Private equity seeks to contribute to the growth of the economy  

In order to boost private equity, it is necessary to attract increased investment, both local and foreign, which will help the growth of businesses and the economy.

According to Eduardo Cortina, President of the Mexican Venture Capital and Private Equity Association (Amexcap), for the sector to achieve a minimum critical mass, 1% of new commitments must be generated in private equity. 

From 2009 to 2019, the private equity industry in Mexico has had a compound annual growth rate of 15.6%. Currently, this association consists of 120 funds, and has $60 billion dollars in committed resources, of which 54% has already been invested, meaning more than $35.5 billion dollars has been invested in projects and companies in different productive sectors such as energy, infrastructure and real estate.

Challenges for private equity in Mexico

Eduardo Cortina says that despite the country’s difficult economic situation, heighten by the pandemic and its impact on businesses, it is still a good time to attract investment, as equity is needed and valuations are attractive.  

The challenge in an economic crisis is knowing how safe it is for locals and foreigners to invest. That’s why the focus is on attracting more equity in order to put it to use and share it through funds, so it can reach the companies that need it the most, as many companies have surety, but not liquidity.

In light of these challenges, Cortina states that improved processes, as well as transparency, must be ensured in order to gain the trust of investors. This is why Amexcap seeks to share success stories and the economic stability that Mexico can have, as well as existing opportunities.  

Government-Private Sector Plan to Attract Foreign Direct Investment

According to Graciela Márquez, Minister of Economy, in light of the changes in value chains, a plan will be implemented that aims to establish manufacturing companies in Mexico. 

Undoubtedly, the relocation of manufacturing in global supply chains, which are looking to become shorter, or even regional, represents an opportunity for Mexico to attract Foreign Direct Investment (FDI). A plan will be prepared alongside state governments and the Private Sector to attract FDI.

The global value chains that involved several countries before seeing a finished product were broken by the COVID-19 pandemic, companies are therefore leaning towards developing closer chains, short or regional, opening up an opportunity for Mexico.

The entry into force of the United States-Mexico-Canada Agreement (USMCA) and the effects of the pandemic are two important factors for the relocation of companies that are looking to produce some of the components they produced in Asia, opening an opportunity for Mexico to begin producing these goods.

In view of the above, the Ministry of Economy will follow-up on the USMCA, and is in talks with the State Ministries of Economic Development to identify the spaces available in industrial parks, as well as carry out logistics processes and train available labor. 

Work is being done with the Business Coordinating Council to pursue direct interviews with top global executives in order to implement this strategy of backing new investment together with the private sector.

Oradel Industrial Center seeks to attract foreign investment by offering competitive advantages to companies that establish their manufacturing and logistics operations in the industrial park, as it is only 10 miles away from international bridges to the United States.