitious project, “is disconnected.”

“Other investments are needed to be able to get that energy out of there,” added Carrillo.

“Transmission and distribution today is a state monopoly, so that is where the effort should be focused. In the generation part, there should be much more buoyant competition,” said Jesús Carrillo.

Francisco Cervantes, president of the Business Coordinating Council (CCE), comments that from a business perspective, this point has been “a constant concern”, for which he has insisted on the need for a regulatory framework regarding investments in energy, so that businesses can draw their roadmaps with the security of being able to follow them in the medium term.

Rule of law

For Mexico to accelerate its recovery after the pandemic, it is necessary to clearly state the rules of the game and provide certainty to investments through regulators. “The rules are what they are and there will be professionals who will be regulating the markets and controlling abuses of power,” said Alejandra Palacios.

When there are weak regulators and rules that are not well defined, “companies abuse more,” Palacios said, since they do not exercise self-regulation, which gives distrust to businesses seeking to settle in the country.

T-MEC: Mexico plays the dream of energy sovereignty in the consultations

The T-MEC does not establish a maximum term for dispute resolution consultations, but the first period -of 75 days- has been fulfilled this Monday, without knowing the course of the talks.

Yellen asks the private sector to invest more for the US energy transition

The Secretary of the Treasury assures that companies have to invest to migrate to clean energies that help combat high energy prices.

#Between the lines | The economy and business, seen by Antonio del Valle

Differences in any commercial agreement are the rule. In times of NAFTA they happened, but now with the T-MEC the tension has intensified with the electrical chapter.

The challenges for the business ecosystem after Covid-19

Generational changes and the evolution of technologies are the new challenges that companies face in doing business.

Mexico requires reforms to grow, says Nouriel Roubini

The Mexican government is optimistic that the economy will grow 3% in 2023, especially when there are threats of a global recession, says the so-called "Dr. Doom"