Mexican investment abroad growing under the radar

Bon voyage
Bon voyage

For a while there it seemed like the only topic the International business media wanted to talk about was China – the economic miracle, the manufacturing giant, the double-digit growth.  And then, it was Brazil.  BRICs!  Emerging market powerhouse!  A seat at the table of world affairs!  Meanwhile, back here in Mexico we skulked in the shadows, grinding away to build up our manufacturing base in the face of cheap Chinese competition and uttering oaths as other countries captured the limelight.

But the media are fickle, and they love nothing more than a splashy trend.  And lately, all of a sudden, it seems like you can’t swing a quarterly report without hitting a story on Mexico’s burgeoning competitiveness for advanced manufacturing.  And as Mexico comes blinking into the glare of favor, reports of major new foreign investment in the country are piling up in areas such as automotive and aerospace manufacturing.  We’re chuffed of course, but as we sift through the smaller headlines we’re seeing another trend that has received almost no attention at all: An apparent newfound enthusiasm among Mexican companies to invest in other countries.  Although investment can rise and fall due to a range of external factors, figures from the United Nations Conference on Trade and Development (UNCTAD) indicate that direct foreign investment by Mexican companies from 2009 through 2011 reached US$29.5 billion, nearly double the amount registered over the previous three-year span.  The following are some examples of how this trend has gathered steam.

Mexican investment abroad is not entirely new of course, with some of the country’s largest companies paving the way early on.  Cementos Mexicanos (Cemex) was a pioneer in Mexican global expansion, taking over two major Spanish cement companies in the early ‘90s and proceeding similarly to enter the markets of the United States, Venezuela and other Latin American countries by the end of the decade.  Cemex subsequently expanded its operations to Asia, Africa and the Middle East, and is now considered to be the third largest cement company in the world.  More recently, other Mexican heavy hitters have stepped up their overseas activity as well.  Telecommunications giant América Móvil, owned by worlds-richest-man Carlos Slim, in 2012 alone acquired wireless carrier Simple Mobile in the United States and aggressively expanded its ownership stakes in telecoms Royal KPM in the Netherlands and Telekom Austria in Austria.  América Móvil is already Latin America’s leading wireless services provider.

Another well established Mexican multinational, Grupo Bimbo, also has kept up its international expansion in recent years.  Bimbo, now the world’s largest industrial baker, acquired the North American fresh bakery operations of U.S. baker Sara Lee in 2010, followed by Sara Lee’s operations in Spain and Portugal in 2011.  Bimbo recently announced it will build a new US$75 million baking plant in Texas, adding to its existing production infrastructure in the state.  Bimbo’s high-profile moves overshadow a number of less heralded but nonetheless important overseas activities by Mexican food and beverage firms.   Monterrey-based food processor Sigma Alimentos acquired U.S. processed meats brand Bar-S in 2010, boosting its existing operations north of the border.  Corn flour and tortilla giant Gruma boosted its already substantial operations in the United States by acquiring a tortilla production plant in 2011 and taking over U.S. tortilla producer Albuquerque Tortilla Co. the same year.  Others targeted the lucrative U.S. Hispanic market as well:  Beverage bottler Arca acquired California savory snack maker Señor Snacks in 2011, while a year earlier Mexican processed foods leader Grupo Herdez bought out another California company, frozen and refrigerated foods producer Don Miguel, to strengthen its presence in the U.S. market for Mexican-style foods.  Mexico’s top poultry producer, Industrias Bachoco, added to the takeover frenzy in 2011, acquiring U.S. poultry processor OK industries to establish a beachhead in the market.    Rounding out the list is beverage and retail group FEMSA, also headquartered in Monterrey, which has new bottling plants under development in Brazil and Colombia and is also expanding the presence of its Oxxo convenience store chain in Colombia.  Most recently, FEMSA is reportedly nearing conclusion of negotiations with the Coca Cola company to become majority owner of a joint venture to take over Coca Cola bottling operations in the Philippines via investment in excess of US$1 billion.

Beyond its well recognized food and beverage brands, Mexico also has been flexing its muscle abroad in various industrial sectors.  Monterrey-based conglomerate Grupo Alfa is very active, with its chemicals division acquiring two PET plastic producing plants and one PTA chemical plant in the United States in 2011, and its Nemak auto parts subsidiary building a new production plant in India and adding capacity to its China manufacturing operations in 2011 and 2012.  Mexico City-based Mexichem, one of Latin America’s largest chemical producers, acquired leading European plastic pipe group Wavin in 2012 on the heels of its 2011 purchase of U.S. compounds producer AlphaGary.  Looking ahead, Mexico City’s Grupo Kuo recently announced plans to partner with a Chinese company to build a rubber factory in China for launch in 2014, and Monterrey-based metal components firm Metalsa opened a new production plant in India and a second office in Japan in 2010, acquired the Venezuelan structural products division of U.S. auto parts maker Dana in 2011, and reportedly plans new manufacturing plants for Thailand in 2013 and Russia in 2015.

Mexico’s foreign legion is not only making a name for itself in established industrial products, but is providing innovation in the world market as well.  This is especially visible in entertainment and recreation.  Mexico City-based Kidzania, a developer of theme parks featuring role playing simulating future careers for children, is a unique and highly successful concept.  The company added new parks in Chile and Malaysia in 2012 to its worldwide presence of 11 locations, with more planned for Asia, Europe and the Middle East over the next two years.  Movie theater operator Cinépolis has found success at home and abroad with its premium services concept – think business class at the movies – opening new locations in the United States and Central America in 2012.  The company is already among the world’s largest cinema operators with presence in 11 countries.

These examples are only a sample of Mexican firms’ increasingly aggressive activity abroad.  And considering this investment has taken place in a down economy, Mexico can only be optimistic about its role in the global marketplace once the world economy resumes more dynamic growth.

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