Mexico Business Review 2021/22

2021/22

2021/22

Introduction Despite suffering a devastating economic blow following the COVID-19 pandemic, Mexico held its ground at the beginning of 2021. The country reported 11 percent growth in its GDP during 1Q21, thereby pointing to a presumed recovery. Investment helped to jumpstart the economy as vaccination campaigns allowed more people to return to the office.

Moreover, the Labor Reform boosted formal job creation, favoring job security in the short run and retirement and financial security in the long-run.

The persistence of the COVID-19 pandemic, however, germinated new grievances, such as a shrinking workforce, supply chain disruptions and raw materials and inputs shortages, compromising industrial manufacturing, one of Mexico’s main economic drivers. The country’s performance was further hampered by the possible implementation of reforms involving the electricity and lithium markets, which have now become a roadblock to investor confidence.

While the energy reform has been in the air since the beginning of 2019, its now more tangible nature has damaged a once bountiful foreign investment sector. Final approval is still needed from Congress and after several back-and-forth rounds with the private sector, the reform is now looking at a balance between national sovereignty and economic development.

In the meantime, investment uncertainty represents the greatest threat to Mexico’s economic recovery in both the short and long run.

After back-to-back quarters of negative growth in its GDP, the country now finds itself in a technical recession. Growth expectations for 2022 are moderate, below 3 percent for most analysts, with a great deal riding on the results of the final vote on López Obrador’s proposed reforms, scheduled for April at the latest, and the related talks between the public and private sectors.

As the country moves through a cautiously optimistic, yet challenging 2022, Mexico Business Review presents in-depth analyses, interviews and insights on the main challenges and opportunities facing the business sector.

Regaining investment attractiveness, providing certainty to investors, improving the relationship between companies and the government and making the industry safer and smarter are paramount necessities on the road to recovery.

Table of Contents

Introduction

2

State of the Economy

4

Finance

19

Tech

33

Entrepreneurship

50

Infrastructure

64

Talent

78

Logistics

95

Oil & Gas

110

Energy

128

Mining

147

Health

166

Automotive

184

1

State of the Economy In 2021, the Mexican economy did not grow as expected as the third and fourth wave of COVID contagions introduced new challenges.

Inflation and interest rates were also on the rise, coupled with consecutive drops in GDP for 3Q21 and 4Q21, putting the country in a technical recession. As a result, BBVA, Citibanamex, B of America and The Central Bank of Mexico have all cut their growth expectations for 2022. Similarly, the International Monetary Fund (IMF) reduced Mexico’s growth forecast by 1.2 percentage points as COVID-19 has once again disrupted supply chains internationally. The economy is now estimated to grow 2.8 percent in 2022, down from the previously projected 4 percent.

In addition to the challenges resulting from COVID-19 and inflation, experts say the economy will take a hit from its trade relationship with the US as exports have weakened. These same experts say Mexico’s fiscal austerity is what has prevented the country from recovering its prepandemic levels.

As the country battles against these odds, a new energy reform is in the pipeline, which, if approved, is expected to hinder investments in various sectors. Despite this uncertain outlook, experts say there are still many opportunities that could boost the country’s economy, among them the government’s flagship projects, which will increase employment and investment; USMCA, which is expected to benefit manufacturers and a possible recovery in exports to the US.

1

State of the Economy

6

Analysis Economic Recovery in Mexico Slows Down

9

View From the Top Miguel Díaz Díaz | General Director | Banxico

10

Expert Contributor Iker Jiménez | Director General for Global Investment | Undersecretary for Multilateral Affairs and Human Rights at Ministry of Foreign Affairs of Mexico

11

Conference Highlights Cooperation the Key to Increasing Economic Competitiveness

12

Expert Contributor Arturo Carranza | Energy Adviser and Consultant | CFE

13

View From the Top Juan Carlos Machorro | Partner | Santamarina y Steta

14

View From the Top Vladimiro de la Mora | President | American Chamber of Commerce of Mexico (AmCham)

15

Expert Contributor Lior Yafe | Economic Counsel | Embassy of Israel in Mexico

16

Expert Contributor Manuel Macedo | President | Honeywell Latin Americ

17

Conference Highlights Pandemic, Nearshoring Raise Industrial, Logistics Demands

18

Content Links

State of the Economy | 6

Economic Recovery in Mexico Slows Down The Mexican economy continues to recover but a variety of factors are hindering growth. Banxico has revised downward the country’s GDP growth for 2021, following a contraction of 0.43 percent in 3Q21. The projection now stands at between 5 and 5.7 percent for the year. Low domestic consumption and the emergence of new obstacles, especially new reforms that are expected to further reduce investment, put the country’s recovery at risk.

“If the country does not manage to change the investment rate by giving clear signs of certainty, we believe that there will be a permanent loss and we will never recover the level of employment seen before the pandemic. A radical change would be necessary to attract more investment and achieve higher growth rates. This can be done, but only through major policy changes,” says Carlos Serrano, Chief Economist, BBVA Mexico, speaking at a conference on Mexico’s economic situation following the COVID-19 crisis.

