Big Companies to Mexico’s President: Stop Changing Rules
Representatives of two top business groups warned that it’s getting increasingly harder for foreign companies to put their money in Mexico and said that messages from President Andres Manuel Lopez Obrador’s government that hinder investment need to stop.
In a rare critique of the current administration, Carlos Salazar, head of one of the largest Mexican business groups, CCE, said companies need a message of certainty from the Lopez Obrador administration to move away from conflicts.
At the same event in Mexico City, Claudia Janez, the head of a group representing global businesses, spoke out even more forcefully against government interference in investment, saying it’s the main cause of economic stagnation in Mexico.
Mexico’s gross domestic product remained flat last year in large part because of the “systemic change of rules to doing business and the constant political messages against the markets and companies,” said Janez, president of the Executive Council of Global Companies (CEEG).
The economy even dipped into a slight recession in the first half of 2019 after Andres Manuel Lopez Obrador scrapped a $13 billion airport project before becoming president in December, and then suspended private oil auctions once in power. His government staged a months-long dispute with several pipeline operators after it decided to change the terms of natural gas contracts signed with the previous administration.
“Companies make long-term investment decisions. Changing rules doesn’t help growth,” said Salazar, who has served as a liaison between the business community and the government.
In recent months, Lopez Obrador has been trying to win over private sector skeptics, but hasn’t delivered what they want, which is mainly a return to business-friendly policies such as the oil auctions. Gross fixed investment, which includes spending in factories and machinery, has fallen for nine consecutive months through October, the longest losing streak since the 2009 recession.
Janez, who is also president for Latin America at DuPont de Nemours Inc., stressed Mexico needs to be clear on why it deserves investment over other countries and that free trade deals will mean nothing if the country doesn’t address its security issues.
She said security has become the number one concern for many companies operating in the country and that some of them are now spending an extra 30% to 40% of their fixed costs to protect themselves. “Insecurity should not be the new normal,” she said.
Decisions to allocate money for Mexico became even harder in the second half of 2019, Janez said, an unusual situation considering that the country was expected to become a natural destination for investment amid the China-U.S. trade war. Members of her business group include Exxon Mobil Corp. and AT&T Inc.
Salazar said he remains optimistic Mexico can reach growth goals in the future. He cited an infrastructure plan from November as a token of hope.
Salazar is helping broker a second investment plan, this time for the energy sector, that could be announced this month or next.
©2020 Bloomberg L.P.