Mexico remains optimistic for market upswing
By Hal Lundgren03 November 2017
Mexico will choose a new leader in July 2018 when President Prieto’s six-year term ends. By law, Mexico’s president cannot seek re-election. Election season could bring confusion and clarity. The confusion? Nine or more candidates might challenge voters, who might not remember all those names.
The clarity? As Prieto and his associates exit, they might want to leave good impressions. That would mean completing as many projects as possible in the capital, Mexico City.The result would be a welcomed activity spike for crane, rigging and heavy haul companies that serve the city of about 22 million.
“We normally don’t do a lot of business there,” said a spokesman for Tradelossa, a Monterrey-based specialized transport company.
There’s a lot of competition down there, he said. Work just isn’t as profitable as in other Mexico locations.
“But with the election, I think there will be a push to finish projects before the new administration comes in,” the spokesman said.
MPE’s Alvaro Rodriguez offered a different election hope that, if fulfilled, could improve Mexico’s business climate.
“We still have lots of corruption in our country, and the Mexican people are rejecting it,” Rodriguez said. “I am not proud of this government.”
Mexico’s historically dominant party, the PRI, has the presidency and other major leadership positions.
“I am hoping we will have a few good independent candidates,” Rodriguez said. “Then we would look them over and get to choose what I would call the least worst of those candidates. Mexico deserves more from its government. Our country is strong. Strong in agriculture. Strong in energy. Several Spanish companies are spending many millions on energy products here. Mexico is also strong in manufacturing and sending its products to the U.S. We will have an even stronger country if we choose the right candidate. But winning will be hard. The government gives lots of money to all the candidates’ campaigns. The independents don’t receive as much of it.”
High hopes for 2018
The 2018 election is the second since 2016 to seize Mexico’s attention. Donald Trump’s rise to the U.S. presidency last year distressed many Mexicans.
“The Trump election and some of the things he said upset many people here,” Rodriguez said. “I represent 14 companies and deal with many SC&RA members. There was lots of nervousness among them. Because of that nervousness, people I deal with were not purchasing as much equipment as they had the past three years. It seems like people aren’t as nervous as they were right after Trump’s election. My sales still aren’t where I wish they were, but they’re picking up. It looks like an improved January. For the country, it also looks like a good time for projects. Plant construction, petrochemicals and energy all seem promising.”
That would be good news at Tradelossa, where the spokesman characterized 2017 as “a tough year for our company. We’ve maintained our staff levels and worked on trying to improve the people we have. Then we try to compensate the people who give us better results.”
The company anticipates another productive year in hauling oversize wind-power equipment, a highlight of this year’s results. The spokesman added, “I recently read about ‘managing uncertainty.’ We had to do a lot of that in 2017.”
Looking at 2018, Rodriguez suggested one other major concern, President Trump’s North American Free Trade Agreement criticism.
Though Rodriguez anticipates no major NAFTA disruptions, he said, “It’s about two decades old, so I understand the need for some renegotiation. I hope nothing worse than a little renegotiation happens.”
Rodriguez speculated that the aftermath of September’s earthquake will spur construction projects in Mexico City and Puebla. The temblor killed more than 200 and collapsed many buildings.
“After the 1985 earthquake, we should have done things the right way and made important changes,” he said. “We didn’t get it done. That was another example of corruption. After this earthquake, we have an opportunity to do things the right way. I hope we will.”
Tradelossa responded immediately to the earthquake.
“It was a time for philanthropy, a time for people to help,” said Tradelossa’s spokesman. “We sent a five-man crew to assist with the recovery.”
Canadian equipment auction company Ritchie Bros. saw a fast response to the earthquake. According to Richard Aldersley, Ritchie Bros. sales director, U.S. Southwest, “We have heard from Mexican contractors that the tragic situation in Mexico City and Puebla has created additional demand for heavy haul and cranes, as well as aerial reach equipment.”
In “a time for philanthropy,” Tradelossa dispatched five workers to Mexico City to support earthquake recovery efforts.