The estimates suggest that a complete recovery is far from likely because not all jobs lost during the pandemic have been recovered, investment is declining and the COVID-19 virus remains persistent, along with an accompanying chip shortage that is hampering industrial production. “The economic recovery weakened in the third quarter due to a double effect: acceleration of the pandemic and worsening of the semiconductor shortage, which had a significant cost in internal production,” says Alfredo Coutiño, Director of Analysis for Latin America, Moody’s Analytics.

Formal job creation, however, has accelerated and is actually better than expected. The increase is mainly due to the labor adjustment that occurred after the implementation of the Labor Reform, which sought to eliminate outsourcing. “The reform has had positive effects on permanent employment. In the short term, it implies greater job stability for workers and in the long term it will represent an improvement in retirement conditions and greater access to the financial system,” said BBVA in its 4Q21 report on Mexico’s situation. Despite the improvements in employment, high levels of labor informality and underemployment persist.

Regarding foreign investment, the levels reached in 3Q21 are below expectations, after growth of 11 percent in 1H21.

According to experts, investment is expected to recover in 2022 as a higher percentage of the population gets vaccinated, which is expected to have a favorable impact on household and company activities. As of Jan. 4, 2022, 149.38 million vaccine doses have been administered, which represents 82.9 million people in Mexico. According to Minister of Health Jorge Alcocer, 89 percent of those vaccinated have already received a complete vaccination scheme. That being said, experts consider that vaccination and economic recovery are going at different rates as the country remains vulnerable to the pandemic despite having a higher vaccination rate.

State of the Economy | 7

In addition, the possible implementation of reforms in the electricity and lithium markets presents a new obstacle to future investment. “The cancellation of clean energy contracts, permits and certificates, as established in the transitional reform in question, would send a new sign of uncertainty that we estimate would reduce investment,” BBVA says in its report 4Q21 report.

Reforms: Obstacle for Investment The Electricity Reform is undermining the confidence of international investors in Mexico, which could also lead to a series of international lawsuits, says Claudio Rodríguez, Partner at Holland & Knight. “Now, we are talking about electricity, the winding up of federal energy regulatory bodies, indirect expropriations of power generation facilities (nationalization) and the unilateral cancellation of lawful permits and private agreements (…). Tomorrow, it might be another topic.”

Additionally, automotive executives have noted that the lack of renewable energy sources in the reform proposal will impact investment as the industry globally is looking to neutralize CO2 emissions. “If Mexico cannot guarantee cleaner carbon emissions, foreign auto plants are less likely to choose Mexico for production,” an industry executive who asked to remain anonymous told El Universal.

The mining sector has also expressed concern about the Electricity Reform, which includes the nationalization of lithium. “If Congress approves President López Obrador’s Electricity Reform that seeks to give the government exclusive control of strategic minerals, investment in mining exploration will be practically null,” CAMIMEX says. In addition, the reform will lead to reduced investment in energy projects within mining, since it forces companies to buy energy from CFE, which is obtained from fossil fuels.

Edmond Grieger, a member of the Energy Commission of the International Chamber of Commerce of Mexico, said that the halt in foreign investment is not a future problem but a current issue.

“We already see companies making decisions to invest elsewhere.

Many companies are deciding to transfer their investment portfolios to new renewable energy projects in Central and South America,” Grieger said during a press conference. The Chamber believes that if the reform is approved, it would have a negative impact of at least US$44 billion on private investments in the country’s electricity sector.

Another factor affecting the country’s recovery is PEMEX. In recent years, PEMEX has benefited from reductions in its ISR rate, tax incentives and equity contributions. However, these actions have affected public finances. According to BBVA, the government’s financial package has helped to reduce PEMEX’s net debt considerably. However, a change in the company’s business model is still required that considers increasing private investment and reducing refining activities, says the bank.

Potential for Improvement Despite the multiple challenges, experts say that new factors will have a positive impact on the Mexican economy. One was the reopening of the border with the US for non-essential travel, which was expected to reactivate the economy in both countries. However, caution has crept in after the US Federal Reserve warned that the US economy is slowing down, which

State of the Economy | 8

could affect Mexico, as well.“There is no questioning the significance of Mexico’s trade position with the US. To be successful, cross-border logistics must have intimate knowledge of the security challenges, economic environment, and regulatory issues in both countries. Most important, however, is keeping up to date on US and Mexican customs regulations.

What makes this challenging is that customs regulations are ever-changing with little, if any, time to prepare,” Said Carlos Godinez, Vice President, Sales and Marketing, Transplace.

Experts point out that the 2022 Economic Package, which contemplates a high investment budget mainly for the Felipe Ángeles Airport, the Mayan Train and the Dos Bocas refinery, will help in the reactivation of the economy since it will indirectly benefit the companies that will participate in the projects.

