Latin Finance - May/June 2011 - 30

mexican corporate outlook

The increase in security operating results. “Media Reasons for Security Deterioration investment will primarily and some food companies Organized crime is the top concern go towards training, access would not be that affected, controls and closed circuit as they would continue to television, according to experience the same levels Increased Petty Theft 2% respondents. of demand, despite the “The cost of increased violence,” he adds. Income Inequality 4% security could have a big Investing Impact impact on earnings of some 4% Polarization of Political Forces Over a third of companies companies, which could in the survey say US impair their credit quality,” Unemployment 7% executives were making says Robert Rauch, partner fewer trips to Mexico in and director of research at 23% Ambiguities in the Judicial Process 2010 compared to the Gramercy Advisors, a hedge previous year. One New fund with $2.8 billion in Strengthening of Organized Crime 59% York-based headhunter at a assets under management. global executive placement “We do not expect 0% 10% 20% 30% 40% 50% 60% 70% firm says it is difficult to violence to decline persuade even Mexican substantially in the next Source: Kroll/Mexico AmCham survey 2011 bankers to move back from five years as the weakness New York or London. in states and municipalities Robillard. Vehicles transporting heavy International companies are also remains,” says Carlos Ramirez, an manufactured goods are being hijacked exercising caution. US equipment economist specializing in Mexico at by drug cartels for ransom or simple firm Caterpillar in September last year Eurasia Group says. “We need to see theft. told its US employees with children to more happen at the level of states and Companies such as Caterpillar leave Mexico because of the escalating municipalities, and while we are fairly have had machinery stolen and held violence. While companies are not exiting optimistic in the mid-term about reforms, for ransom. “Cargo theft of high tech things are moving forward slowly,” he companies such as FoxCom, HP and Sony the country, the violence is taking its toll on investments. says. “What is needed is extensive reform of trailers of PCs and TVs has been rife,” Only 8% of respondents say they of the police and judicial system at the says Stewart. Respondents of the security were considering moving operations to state level,” adds Ramirez. survey say extortion by organized crime another country, but 27% say they were was the principal cause of internal reconsidering investment plans due to Demand Is Vulnerable insecurity in companies. the security situation. Sinkin says that The most vulnerable sectors include Kastholm adds that sectors he does tourism, transport, auto and consumer not expect to be impacted include telecom while he is not seeing investments being companies, whose operations companies, which he says have very solid cancelled, attracting new investment to Mexico is a “tough sell.” could be targeted or whose “Companies are not looking customers could be put off by Kroll/AmCham Security Poll to uproot their operations increasing violence. “Obvious More than 90% see no improvement as these represent millions sectors we would monitor . . . of dollars of investment, include tourism, retailers and More secure in 2011 but there is no doubt that restaurants,” says Kastholm. than in 2010 (8%) the situation is influencing Consumer companies that Equally secure in 2011 greenfield operations as some ship their cargo are vulnerable to than in 2010 (25%) new investments that were hijackings and roadblocks, says being planned have been put on Robillard. hold,” says Robillard. Top concerns among those “As the war on drugs surveyed by Kroll and the continues it will deeply affect American Chamber in Mexico growth, the economy and include cargo theft, protecting companies in Mexico, unless logistics and infiltration of Mexico makes structural cargo belonging to consumer Less secure in 2011 changes. At the moment, FDI companies by organized crime. than in 2010 (67%) and growth is okay, but in the “The reputation of companies long term it is not sustainable,” is at risk if their trucks are Source: Kroll/Mexico AmCham survey 2011 Sinkin says. LF seized containing drugs,” says

30 LatinFinance

May/June 2011

Latin Finance - May/June 2011

Table of Contents for the Digital Edition of Latin Finance - May/June 2011