Multinational companies profit from Mexico, but give little in return

According to an investigation conducted by EL UNIVERSAL with information from 10 multinational companies, Mexico represents between 3% and 34% of their net income.
Pepsico, who currently holds the presidency of CEEG, obtained US$269.7 million in profit in Mexico, equivalent to over 6% of its total sales. (Photo: ARCHIVE / EL UNIVERSAL )
25/05/2015
13:10
Miguel Ángel Pallares Gómez
-A +A

Multinational companies obtain up 73% of their profits in Mexico, but their contribution to the local economy is not proportional, experts said. 

According to an investigation conducted by EL UNIVERSAL with public information from 10 multinational companies (Bancomer, Santander, OHL, Walmart, Coca Cola, HSBC, Citigroup, Pepsi, Heineken and Hasbro), Mexico represents between 3% and 34% of their net income and between 1% and 73% of their profits. 

With more than 53 million poor people in Mexico, experts consider it necessary to develop strict industrial policies so that the profits obtained in our market are proportional to the improvement of the conditions of Mexican families and local productive sectors. 

Experts said that even though foreign investment is necessary, it is overestimated. Mexico's government offers up to five or 10 times more support to transnational companies even though foreign direct investment represents between 2.5% and 3% of Mexico's Gross Domestic Product (GDP), while domestic private investment contributes between 12% and 13%. 

Large multinational corporations have been accused of corruption in Mexico -like the recent case of OHL and the alleged payment of bribes by Walmart- as well as of tax avoidance, such as Hasbro. 

"Mexico offers many advantages and subsidies to these companies, more than other countries, so multinational firms take advantage of the investment needs of state and federal governments," said José Luis de la Cruz, director of the Institute for Industrial Development and Economic Growth (IDIC). 

The researcher, who has worked at universities such as Harvard, said that transnational companies also have bargaining, economic and management powers to capitalize on the market, human capital and location of the country 

The government "gives preference to multinational companies with subsidies ranging from five to 10 times more than those offered to local firms," he added. 

José Antonio Quesada, customer and market leading partner of PwC Mexico Customers and Markets, explained that in order to attract investments from global corporations Mexico's government offers discounts in property taxes and suppresses others, but added that managers are concerned about corruption. 

"I do not believe that offering a preferential treatment can attract large projects, because foreigners have other concerns such as the way business are conducted in our country," he added. 

Rafael de la Fuente, chief Latin American economist at UBS, said corruption and insecurity in Mexico are factors considered by multinationals to decide investments, but in general the market potential is more attractive to employers. 

"The fact that Mexico has competitive advantages due to its proximity to markets like the United States, in addition to offering high competitiveness in some industries such as manufacturing, prevents corruption and insecurity from having a significant impact." 

In February 2015 the Executive Council of Global Enterprises (CEEG for its Spanish acronym) announced investments for 11 billion dollars in Mexico by its members. 

The CEEG brings together 42 multinational companies with operations in Mexico that it says represent more than 10% of Mexico's GDP, 11% of exports to the United States and generate 500,000 direct jobs in industries such as aeronautics, food, drinks, automotive and banking, among others. 

Silvia Rodríguez, professor at the Universidad Panamericana, said that the income and profits of multinational companies have not improved the living conditions of the population, and added that a regulatory framework and policies are needed to improve the position of employees, suppliers and companies linked to these giants.

 

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