Minister of Finance Rogelio Ramírez de la O says the government decided to prioritize the projects because last year they played an important role in mitigating the impacts of the pandemic in southern Mexico. In addition, some experts believe that these projects will have a fruitful 2022, especially as the Dos Bocas and Felipe Ángeles Airport are expected to be completed. “The biggest restricting factors that occurred due to the refinery’s construction have already passed. We believe that 2022 will be a good year for the industry and the Dos Bocas environment in general,” said Pablo Nieto, Vice President of Operations, Roca Ventures. Nevertheless, the Economic Package does not contemplate other large infrastructure works, which could mean a drop in public investment, said Alejandro Saldaña, Chief Economist, Grupo Financiero BX+, in an El Financiero article. Adds Carlos González, Director of Analysis at Monex, in the same piece: “The outlook for the PEF 2022 may be much more challenging next year, since it will be quite limited. The priority will be to maintain healthy public finances. In addition, greater transfers of financial support to PEMEX are expected.”

The Ministry of Economy says that USMCA has been a powerful tool for the country’s economic recovery and the expectation is for this to continue. “USMCA will greatly benefit Mexico. No sector of the Mexican economy has benefited more from USMCA than manufacturers. The treaty attracted a significant amount of FDI to help expand productive capacity and ramp up exports,” said Ana López, Executive Vice President and General Director, AmCham.

However, there have already been disputes related to the treaty, which are expected to increase due to the energy reform.

Claudio Rodriguez, Partner, Holland & Knight, considers the bill “incoherent, illogical and impractical.” “It would lead to a paralysis of the energy industry in Mexico. Indeed, as originally proposed, it means that with immediate effect, all permits and contracts in the hands of private companies are null but without a definition of a clear implementation path.” Similarly, Sean McCoy, Director, Edison Energy, said the bill should not be approved as it violated many principles of free trade agreements such as USMCA. While there is no doubt the country’s economic recovery will continue, its pace will depend on the certainty provided by the government and the efficient allocation of budgets.“Rule of law is important to foster long-term investment, especially for Read the complete article More about this topic

SMEs. If we can give strong certainty to investors, economic development can truly kick off,” said Francisco Lira, CEO, Banco Sabadell México.

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from the

Q: Why is the transition to digital payments important for Banxico and what is its role in advancing financial inclusion?

A: Every Mexican should be able to send and receive electronic payments or transactions in a seamless, efficient, transparent and safe way. This is Banxico’s visionbecause we consider payments to be a stepping stone on the financial inclusion pyramid. We believe that once people start entering the world of electronic payments many opportunities will open to them.

Once users have generated a history of electronic payments, several other financial services can be offered to them much.

New technologies have become a part of people’s lives and smartphones play an increasingly important role in their routine, so the flow of information that can be generated by introducing electronic payments can be significant. This is positive for societies as a whole. Financial entities can help to better characterize money flows and offer businesses a loan when their sales are low and then investment opportunities when they are high. This can generate a win-win proposition for both the financial sector and end user. If the positive effects stemming from the introduction of e-payments add up, growth and welfare can be achieved.

Q: How is Banxico ensuring that every player in the market is aware of their role in driving financial inclusion?

Miguel Díaz Díaz

A: The financial system is so complex that it is impossible for a single entity to coordinate it all. It is not possible for one entity to dictate what everyone else should do. One of our responsibilities is to create an ecosystem in which market forces can come in and

General Director | Banxico

coordinate everyone. The system should not be built on what an authority says but on market forces to operate efficiently. To achieve this goal, we set up the infrastructure from a back-office perspective to allow different actors to join the ecosystem.

Banxico Boosts Digital Payments Ecosystem

We see a lot of fintechs and bigtechs trying to enter the digital financial ecosystem and we need to create the conditions so that all those who want to do so can compete on a level-playing field.

We want different ideas and proposals to join the market. We want to lay the groundwork so that, even if you are a fintech with a customer base of more than 50 million users outside Mexico, you cannot take over the market immediately. We do not want a winner-takes-all situation in the financial system but a Darwinian ecosystem where ideas succeed or fail based on the benefits they bring to the general public.

For this to work, we need to open the ecosystem to external ideas that can be applicable across broad segments of the population, which are likely to come from small fintechs. For example, a startup with 10,000 clients relying on a closed ecosystem to generate a payment system will most likely fail. But, if this small business is allowed to join the financial ecosystem and these 10,000 customers can easily pay using a different financial institution, the startup will find an easier path forward.

We encourage a network effect among the various potential participants in the financial market so that their ideas compete,

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not the size of their network. If that was the case, small companies would be out of the market and just a couple of bigtechs would have sufficient scope to provide an adequate financial service. This would kill lots of potentially great ideas for society and particular market niches.

G

lobalization allowed companies to place each step of their production chain in a different country, which cheapens costs by benefiting from comparative and competitive advantages. However, these global production chains were unprepared for a world

catastrophe, such as the COVID-19 pandemic. Governments shut down economic activities, causing millions of people to lose their income, disruptions in the global value chains, shortages in some products, and backlashes in some sectors. For example, there is still sub-production in semiconductors chips that has forced some automobile companies to use old technology to keep their production lines active. However, 2020 was not exclusively about bad news. For some sectors, such as health, digital industries, videogames and online sales, the situation represented an opportunity to grow. Moreover, the digital adaptation expected to take place in a decade accelerated as a result of the necessity to work from home, leading many people to acquire new computer equipment and companies to implement online platforms that

State of the Economy | 10

allowed their employees to do home office.