“Given this increased demand, we have seen consistent buying from Mexico bidders at our California, Arizona and Texas auctions,” said Aldersley. “But given the surplus equipment already in the market with an economic downturn mainly due to depressed oil prices and the government’s lack of public bid projects, most of that demand is being satisfied by existing assets. The Mexican oil patch is controlled by state operator PEMEX, which has been in a depressed state. We have yet to see any additional contractor funding from this sector.”
Based in Coahuila, Tecno Montajes is nearly 600 miles north of Mexico City and the earthquake recovery area.
“A terrible thing,” said the company’s director, Mauricio Gandara. “But we are too far away for the earthquake to affect our business.”
Gandara employs about 60 people and can add several hundred more when a large mechanical installation or plant relocation demands them.
“If a project requires extra people, we collaborate with skilled subcontractors, and they do good work,” he assured.
Even if the 2018 election season brings confusion, Gandara thinks there will be at least one steadying force next summer.
“The exchange rate between the peso and U.S. dollar,” he said. “It will probably remain fairly stable. That will be good for Mexico’s economy.”
Amisa Group’s Jorge Garcia has already seen an uptick in business. His Monterrey-based relocation/installation services’ company normally employs about 75 people. Subcontractor count often lifts the workforce to 100. But not now. Work for BMW, anticipated work for Toyota and development of a large shopping mall has boosted Amisa’s worker count to about 200.
“Our work on the shopping mall started in September, so we’re fully booked for now,” Garcia said.
Amisa Group has already assisted at BMW’s plant construction in San Luis Potosi. The two-year project will culminate with auto production in early 2019.
“We will be working there for the rest of this year and all of 2018,” Garcia said. He also speculated that his company’s Toyota work might start in February. He added that the Monterrey-area shopping mall work is a bit unusual for his company. The mall, too, is unusual.
“There might be a movie theater,” he said. “Other than that, there won’t be any large stores. It will have mostly coffee shops and smaller restaurants where people can hang out. Just like in the U.S., people in Mexico are buying more things online. There isn’t as big a demand for large stores.”
With deep roots in Canadian and U.S. automotive work, Excel Machinery found similar opportunity two years ago in Mexico. The company set up Mexico operations in Cueretaro. Alejandro Garcia is in charge.
“A company outside Mexico ships its equipment to us, and we install it,” he said. “Dye-casting. Injection. All rigging services. We can do what the company wants us to do.”
Right now, about 90 percent of those installations are automotive-related. Japanese companies account for about one-fourth of Excel’s Mexico business.
“We have not been in business long,” he said. “We have only one facility. But, for sure, we want to expand. We will expand. Maybe next year. Maybe the year after that.”
Asked where customers might want that second site be, he replied. “Cueretaro is in central Mexico. Right now, I couldn’t pick where our site will need to be. We’ll have to wait and see where we can serve our customers best.”
Garcia is equally uncertain about the 2018 election’s impact.
“To be honest, I have no idea,” he said. “The only thing I could be sure about is that we’ll have a new president.”
European companies’ interest in Mexico continues to grow. A German company, Modulift, recently named Cargo Lift as its first distributor in Mexico. A below-the-hook equipment provider, Cargo Lift is stocking Modulift spreader beams up to 110-ton capacity.
Based in Mexico City, Cargo Lift also operates in Ciudad del Carmen, from where it principally supplies oil and gas customers. A third location, Veracruz, serves as a port for arriving European products.
The company is primarily a supplier of rigging equipment, manufacturing a range of wire rope, synthetic, chain and other slings.
Ricardo Barroso Couttolenc, commercial director at Cargo Lift, said, “Our customers have welcomed the addition of Modulift equipment to our product range. We adhere to a philosophy that every piece of equipment we supply must have at least one advantage over a competing product, and in Modulift’s case we know its spreader beams offer a myriad of benefits over alternative solutions.”
Sarah Spivey, managing director at Modulift, said,“We appreciated Cargo Lift’s recognition of our multilingual strategy. As I’ve said before, it would be a mistake to assume English is always the language of business.”