Francisco Cervantes, President, National Confederation of Industry Chambers: Interview

Interview: Francisco Cervantes

How can the National Development Plan (Plan Nacional de Desarollo, PND) 2019-24 improve industrial productivity and competitiveness in Mexico?

FRANCISCO CERVANTES: The PND 2019-24 has good goals and the initiatives and mechanisms to achieve them, but there is still room for improvement. For instance, innovation should be one of the plan’s main priorities, given that it is a key driver of industry growth. Not only that, largescale infrastructure projects will require more substantial government funding than what was available under the previous administration, but the PND 2019-24 mainly glosses over the idea of public investment. Regarding exports, the development of local content is extremely important for Mexico’s broader economy and needs to be better integrated into the plan. We have a $1.6bn trade surplus with the US, but only a small percentage of content is produced in Mexico, with a majority coming either from the US or Asia. Furthermore, we often receive niche foreign investment and highly specialised human capital, especially at refineries, airports and other large-scale infrastructure projects. While the country needs foreign investment, it has to go further in promoting national content, which is the most important factor for industrial development. It should therefore be prioritised in the PND 2019-24. It is because of these issues that Mexican industry has not experienced significant expansion in previous years. We have targeted reaching national content of at least 40-45%, up from the current 21%. If we want to promote industrial development, this goal has to be attained. At the same time greater public investment should address the lack of infrastructure.

What infrastructure developments should be prioritised to better leverage industrial competitiveness?

CERVANTES: Infrastructure projects need to be fully integrated in order to bring a return on public investment. For instance, the Durango-Mazatlan Highway does not yet have a fully developed port connection. Additionally, the Port of Mazatlán remains underdeveloped and has yet to reach the standards needed for international trade. Likewise, with regard to the Trans-Isthmus railway project, we need to ensure the ports of Salina Cruz and Coatzacoalcos are updated so the network can tap into all potential opportunities for Mexico. Such large-scale projects have an effect on some 37 industrial segments. Once they are operational they generate social capital in the form of employment, fiscal capital in the form of taxes and private capital in the form of investment to further develop the area. We have to better assess which infrastructure projects are fundamental for the core of our economy and give priority to those projects to boost competitiveness. One such example is the road to Laredo, Texas, which serves as a primary connection to the US for the automotive sector. The value of goods traded at this border point equals that of every other US entry point combined.

Which sectors have the potential to attract the most international investment?

CERVANTES: The energy sector will continue to be a prime area of investment, given that the government is focused on revamping operations and boosting production at the state-owned oil company Petróleos Mexicanos. Mexico is also one of the world’s most suitable countries to implement renewable energy projects. In fact, clean energy is already having a substantial impact in the country’s mobility: out of the 47m vehicles registered in Mexico, 3m are hybrid or electric.

Investment in the aerospace industry is also growing at 14%, and this is increasing activity to unprecedented levels. Additionally, the automotive industry is bucking the global downward trend, and it continues to be one of the most relevant sectors for the country’s economic development. Mexico is the world’s fourth-largest automotive exporter and the sixth-largest automobile manufacturer. We are also becoming one of the most important manufacturers of heavy vehicles worldwide.