Overcoming the COVID-19 Pandemic

By Building Differently Iker Jiménez Director General for Global Investment | Undersecretary for Multilateral Affairs and Human Rights at Ministry of Foreign Affairs of Mexico

From the last quarter of 2020, economies started to recover.

Nevertheless, this recuperation is not bringing us back to the old status quo. Many companies are thinking of moving their plants to other countries, now considering not only costs but safety against disruptions in the global value chains. This situation, summed up by the new rules of the USMCA, presents a massive opportunity for Mexico to insert itself in global value chains and attract foreign investment.

With the purpose of attracting this reallocation of companies to Mexican territory, motivating investment that is already in Mexico to stay, and paving the way for entrepreneurs who are considering our country for their projects, since May 3, 2019, the Ministry of Foreign Affairs of Mexico has been responsible for carrying out economic promotion and investment attraction activities. The mastermind behind the project that would embrace these new functions is Javier Jileta, my predecessor. His vision was finally materialized on June 14, 2021, as the General Directorate of Global Investment (GDGI), which I have the honor to lead with the support of Deputy Minister for Multilateral Affairs and Human Rights at the Ministry of Foreign Affairs of Mexico Martha Delgado and Minister of Foreign Affairs Marcelo Ebrard.

GDGI assumes the role of the now-extinct ProMéxico for promoting Mexico’s strengths abroad, while the Ministry of Economy inherited the responsibilities of capitalizing on the opportunities from within. GDGI focuses on economic diplomacy, foreign investment and market diversification. We seek to be the link between international and private sector organizations, the three governmental levels and the more than 160 Mexican diplomatic missions abroad to connect national companies with foreign commercial opportunities and facilitate the establishment of capital in our country. To take the best from our efforts, we identified six priority sectors: mobility, life sciences, aerospace, infrastructure, agribusiness, and digital industries, although our scope is not limited to these. GDGI also accompanies and guides companies in the process of internationalizing their projects.

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We work together with UNDP, which helps us align these projects with the Sustainable Development Goals of the 2030 Agenda and support our strategies on principles of equality, inclusivity, human rights, and gender perspective.

Conference

State of the Economy | 11

Highlights

Cooperation the Key to Increasing Economic Competitiveness Ana López Mestre Executive Vice President & General Director | AmCham

José Román President & Managing Director | Nissan Mexicana and NIBU

Rasmus Duun General Manager Latin America | The LEGO Group

Beni López CEO | Softtek US & Canada

M

exico has built a place for itself on the international economic stage as a fully integrated manufacturing center. The country’s competitiveness is multisectoral but to continue growing and strengthening its capabilities, it needs to look

at industry as an ally, not an enemy. While issues abroad might impact Mexico’s economic competitiveness, there are several internal challenges that both the government and industry must tackle. “Cooperation between the private and public sectors is essential, coupled with an accelerated tech transition that fosters a fully interconnected ecosystem,” says José Román, President and Managing Director of Nissan Mexicana and NIBU. Major concerns for the sector in Mexico and abroad are climate change and sustainable manufacturing. According to Román, companies in the auto sector are already developing more efficient engines and better-quality fuels, which are expected to further increase interest in Mexico’s manufacturing capabilities. These capabilities are led by Mexico’s widely acknowledged high-quality talent pool. This talent will catalyze competitiveness, says Beni López, CEO of Softtek US & Canada.

To continue growing at this pace, education needs a boost. In Mexico, “education is underprioritized,” says Rasmus Duun, General Manager for Latin America at The LEGO Group. “This is making the difference between countries and their global competitive advantage.” One universal driver behind the country’s competitiveness is technology. Industry 4.0, for example, “not only boosts our manufacturing capabilities but also helps avoid logistics and supply chain disruptions,” says López. Tech must be promoted so that the industry ecosystem can be improved systematically, he adds. To create and foster local tech, training and education are also essential and joint sponsorships for research and innovation centers could help scale in-house talent, says López. Furthermore, launching innovation and development centers could push the country to the forefront of technology while supporting the implementation of factories and projects, adds Roman.

The integration of North America has provided Mexico with a great advantage by boosting the development of many different industries. Tech, however, is the key to success. “We have to invest in tech, regardless of the industry,” says Dunn. “Mexico is already an attractive investment hub and competitiveness powerhouse but we compete with China, the US and India. This enhances the

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importance of caring for our current projects and our in-house talent,” adds Ana López Mestre, Executive Vice President and Director General of AmCham.

O

n June 9, 2021, President Andrés Manuel López Obrador announced the appointment of Rogelio Ramírez de la O as Mexico’s new finance minister. The new minister’s academic profile, his professional experience and the

unanimous recognition of his talent and capacity generated great expectations regarding what his participation within Mexico’s “Fourth Transformation” might trigger. More than a few are convinced that with Ramírez de la O at the head of the Finance Ministry, Mexico’s prospects regarding its financial, fiscal, spending, income and public debt matters will improve.

