Facing Challenges & Opportunities in Mexico

Dear clients and friends,

Mexicans went to the polls a month ago and elected the young face of the old Institutional Revolutionary Party (PRI), Enrique Peña Nieto. After two successive presidential terms of the National Action Party (PAN), Mexicans opted for the telegenic Peña Nieto who has promised to tackle the crime and drug violence and to liberalize Mexico’s energy sector. The election is significant to Mexico and the United States, as well as to our clients who face real challenges and opportunities in Mexico.

One major challenge involves security and an increasingly explosive situation with criminal drug organizations in Northern Mexico. Current President Felipe Calderon has taken an unrelenting stance against the cartels, but many blame his administration for the uptick in violence which has claimed the lives of more than 60,000 over the last six years. Cities like Monterrey, the industrial northern hub of Mexico and long considered safe, are more vulnerable to the violence. Fortunately, Monterrey business leaders are actively working with local government officials and civil society organizations to help secure the city, and no doubt they are eager to see what president-elect Peña Nieto will do to help. Likely, he will continue with the policies of Calderon, with a focus on bringing down the murder and kidnapping rates and professionalizing the police. Security concerns will be Peña Nieto’s biggest challenge, and it will influence his approach to other issues.

Another reason our clients should be paying attention to the election of Peña Nieto has to do with the energy sector. Here we have a great opportunity, particularly given Peña Nieto’s campaign promise to make private investment in the oil and gas industry possible. The industry was nationalized in 1938, and since then, it has been dominated by the state-owned oil company Pemex. Because of the lack of private investment and competition, capacity and production have been lower and less efficient. Previous Mexican presidents have talked about opening up this sector before, but now, with support from PRI legislators in the Mexican Congress, Peña Nieto may be able to enact meaningful change. Private-sector investment in this area would open up the Mexican energy market to many U.S. companies, allowing for the possibility of increased energy integration between our two countries. Already, Mexico is the United States’ second largest supplier of oil behind Canada.

To help our clients address the security concerns and take advantage of business opportunities in Mexico, we have developed unique capabilities through the creation of Madison Intelligence. Partnering with trusted colleagues in Mexico, we launched Madison Intelligence to enhance our reach into Mexico and throughout Latin America. Like The Arkin Group, Madison Intelligence provides clients with strategic intelligence and prescient analysis to help them minimize risks and maximize payoffs when making critical business decision. In Mexico, Madison Intelligence is headed by Mr. Jorge Tello and headquartered in Monterrey. Mr. Tello is a specialist in strategic intelligence and information systems having served in both the private and public sector, including as Advisor to President Calderon on National Security and as Head of the Mexican Intelligence Agency.

Working with the Madison Intelligence team in Mexico, we are well positioned to conduct security surveys and to provide honest assessments of the security situation in Mexico and how it may affect business. Additionally, we have started working with clients in Mexico to help them create effective information systems within their firms designed to facilitate the collection and analysis of industry intelligence. This service enables these clients to capitalize on existing opportunities in sectors such as oil and gas, mining, food and beverage, and telecommunications in Mexico. Strategic information such as this can help give our clients the edge in an increasingly competitive business landscape in Mexico.

The election of Enrique Peña Nieto is significant for Mexico and for the United States. It is also significant to our many clients with investments and operations in Mexico. Mexico faces many challenges and opportunities, but with our partners at Madison Intelligence, we are eager and able to address both.