Page 62 - STRATEGY Magazine

Institute of Competitiveness. It has one of the highest GDPs in all of Latin America, as well as Mexico’s highest per capita GDP.
Puebla, Mexico’s fourth-largest city, is a booming metropolis with ex- traordinary history as well as a strong manufacturing base. Home to many colleges and universities, the city is also the location of the world’s largest Volkswagen plant outside of Germany and the Western Hemisphere’s most technologically advanced automotive plant, built by Audi. The historic city center has been named a UNESCO World Heritage Site.
Another thriving manufacturing cen-
ter is Querétaro, which “exploded onto
the scene about ten years ago,” notes
Claude Gobenceaux, Vice President of
Region of FEMIA, an aerospace trade group. “That growth oc- curred with the arrival of two aeronautics giants in the city.” Today, the city is a globally recognized aeronautics hub that employs about 8,500 people.
WEANING OFF THE U.S. MARKET
For all the strides that Mexico has made over the past 30 years, it still faces chal- lenges, not the least of which is its eco- nomic dependence on manufacturing exports to the United States. The auto- motive industry alone exports 80 percent of its production. This leaves the econ- omy exceptionally vulnerable to a slow- down in demand from the United States.
Across the export sector as a whole, just 50 companies account for 46 percent of total exports. SMEs, the backbone of the economy in terms of domestic output and jobs, play only a limited role in interna- tional trade, accounting for just 13 per- cent of total exports. The concentration of production facilities has exacerbated income disparities between a highly pro-
ductive modern economy in the northern and central regions of the country and a more traditional economy with lower pro- ductivity in the south. Income inequality remains high, and the informal economy remains extensive.
There are three major office markets in commercial real estate in Mexico right now— México City, Monterrey, and Guadalajara. There are also several up-and-coming mar- kets, like Puebla, Querétaro, and Aguascalientes, that are smaller but important. —Victor M. Lachica Bravo, CEO & President, Cushman & Wakefield of Mexico
the Central and South
Change of Mentality
JUAN FRANCISCO TORRES LANDA
Managing Partner Hogan Lovells
“I’m bullish on Mexico becoming a world power,” says Juan Francisco Torres Landa, a Managing Partner with international law firm Hogan Lovells. Yet he recognizes the long road ahead. “We need to narrow the gap with poverty, assert the rule of law, and create transparency on criminal prosecution. We need a complete change of mentality.”
Torres Landa believes that “the single most important event in current Mexican political and economic history is NAFTA.” He sees the treaty’s clear guidelines as a real boon, enabling Mexico to play a meaningful role in North American commerce. The attorney also credits the main political parties for generat- ing the required consensus to pass comprehensive legal changes that resulted in critical structural reforms in energy, telecom, education, and other areas.
AN UNCONVENTIONAL VIEW
Yet in terms of lasting stability, Torres Landa asserts that his country’s leaders, past and present, have failed to advance the rule of law and eliminate corruption. The primary inhibitor, in his view, is the prohibition of drugs, which drives a stubbornly high crime index. For this reason, he has become, unconven- tionally, a proponent of drug legalization through a series of health-oriented regulations. “There’s not a single hard fact suggesting that prohibition renders a good result.” Prohibition should drive prices up, but in reality, the opposite has happened: world supply is at a record high and prices have been forced down. He suggests that the government take over the drug supply and regulate production. “I would rather have the health ministries in charge of dealing with these issues, and the govern- ment earning the revenue.”
“The less-developed parts of Mexico prevent the other parts from making more progress. We need to push the two closer together, not further apart.”
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