These expectations are not limited to the possibility that some of the political problems afflicting the country will find a solution in the technical capabilities of the finance minister. Nor are they reduced to the possibility that the influence that this official exerts over the president could be a factor for overcoming the notion that in Mexico “everyone can make decisions about everything.” Rather,

State of the Economy | 12

these expectations reflect the desire that a person whose strong

The ‘Ramírez de la O Factor’ Arturo Carranza Energy Adviser and Consultant | CFE

interaction with the president is recognized can help move the government in a different direction.

This long-awaited change of direction implies that Ramírez de la O will try to influence the progress of key sectors, such as energy.

In this sense, many investors hope that Mexico’s new finance minister can promote a change in Lopez Obrador’s energy policy to make it more pragmatic and less ideological. What the official acknowledged before legislators just before his ratification — that he would demand to be informed and have a say in all matters related to PEMEX and CFE — encourages these expectations.

This change of direction also means that the work of the finance minister will help create a better investment environment, thus favoring economic growth. This is a vindication for the private sector: as long as the government signals that the rule of law is respected, companies will continue to invest in Mexico.

The expectations the private sector has built regarding the appointment of Ramírez de la O differ from those that the head of the Executive has of him. From López Obrador’s perspective, Ramírez de la O joined the federal public administration to deepen the guidelines upon which Mexico’s macroeconomic policy has been conducted in times of the “Fourth Transformation.” The components of this macroeconomic policy rest on a public spending program that does not include the increase nor the creation of new taxes or public debt, emphasizing instead the austere execution of the public budget.

In the background, which seems more like a concession to the private sector than an authentic conviction, President López Obrador has also suggested that the arrival of Ramírez de la O to the Finance Ministry has the purpose of stimulating synergies between public and private investment. But what could the person in charge of the public coffers do in this regard?

Although the expectations are as broad as they are contrasting, the truth is that, in practice, the scope of action of the finance minister is limited by the convictions of his boss, by the limitations

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that the law imposes on him and by the moment in which he takes on the reigns of this government branch. The latter is important because, in the second half of a six-year term, the dynamics of power and the decision-making process will begin to turn progressively to the games of the presidential succession.

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from the

Q: What legal support is in demand by companies in Mexico’s energy sector?

A: The electric, oil and gas sectors have been living a different reality than the ones existing before the current administration. As a law firm, this has changed our outlook as well: instead of receiving numerous advisory requests from the private sector regarding new projects, ventures and power plants, we are, unfortunately, seeing more need for advice regarding how to restructure, litigate and file administrative or amparo procedures and defend themselves from government initiatives. Licenses, approvals and permits have almost come to a complete standstill. This, of course, partly has to do with the pandemic. Regulators are still in pandemic mode, meaning they need more time to complete procedures. The private sector is facing a perfect storm for these reasons.

The other problems we are facing have to do with regulation.

In 2013, former President Enrique Peña Nieto pushed the Energy Reform through Congress, essentially altering the Constitution so that private and international companies could enter the Mexican energy market. This reform required a level playing field, meaning asymmetric regulation and measures from the government that would affect the market share of PEMEX and CFE. The result stands almost directly against what the current administration wants to achieve, which is a

Juan Carlos Machorro

stronger state-owned presence in the energy sector.

To reach this goal, the executive branch began rolling out regulations under what it understood to be its executive

Partner | Santamarina y Steta

power. However, federal law stands one level above measures such as SENER’s reliability policy, so when these initiatives breached these laws, they were halted. In a way, this was a learning curve for President Andrés Manuel López Obrador, who began to amend the federal Electrical Industry Law (LIE).

USMCA Could Shift Focus of Mexico’s Energy Policy

Q: How can Santamaria y Steta help clients overcome the blockage in permitting and licensing?

A: We help clients meet all the requirements, as well as pushing for these permits to go through. We maintain good and sound professional relationships with these regulators, which allows us to get things done. The firm has been able to push regulators harder and speed up the process.

When we get few or no responses in our interactions with regulators on permits, a legal route through the court is the regrettable secondary option. The good news is that the courts have been responding efficiently and fairly. Some of the suspensions against the alterations to the LIE have been lifted. The final decision on the issue will likely take some months. Unfortunately, new project developments will slow down even more for the moment.

What is happening in the sector is a trend, which will eventually end. International players are used to these political swings and know that this is temporary. As their Mexican

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legal counsel, we are obligated to convey this message to our clients, as well as the assurance that the rule of law is to prevail. The legal framework cannot be destroyed. We simply need to protect investments and guard the legal framework for a while, and we certainly know how to do that.

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from the

Q: As the new President of the American Chamber of Commerce, what are your main priorities?

A: AmCham’s DNA is to strengthen integration between Mexico and the US to foster greater commercial exchange and collaboration that result in a better environment for social and business development. This historical, economic and cultural integration of both countries includes shared challenges but also opportunities for cooperation to solve them.

