Nearshore Americas

Commentary: Presidential Election is a Win for Mexico, Regardless of Outcome

Latin America, including Mexico, has received scant attention in the U.S. presidential election. While it’s easy to see why President Obama and Mitt Romney are preoccupied with the U.S. economy, analysts agree that the eventual winner should put Mexico on his agenda, as the country represents more opportunity now than during the prior election in 2008.

“We believe we are in an even better position as a country today,” Timothy Marx, an analyst with the Boston Consulting Group (BCG) in Monterrey, Mexico, tells Global Delivery Report. In fact, Marx echoes BCG’s senior partner Hal Sirkin, who says that in the next few years Mexico could give China a run for its money as a supplier of manufactured goods to the U.S. market. That should be a boost for all kinds of technology investment.

18,000 U.S. companies that have injected over $145 billion into Mexico during the past decade.

Technology on the Grow

“According to the capabilities that Mexico has created – and will continue to generate – we believe the country will remain competitive in offering services to U.S. companies,” adds Alejandra Mendoza, research and consulting manager at International Data Corporation (IDC) in Mexico City. “The greatest opportunity will be in software development services. This includes design, functionality and testing.”

Post-election, there should be significant home-grown tech investment, too. Given that the U.S. is the world’s biggest importer, and that Mexico is right next door, investments in ERP and logistics software, as well as support, will be a necessity.

“Mexico is recovering some competitiveness – it has advantages in terms of proximity, and in some cases even in terms of language and culture,” says Mendoza.  “In Mexico there are several services companies with SAP certification, and we expect to see growth in this area, as well as in related services.”

Mendoza’s observation is supported by SAP itself. The German software giant recently released a survey conducted on its behalf by the Economist Intelligence Unit. It found that IT efficiency and effectiveness was a top business priority for a third of Mexican companies, with the majority embracing automation.

Romney vs. Obama

Over the past four years Obama, who is counting on Latino support, has gotten tough with Mexico on the immigration front, deporting close to 1.5 million illegal immigrants. To put things in perspective, he sent more people home than in the combined four terms of Bill Clinton and George W. Bush.

But there has been cooperation, too. The Obama administration has been bullish on the more than $1.25 billion in daily trade with Mexico. In 2010, president Obama and Mexican president Felipe Calderón initiated the Executive Steering Committee for 21st Century Border Management to make the U.S.-Mexico border more efficient and secure. This was not all about anti-terrorism and immigration; it was also to make things easier for the 18,000 U.S. companies that have injected over $145 billion into Mexico during the past decade.

The cooperation between Obama and the Calderon administration with regard to telecommunications services has also been exemplary. There are at present 39 agreements on shared radio spectrum, and Mexico has been eager to comply with the High Level Consultative Commission on Telecommunications.

Yet this and other agreements are now bureaucratic realities, and all will likely remain in place should Romney win.

Would a Romney administration shake things up with Mexico? Unlikely. He certainly won’t undo cooperative agreements. Romney, whose father was born in a Mormon colony in northern Mexico, was the only candidate to give a  shout out to Latin America during a foreign policy debate with Obama and his business focus likely won’t hurt sentiment in the investment community.

Teaming up on Tech?

Mexico has a six-year election cycle, which means that every fourth U.S. election, and every second Mexican election, the two countries coincide. This is one of those cycles, meaning that Mexico’s new centrist president-elect, Enrique Peña Nieto, will be dealing with either Obama or Romney.

Peña Nieto wants labor reform and a more open energy market. He won’t touch NAFTA or the World Trade Organization’s dispute settlement mechanisms. This means that either Obama or Romney will have a reasonable, business-friendly Mexican administration to contend with, minus the periodic grandstanding that politics requires.

But as decision day looms in the United States, financial analysts are bemused that the U.S. candidates aren’t sitting up and taking note of Mexico’s coming boom.

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For example, Barclays economist Marco Oviedo concurs that Mexico is now competitive with China, but goes one step further, arguing that this change “is likely to be structural and persistent.” Why? Because Chinese workers are aging, getting more costly, and that country is more reliant on a sluggish European Union economy.

As well, analysts from Nomura Group expect Mexico to surpass Brazil as the region’s number one economy by 2022. That’s a staggering prediction, and suggests that Mexico will be seeing massive investments in technology – no matter who sits in the Oval Office. Nomura Group anticipates that Mexico will be known as Latin America’s “jaguar.”

Result? As Mexico reshores manufacturing to support the U.S. market, it is unlikely that it will make much difference who sits in the White House. Many U.S. businesses are sitting on cash. Analysts believe that an Obama win is priced in to the market, with a Romney victory typically seen as a plus for business.

Either way, there could be a loosening of the purse strings once the dust settles, resulting in more technology investment south of the Rio Grande.

This article first appeared in sister publication Global Delivery Report

Tim Wilson

Tim has been a contributing analyst to Nearshore Americas since 2012. He is a former Research Analyst with IDC in Toronto and has over 20 years’ experience as a technology and business journalist, including extensive reporting from Latin America. A graduate of McGill University in Montreal, he has received numerous accolades for his writing, including a CBC Literary and a National Magazine award. He divides his time between Canada and Mexico. When not chasing down stories, he is busy writing the Detective Sánchez series of crime novels.

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