Purchase OBG Publications

Since the early years of the maquiladora concept, a cross-border manufacturing government programme, the Mexican manufacturing sector has evolved significantly. Today, the well-established and globalised Mexican industrial sector is a much more specialised and nuanced market, with a stronger regulatory framework. In 2014 the sector saw its GDP increase by 4.22%, according to the National Council of the Maquiladora Industry, with clothing, paper, transport equipment, and machinery and equipment among the best performing sub-sectors. Meanwhile, contributing around 5% to the country’s total GDP in 2013, Mexico’s mining sector is among the top 10 world producers for at least 16 minerals. Though challenges remain, including stagnant local consumption, with a stronger regulatory framework the country is set to strengthen its position as a global player in manufacturing clusters, ranging from the well-established automotive industry to the rapidly developing aerospace manufacturing sector. This chapter includes interviews with Manuel Herrera Vega, President, Concamin.

With more than 6% of GDP coming from oil and gas, and 1.8% from the utilities sector, energy is one of the most important components of the Mexican economy. The country’s oil exports have made up a large part of the public budget for several decades. Nonetheless, the decline in production of Petróleos Mexicanos (Pemex), the state-owned oil company, from a peak of roughly 3.4m barrels per day (bpd) to around 2.5m bpd after 2010, combined with oil price volatility, led to a legislative revision in 2013. The energy reform, which opened up the sector to private investment, is expected to have a profound impact on the sector, though in an initial phase, investment in oil and gas exploration and production is likely to be outrun by advancements downstream. Even so, following reform, Mexico is poised to become one of the most dynamic energy markets in the region. This chapter includes interviews with Pedro Joaquín Coldwell, Minister of Energy; Emilio Lozoya Austin, CEO, Petróleos Mexicanos (Pemex); and Alberto de la Fuente, Managing Director, Shell Mexico.

Although the pace of expansion has moderated in the past two years, in line with a sluggish economy, Mexico’s insurance industry has been experiencing strong growth. The number of active companies in the sector reached 105 by the end of 2014, up significantly from 70 in 2000. Moreover, total premium income in 2014 reached $24.47bn, or 2.1% of GDP, according to the industry’s main regulatory body, the Insurance and Surety National Commission, while premium income grew by 4.5%, or about 1% in real terms. Meanwhile, the introduction in 2015 of the solvency II capital reserve, governance and transparency standards placed Mexico in the vanguard of insurance industry regulation. With insurance penetration rates still relatively low, the outlook for the sector remains encouraging.

Mexico’s stock exchange (Bolsa Mexicana de Valores, BMV) was heavily influenced by global trends during the course of 2014, marked by a high degree of volatility, geopolitical worries, concerns over future interest rate movements, and a somewhat mixed attitude to risk-taking. In Mexico, enthusiasm over the structural reforms was tempered in the fourth quarter of 2014 by worries over the impact of lower international oil prices. The BMV ended 2014 with market capitalisation of $480.2bn, down 8.7% in dollar terms, and remained somewhat subdued in the first quarter of 2015, with total market capitalisation rising about 1.3% in nominal terms to MXN7.1trn. Even so, given political uncertainties in Brazil, Mexico was the most active equity market in Latin America, accounting for around 40% of Latin America’s total trading volume. This chapter includes an interview with Jaime Ruiz Sacristan, President, Bolsa Mexicana de Valores (BMV).

Mexico’s banking system has enjoyed two decades of growth and stability. Operating with comparatively high capital reserve levels, Mexico has a stable and profitable banking system. In the period from 2010 to 2014, the financial system as a whole grew at an average annual rate of 10%. As of March 2015 total assets in the commercial banking system stood at $541.8bn, with 45 active banks. The industry has a high level of concentration: the top six banks controlled 58.7% of total assets and 60.2% of the total loan portfolio. Recent adjustments to the regulatory framework, such as the 2014 banking reform, can be seen as fine-tuning an essentially robust industry framework. However, banking penetration remains low and financial exclusion indicators are comparatively high, with more than half the population not having a bank account. This chapter feature an interview with José Marcos Ramírez, CEO, Grupo Financiero Banorte.

With a GDP of $1.26trn, Mexico is the second-largest economy in Latin America after Brazil and one of the most liberalised in the region. Though economic growth has been slow, ranging from 2% to 3% during much of the past decade, a series of reforms introduced by the government of Enrique Peña Nieto are expected to accelerate the pace of economic development in the medium term. While initial investor and market excitement over the structural reforms has been tempered by low oil prices and a degree of nervousness over the potential effects of monetary tightening in the US, Mexico is set for growth in 2015, with the economy expected to expand by 3%, according to the IMF, following estimated GDP growth of 2.1% in 2014. This chapter includes interviews with Ildefonso Guajardo Villarreal (IGV), Minister of Economy; Luis Videgaray Caso, Minister of Finance and Public Credit; Francisco N González Díaz, Director-General, ProMéxico; and Juan Pardinas, Director General, Mexican Institute for Competitiveness.