In this regard, in light of the socio-political juncture in both countries and given the impact of COVID-19, under my leadership AmCham will continue to contribute to Mexico’s competitiveness and bilateral integration, under five strategic priorities: (i) Economic recovery and integration of North America; (ii) Bilateral trade and USMCA’s implementation; (iii) Regulatory cooperation; (iv) Security and Rule of law: Trust and certainty for investments; and (v) Sustainable growth with social responsibility, care for the environment, compliance, and diversity and inclusion.

Q: What are the main strategies the Chamber is employing at this time to promote FDI in Mexico?

A: There is no magic trick; investment needs competitiveness and certainty. Nevertheless, USMCA represents a great opportunity for Mexico to access a 490-million-people market, and for the

Vladimiro de la Mora

block to grow in competitiveness and integration. At AmCham, we maintain a permanent dialogue with the authorities at all levels, sharing our expertise and vision on how to create these conditions of certainty, with legality, consistency, respect to

President | American Chamber of Commerce of Mexico (AmCham)

contracts, transparency and free trade.

Q: Which areas of opportunity have you identified in the commercial relationship between Mexico and the US?

AmCham Sees Shared Challenges, Opportunities

A: Through its stimulus package with support for state and local governments, families and small businesses, a commitment to investment and job creation, as well as a rapid advancing vaccination plan, the US has set the course for its recovery. Mexico must take advantage of this injection of resources into the U.S. economy, responding in a timely manner to a potential demand for exports and facilitating the creation of jobs and investment, through the enforcement of the Rule of law and respect of international agreements, including USMCA. Mexico has the opportunity to consolidate itself as the main ally of the US under the concept of “ally-shoring,” a step beyond nearshoring, since there is an additional value between allies with ideological affinity.

Q: Regarding the USMCA, how can Mexico further take advantage of this agreement to boost its economic recovery?

A: With its geographic advantage, the development of its industry and talent, and its export capacity, Mexico has a great opportunity to continue consolidating its position as a key partner and the best supplier to the US and Canada, with access to a market of

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490 million people. In the context of recovery, the agreement is a positive asset for investment flow and certainty, trust and collaboration. However, it is not enough to trigger social and economic development. Mexico must create the necessary conditions to encourage growth and certainty.

T

echnology has delivered different breakthroughs throughout history, which have been acknowledged as “technological and industrial revolutions.” These revolutions exemplify a human being’s need to optimize everyday tasks, facilitate working tools

and channel efforts that have a repercussion on the innovative creations that industries inherit. With these efforts, antecedents that delimited the way toward a business-industrial integral development have been developed.

The new technological revolution finds its tools within Industry 4.0. It combines operational techniques with state-of-the-art technology to optimize the processes of companies, organizations, institutions and the home itself. New telecommunication tools, such as internet and other technologies, have converged within Industry 4.0, which combines all these tools as well as a specialization in its opportunity niches. Industry 4.0 has thus become the new bet for innovation and the most important

State of the Economy | 15

breakthrough for those companies wishing to remain at the

Industry 4.0: The Bet for Business and Technology Lior Yafe Economic Counsel | Embassy of Israel in Mexico

forefront with the highest standards of innovation and efficiency.

It is important to mention that Industry 4.0 should not be considered just a migration from the traditional — that is phone calls and all that was saved in file rooms full of folders and documents. It is also a bet on a sustainable world in which not only environmental protection, thanks to phenomena such as home office, becomes relevant but transparency and information monitoring. In other words, Industry 4.0 is the foundation for tools that will facilitate the functionality of processes, from the smallest to the largest scales.

Industry 4.0 should not be limited as a corporate benefit, it should support all production processes, purchase-sell products, operating systems management, customer service, government platform optimization and also as a market opportunity that thousands of families will bet on after enduring the lifestyle jump taken over the last year and a half, which has also forced us to look for alternatives that contribute to responsible and sanitary social distancing.

Confinement repercussions and health distancing measures at the international level have taught us that the migration from traditional to technological is not a privilege of those companies betting on being at the forefront. Rather, the very need to maintain functions in the economic order at the micro, medium and macro levels finds in telecommunications, technology, platforms and processes automation the solution for an uncertain future that has also contributed to a change in everyone’s lifestyle.

Hundreds of startups around the world found prior to the health crisis, as well as during it, the opportunity to become the ideal market to offer different solutions that, although seemingly repetitive, resulted in an opportunity to reduce costs and create specialized technologies for companies.

Within the large solutions portfolio attributed to industry 4.0, the state of Israel offers a true catalogue of solutions that contribute to

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optimal business performance, as well as solutions that benefit the regular public. Israeli startups have become referents of innovation at the world level, not only because of the high level of technology they develop but because of how disruptive their solutions are, their cost accessibility and the high impact they have globally.

A

s we focus on the economic recovery from COVID-19, we have another global issue that is of the highest priority: climate change, the effects of which could transform the way we live and develop as humanity. In the last general assembly

of UN, Secretary-General António Guterres expressed it frankly: “We need a 45 percent cut in greenhouse gas emissions by 2030,

so that we can achieve carbon neutrality by the middle of the century.” Although the world has gained awareness on this subject and taken very important steps in recent years, it is still necessary for industries and business leaders to further increase their efforts and create solutions for more sustainable processes. All stakeholders must align with reducing CO2 emissions.

