By Samuel Peña Guzman
Foreign Investment Coordinator
State of Nuevo Leon |
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A few days ago I had the chance to read an editorial article abroad regarding CEMEX a Monterrey cement company. It did not only make me feel proud as a Mexican, but also called my attention on this Company´s leadership during the last few years. The high quality of its products has taken it to the summit among cement producers in the world. It seems as if Lorenzo Zambrano, General Director and Chairman of the Board is one of the few businessmen that has decided to go all the way for Mexico; he also seems to be one of the few businessmen in the world that has not transferred operations to China.
Cemex, has its headquarters in Monterrey, and ever since 1985, when Mr. Zambrano took the leadership of this company, founded by his grandfather, it has become, from a regional enterprise to a world-wide company. In addition to being among the first ten companies in sales, CEMEX has also established a presence with investments at 30 countries all over the world. As a matter of fact, its first great global strategy achievement took place in 1992, by purchasing two Spaniard cement companies. Notwithstanding the harsh criticism from financial analysts, due to the debt acquired by Cementos Mexicanos, this businessman kept on acquiring debt as a growth strategy. Later, in 2004, he purchased the Texas cement company Southdown, Inc., making of CEMEX the largest cement producer in the USA.
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It would be a successful development strategy if every company in Mexico had officers with the ability and leadership found at Cementos Mexicanos´ management. Unfortunately, this is not the case, and, as a foreign investor told me once, "Mexico has the bad image of poor companies and wealthy businessmen." This is a tangible and serious reality in our country. The bottom line in Mexican economic development is not the lack of government incentives, or its infrastructure below par. Mexican companies are not competitive because their internal structures are full of ill-practices, of family and friends (compadres to use a Mexican word). The problem we face is inside the structure of nepotism-filled organizations and on the outside there is strong competition. Both these problems - internal and external - in Mexican companies prevent them form competing with the same assertiveness as foreign companies do.
Even though the most important businessmen in Mexico belong to an evolved generation, more prepared, that strive for their companies´ success, the lack of an open and transparent system to allow for talent competition, inhibits well-prepared professionals. Those who aspire to positions already reserved for family and friends, find their opportunities limited notwithstanding any brilliant preparation they could have.
Lets face it, talented young people cannot aspire to manage or chair public companies and/or family companies. That is why they decide to work for international companies and not for Mexican companies. At multinational companies the promise to grow and aspire to manage the corporation is not a dream reserved only for those who inherited a name.
Mexican companies do not grow because they do not pay the salaries-decent, I mean- deserved by the talent that is worthwhile hiring, because family and friendship ties hinder professionalism and competition, let alone sharing profits with top management. This type of incentives as a culture simply does not exist in Mexican companies as in their foreign counterparts.
On the other hand, the external factor is crucial. Globalization, which Mexico is already part of, has undoubtedly brought problems to companies´ competitiveness, especially those who enjoyed some kind of protection from the Mexican government, such as subsidies. Also, foreign businessmen are questioning the high profit margin demanded by Mexican businessmen. While at most industrialized countries profits are around 5%, in Mexico they even reach 100% in some cases. The voracity and ambition for quick profits, the culture to obtain a profit within a shorter term, differs from the vision of doing business abroad.
In the old times of protectionism, monopolist profits were assured by political support from government elites, which gave way to eliminate competition and arbitrary pricing - a nationalist culture. These were common practices in the old days when the Mexican government had more than a thousand government-sponsored enterprises, which would only fulfill a social function rather than increasing their value and productivity. Neo-liberal economic policies implemented early in the nineties have slowly done away with this situation.
Also, markets internationalization has forced Mexican companies into a fierce competition, mainly against industries from developed countries.
This was meant to happen sooner or later. Liberalizing economic policies have come to stay as an unavoidable trend and in less than 20 years we have signed more than 32 free trade agreements with several countries that will eventually make of Mexico a most open and vulnerable country at a global level. Even more open than the 7 most industrialized countries in the world.
This, of course, means a cost to the companies in trying to survive in a highly competitive market. No doubt this aggressive opening forces companies to adopt a new corporate mind, completely different, mainly in the way of making business and foster growth.
Those companies that depended on Mexican government protectionism, and that did not consider improving their competitiveness have seen their profits dramatically reduced. This has forced the companies to fight for broader markets, try to increase their customers base to compensate the drop in their profits and unfortunately many "die in action."
Costs reduction is an every-day business strategy, which has undoubtedly become a challenge for businessmen to get back on their feet, in addition to increasing competitiveness. Being more efficient, achieving, getting the most of resources, both human and material, is the common objective of Mexican companies.
It is common now to see scenarios where a drop in sales due to lack of quality, or non- competitive prices, causes a scarcity of liquidity that forces many companies to contract debts, which sometimes entails a snowball effect that ends up in the company´s bankruptcy.
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