23 | OCT | 2019
Mexico and the U.S. on discussions of “Marshall Plan”
Alfonso Romo Garza, head of the Mexican Office of the President – Photo: EL UNIVERSAL

Mexico and the U.S. on discussions of “Marshall Plan”

09/07/2019
18:57
Mexico City
Misael Zavala & Alberto Morales/EL UNIVERSAL
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The “Marshall Plan” would boost the investment in and growth of the northern and southern frontiers of Mexico through an increase of private investment

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A month ago, Mexico’s Presidency started discussions with Mexican and American businessmen for the beginning of the “Marshall Plan,” which looks to boost massive investment in different regions of the national territory, especially in its northern and southern frontiers.

The responsible to take the plan to private initiative is the head of the Office of the President, Alfonso Romo Garza, who offers certainty and reliance in private conversations with businessmen to turn Mexico into a paradise for investment, through the creation of companies for increasing exports and elevate foreign investment in the country, which will solve problems of infrastructure and logistics.

According to the document of the strategy of the government in possession of EL UNIVERSAL, the plan contemplates four objectives: drawing more direct foreign investment, increase the national and American content, reducing the commercial deficit with different countries, and balance the growth of the regions of the country.

Romo Garza explains in the document that there are US $40 trillion in the world looking for projects of infrastructure in countries that offer them a foreseeable institutional framework. The federal government poses that Mexico has foreign investment needs and the companies can invest in different projects.

One of the offers for investors is to bring projects to the Southeast that boost the growth and development, especially of natural gas as a determining factor of growth of the economic opportunities for the population. With the investment in the Southeast of Mexico and with productive projects, the government also pretends to solve the migratory problem at the root.

The also president of the Council for the Promotion of Investment, Employment and Economic Growth of the federal administration, bolsters the idea of a “Marshall Plan” as massive investment, that is, that American companies invest in regions of Mexico, as the government of the United States did in Europe after the Second World War in order to help rebuild the continent.

“A month ago, I participated in the CEO Dialogue in Mérida and I invited the [American] businessmen to further strengthen the Northamerican region and connect the Southeast of the country to turn it into a region of growth,” Romo Garza details in a document.

To this end, the President Andrés Manuel López Obrador and the head of the Office of the President are holding private reunions with businessmen of different regions of the country, focused on diverse industries like steel, footwear, textiles, sugar, finances, Afores, and others. The first meetings have been with local private initiative of Jalisco, Guanajuato, Coahuila, Nuevo León, Veracruz, and Yucatán.

Our mission is to ensure a favorable business environment so that private investment, along with public investment, be the base to achieve the average growth of 4% by the end of the administration,” the document asserts.

But for a growth of 4%, according to Romo Garza, it is needed that the total investment as a percentage of the gross domestic product (PIB), be of 25%. Nowadays, it is 20.2%: 17.5% private sectors, and 2.8% public sector.

“A quantum jump is needed for private investment to reach 25% of the PIB. The effort is gigantic and the private sector must show more commitment with its principal labor, which is to invest. In the last administration, the average growth of private investment was only of 2.2%, and in 2018 it was only of 0.8%,” details the seven-pages text.

Among other goals of the government is to achieve greater integration of value chains to strengthen the domestic market, having a fair and balanced insertion with the foreign trade, increasing the national content of the productive plant to have a multiplying effect in all the economic sectors, and incorporating small businesses to the productive and competitive circuit of the country.

In addition, the government will bolster consumption to foster the markets, so the plan specifies that it will take advantage of the high rate of trust in the consumer.

Adverse environment. In the discussions that the chief of the Office of the President has had with the private investment, it also presents different unfavorable factors for the Mexican economy and investment.

The most highlighted one is the threat from the American government to impose progressive tariffs to Mexican exports, which could have had a negative impact on the automotive, electronics, farming, textile, and steel industries, among many others.

Another of the challenges the country recently faced was the reduction of the grades in the perspectives of Mexico’s sovereign debt and the localization of Pemex by the two risk-assessment companies.

“There’s concern for the price increases of the new debt emissions of the public sector and the knock-on effect it has already had, most of all in the grades of some banks operating in Mexico and that attend to the international debt markets,” he stated.

However, the federal government has announced different measures to capitalize Pemex and reduce its tax burden; in addition, an important restructuration of its debt was announced and a letter of intent was signed with three financial institutions (HSBC, JP Morgan, Mizuho, and more than 20 banks) for the renovation and refinancing of its compromised lines of credit with maturity towards the end of 2019 and the beginning of 2020.
 

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