The good news is that globally there is an increasing sensitivity to this. Proof of this is that the total value of sustainable investment assets around the world reached around US$35 billion just last year, which illustrates the importance that countries are placing

State of the Economy | 16

on this issue; however, there is still much to do. I would like to

How Can Companies Contribute to Sustainability?

Manuel Macedo President | Honeywell Latin America

reflect on six recommendations, which, from my perspective, can accelerate and strengthen our contribution toward sustainability: 1. Join global commitments Carbon neutrality is one of the most important strategies to achieve a more sustainable world. The UN has involved countries that emit more than 65 percent of greenhouse gases, representing more than 70 percent of the global economy, to reach carbon neutrality by 2050. In the case of Honeywell, in addition to committing to achieving this by 2035, we allocate 50 percent of our research and development budget to the creation of technologies that have a positive impact on the environment.

2. Align business strategies with sustainable goals We must ensure that our business strategies and sustainability goals are fully aligned. Our perspective must be holistic and not as two separate or conflicting areas. This alignment makes the difference if we want to demonstrate a real commitment to take sustainability to the highest level of relevance within the company.

3. Measurement end to end It is key that once we have outlined objectives, we begin to monitor fulfillment by generating reports that provide updates of our progress to our stakeholders. Besides transparency, this is evidence that our companies’ commitment is solid.

4. Technology allied to sustainability Companies invest in innovation to increase their competitiveness.

In the same way, we should ensure resource allocation into technology creation that will offer solutions to fixing sustainability problems.

5. Build community In each region where we establish an operation, we should make sure we give back to the community. It is crucial to be up front and align our programs to work with our employees, vendors, customers and communities on climate change issues.

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6. Small actions count too Finally, from within companies, adjustments can be made to contribute to a more sustainable world, from adopting technology for the smarter use of energy and water to creating a culture of saving resources, such as decreasing paper consumption.

Conference

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Highlights

Pandemic, Nearshoring Raise Industrial, Logistics Demands Claudia Avila Connelly Executive Director | AMPIP

Luis Gutierrez President | Prologis Latinoamerica

Jorge A. Fabris Managing Director | Newmark

Juan Rodrigo Vega Chief Marketing Manager | Insur

W

ith the economic recovery seemingly in full swing, the growing demand for nearshoring manufacturing and logistics-focused activity provides Mexico’s industrial parks with a great deal of demand. Adapting to current needs

is essential to attract these new players, argue industry experts, but this shift should also align with optimal investment attraction strategies. “The real estate market for industrial and logistics players has been one of the winners of the pandemic, although seeing markets in terms of winners and losers is too simple because they are all intertwined,” says Claudia Ávila, Executive Director of the Mexican Association of Industrial Parks (AMPIP).

Two main drivers are pushing demand in the market: the growing need for nearshoring to outsource manufacturing or logistics to Mexico, as well as the spectacular growth of e-commerce. Ávila mentions that the latter industry has experienced a whopping 81 percent growth from 2019 to 2020, according to a report from the Mexican Association of Online Sales (AMVO). “We are experiencing record growth in the industry,” says Enrique Lavin, Country Head of PGIM Mexico, the local arm of a leading global real estate manager and administrator. “Nearshoring is a reality. We see it increasing 15 percent year-over-year for industrial parks and logistic centers,” he adds, noting that most players settling in the Mexican market tend to come from the US and Asia. But neither manufacturing nor logistics are standing still. Both are moving with current trends, such as sustainability, environmental responsibility, digitalization and the use of electric vehicles (EVs).

“Adaptability to new challenges and trends is key,” says Juan Rodrigo Vega, Chief Marketing Manager for CONSTRUCTORA INSUR. Investment volume in 3Q21 hit a record high, reaching US$193 billion, according to infrastructure giant Newmark’s 3Q21 Capital Markets Report. In the current market, investors are looking for higher efficiency: “It is necessary to address challenges from industrial players looking to become more efficient,” says Jorge Fabris, Newmark’s Managing Director.

Though adaptation is essential for the success of real estate companies, the shift to client demand should go hand in hand with attracting foreign direct investment (FDI). Because Mexico is widely recognized as a force in manufacturing, with an excellent workforce to boot, the country is well-positioned to attract such capital. In fact, Mexico is one of the world’s top locations for FDI.

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“During events and panels, people on the outside often see Mexico as a potential winner. We are in a privileged position to make good use of growing demand,” says Fabris.

