When Jose Medina Mora (Mexico City, 1955) took the reins of the largest employer in the country, the pandemic had already done its greatest damage. It was January 2021 and both the Employers’ Confederation of the Mexican Republic (Coparmex) and other business associations were directly confronting President Andres Manuel Lopez Obrador over the lack of support for the private sector during the lockdowns. The economy was weak and the 39,000 companies that the Confederation represents were hoping that Medina Mora would patch up the cracks.
Almost two years later, the businessman speaks cautiously about the relationship with the President, but he has no filters when it comes to the lack of rule of law in the country, which, he says, is the highest obstacle facing the private sector . Either because it leads to insecurity with high costs or because it generates legal uncertainty for foreign investors. The economy has advanced, but it has not finished recovering its pre-pandemic production and while Mexico has competitive advantages, it is not taking advantage of its potential, argues Medina Mora, a doctor of engineering from Stanford University.
Brother of the former Minister of the Supreme Court, Eduardo Medina Mora, the businessman has a four-decade career in the information technology sector. But his position in Coparmex, an association of almost 100 years of existence, now requires most of his time. The companies he represents employ almost five million Mexicans and are responsible for 30% of the Gross Domestic Product (GDP).
Ask. My impression is that the biggest problem facing companies in Mexico right now is insecurity. I am right?
Response. Yes. I visit two or three cities in the country every week where I ask them, what worries them? The common factor is growing insecurity. In a survey, we asked Coparmex member companies and found that one in two has been the victim of a crime in the last 12 months. The most common crime is theft of merchandise, the second is vehicle theft, and the third is extortion, which includes collection of flats. We find that an average of 232 business theft folders are opened every day throughout the country and, when we see that an Inegi survey shows that 83% of business theft cases are not reported, we understand that these folders are just one fraction of the crimes that are being committed. It is a reality that the costs of insecurity are rising. Companies have to invest in preventive measures such as cameras or in guarding their merchandise, for example. One might think that in the safest cities there is no concern, but there is also because there were no cases and now there are beginning to be. Part of the proposals we have made is the need to strengthen the municipal and state police, because security begins in the closest. We do not see in the budget that there are resources for this. There was a trust [programa] Fortaseg that disappeared. A second proposal is the coordination of the federal government where the National Guard has to act in a subsidiary manner with the state and municipal police. In the case of the National Guard, it seems to us that this approval of the law that took place both in the Chamber of Deputies and in the Chamber of Senators, is unconstitutional. The command of the National Guard must be civilian. What he should have presented was a constitutional reform because we have to have the Rule of Law, that is, that we all respect the law and that we respect all laws, from the Constitution to the last law and from the President of the Republic to the last citizen . Part of why more investments do not come to the country has to do with the lack of rule of law. Simply, the consultation request of the American government and the Canadian government has to do with this, with the fact that we signed that there would be equal conditions for the companies and then the Electricity Industry Law was approved that puts the State company at an advantage. So, the lack of rule of law is reflected in security, due to this change of command of the National Guard, but it is reflected in many laws that have been approved and that are unconstitutional. We also propose coordination between authorities that involves citizens, through citizen observatories, as has been done in some parts of the country with good results.
P. At press conferences, the President attacks companies one day and the next day their representatives may be at his side. They have also announced joint investments that later do not materialize. What is the relationship between companies and the President really like?
R. I can talk about the President’s relationship with Coparmex. My entrance to the presidency of the Confederation coincides with the initiative of the President to prohibit subcontracting. We asked the President for dialogue, and he agreed. For three months we dialogued, also including the Business Coordinating Council and the Mexican Business Council. Three months we met once a week. In that dialogue we started from very different points and we reached a good agreement in which the three parties won. One point we share is the need to raise the minimum wage. With the Ministry of Economy we are working on an economic reactivation plan. With the Secretary of Labor, and since the labor law changed, there has been a very frequent dialogue. From the point of view of Coparmex we have a dialogue with the authorities. There are issues where we agree on the objective, we differ on the strategy, but we have that open communication of respect where we freely express our point of view. For example, the Government spoke at the time of putting a price control to deal with inflation. We business bodies said that price control is not the way to go because it alters the markets and the one who pays the consequences is the consumer. The president listened and focused on the gasoline subsidy, the electricity rate and the booths. Next Monday, October 3, the next version of the anti-inflation package will be announced, where there will be an additional effort by companies, producers and distributors to ensure that this increase in costs is not transferred to the price of food products, which It is where there has been more inflation. Thanks to this voluntary agreement between the government and private initiative, it has been possible to contain it a bit, but we will still have high inflation for the rest of the year. Banco de Mexico’s expectation is that it will go down slowly next year and it will be until 2024 that it reaches the goal of 3%.
P. Do you think that the constant change in the inflation outlook of the Bank of Mexico is generating uncertainty?
R. There is enough certainty that, faced with inflationary pressure, the Bank of Mexico will raise the reference rate, because that is its mission. If he didn’t, then I would be worried.
P. But its mandate is also to anchor inflation expectations.
R. We believe that they are doing their job well. Given the high inflation, that is the right thing to do and somehow the markets expect it.
P. Listening to him talk about the dialogue he has with the government, it seems that the investment climate has not deteriorated. But businessmen and analysts say yes.
R. In the lack of the Rule of Law is the key, from which insecurity and uncertainty derive. I was in Houston last month and in Los Angeles last week talking to American companies that intend to invest in Mexico and these are the two topics that they tell us about. They have projects already evaluated with financing and are waiting to see if Mexico is going to comply with what we signed in the T-MEC. The Law of the Electricity Industry goes against what we signed in the T-MEC and that is why the consultation. Hopefully it will be resolved at that moment, because if it doesn’t go to the international panels where it is most likely that they will agree with the governments of the United States and Canada, and that will allow them to compensate what they lose through tariffs, copper all in products of the field. It is estimated that the cost for Mexico could be between 10,000 and 30,000 million dollars. It would be disastrous for the Mexican community, because the engine of the economy is exports.
P. In your dialogue with the President, have they made you see this?
R. The President has told us very clearly that he is not going to fight with the United States and that this is going to be fixed. At first our position was pessimistic, since the consultation comes after bilateral meetings with President Biden and the visit of several members of his cabinet in which this was not resolved. Also because the President’s narrative was that we are not a colony of anyone and that national sovereignty is more important, when this has nothing to do with sovereignty. But, in short, to our position in which we said, Mr. President, we are concerned about the consultation request, he said: “We are going to fix ourselves, we are not going to fight with the United States.”
P. In the north of the country there is a high demand for industrial buildings due to the relocation trend of companies from Asia to this part of the world. However, much has also been said that Mexico is not benefiting as much as it could from the nearshoring. What is the reality?
R. Both. There is a shortage of spaces in industrial parks due to the opportunity of nearshoring. Why do we say that Mexico is not taking advantage of this opportunity? We simply see that China lost 4% of its trade with the US and the logical thing is that Mexico would have taken it. In Mexico we only took 0.5% and a country like Vietnam, very far from the US, took 1.8%. That is the opportunity that we are not taking advantage of, being so close to the US. The great message from the US in the High-Level Economic Dialogue is that we must produce in the T-MEC region and we have to take advantage of it.
P. And the Government, is it reacting?
R. Without being the priority of the Government, the part of the Government that corresponds to it, such as the Ministry of Economy, if they are very clear that it is an opportunity that must be facilitated. It would be much better if it were a priority for the President, but the Government does an extraordinary job with the few resources it has.
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Source: EL PAIS