Mexico’s Economic Overview For 2022 and the Role of the GDGI Iker Jiménez Director General for Global Investment | Undersecretary for Multilateral Affairs and Human Rights at the Ministry of Foreign Affairs of Mexico

Bilateral Efforts Strengthen Health, Sustainability, Development Jon Benjamin UK Ambassador to Mexico

Demonstrating the Value of Mining to Mexico Bradford Cooke CEO | Endeavour Silver

The Constitutional Electricity Reform Fallout Santiago Arroyo Director General | Ursus Energy -

PEMEX Toward the End of the SixYear Presidential Term Fluvio Ruiz Alarcón Advisor | Senate of the Republic

Democratize CFE If It Is to Lead the Energy Transition Leonardo Beltrán Distinguished Visiting Fellow | Center on Global Energy Policy at Columbia University

Mexico’s Energy Reform: Sovereignty, Transition, Development Fedlala Akabani Minister of Economic Development | Mexico City

Toward a New Stage of Mexico-US Cooperation Ana López Mestre Executive Vice President and General Director | American Chamber of Commerce of Mexico

Mexico, South Korea Kick Off Free Trade Agreement Negotiations 02/03/2022

Global Supply Chains to Continue Facing Disruptions 29/03/2022

2

Finance Over the last few years, the fintech sector has become increasingly robust, injecting dynamism to the financial sector, incorporating people and companies that could not benefit from traditional banking, in addition to facilitating processes and payments. In Latin America, the COVID-19 pandemic became the catalyst for further digitization in finance, as lockdowns limited the use of traditional services, leading fintech users to grow 220 percent.

After Brazil, Mexico has the largest number of fintech companies in Latin America. In 2021, the number of fintechs operating in the country grew 16 percent, reaching 512 companies. While there has been growth, experts say there are still many challenges ahead for Mexico to be as competitive as other countries in this sector. Digitization has not penetrated the public sector as successfully as in the private sector. There is resistance and the Mexican regulatory framework has not incorporated major fintech trends.

While experts say these challenges need to be addressed, they agree that 2022 will be a year of consolidation for fintechs, especially as 100 institutions are expected to be licensed. In addition, if successfully reformed, the Fintech Law could result in a more modernized and strengthened sector. If these two factors are achieved, Mexico could become the epicenter of financial innovation in Latin America in the short term, experts say.

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Finance

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Analysis Digitization Still a Roadblock to True Financial Inclusion

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View From the Top Miguel Díaz Díaz | General Director | Banxico

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Expert Contributor Jorge de Lara | Vice President and General Manager for GCS | American Express Mexico and Latin America

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Expert Contributor Aito Chinchetru | Founder and Co-CEO | Fintonic

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Expert Contributor Héctor Cárdenas | CEO and Co-Founder | Conekta

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View From the Top Juan Luis Bordes | General Manager | PayPal Mexico

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Conference Highlights Fintech Filling the Gap for Frustrated Consumers

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Expert Contributor Juan Carlos Castro | Co-Founder | Briq Fund

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Expert Contributor Cristian Huertas | Country Manager | BNEXT

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Expert Contributor Lisset May Cervantes | Senior Director Sales | Kueski

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Expert Contributor Javier Martínez | Chief Product Officer | Bitso

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Content Links

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Digitization Still a Roadblock to True Financial Inclusion Digitalization has been key to advancing financial inclusion in Mexico. However, a bigger change is needed, with awareness and regulation the major priorities to make inclusion a reality. “The risks of not digitally transforming are too great to ignore, which pushes business owners to let the fear go and adopt such tools to ensure survival. I tend to share this view, particularly considering how much this sector stands to gain from this new digital reality,” Vice President and General Manager at GCS American Express Mexico and Latin America Jorge de Lara told MBN. Digitalization is already a crucial component of Mexico’s financial inclusion strategy. Facilitating access to financial products and services to private clients and MSMEs while growing digital payments in both the public and private sector are two of the main objectives of the National Financial Inclusion Policy established for 2024, according to the National Banking and Trading Commission (CNBV).

There have already been efforts to advance digitalization and financial inclusion in the public sector, such as SPEI and the CoDi payment system, which allows account holders to pay in any establishment via a QR code generated by a smartphone.

While this option offers an easy and accessible way to advance digitalization, results have been lacking, according to Jaime Márquez, Director of Business Development, Grupo STP/LGEC. “During its first year (up to September 2020), 5.1 million bank accounts enrolled, according to official data from Banxico, just about 30 percent of the goal that had been set. Furthermore, the pandemic put the brakes on the implementation of the platform,” Márquez told MBN. Digitalization efforts have been most evident in the private sector, mostly led by fintech companies. These players have been essential in the digitalization of the financial system, partly because of banks’ resistance to change and their disinterest in providing financial services and capital access to the unbanked Mexican population. Having said that, banks have gradually delved into new business models through apps that give users more freedom when managing their finances, even allying with fintech newcomers to further strengthen their offering. “New business models have become a way to transform the bank and develop competitive advantages that will help us to attract new clients and do business,” Jordi García, Head of New Business and Strategy, BBVA, said during the Singapore Fintech Festival.

Fintech regulations are still evolving, however. “Fintech companies must formulate robust and ethical growth strategies with the best interest of their consumers in mind. To do so, companies are placing a salient emphasis on cybersecurity that is necessary to avoid security breaches and maintain consumer confidence,” says Steffan Moller, Co-Founder and CEO of Klar. Therer are also many aspects of fintech that have not been addressed by regulation.

“Despite banking-as-a-service (BaaS) being an international trend, Read the complete article More about this topic

it is still not properly recognized in the regulatory framework.

However, this model can be adopted using other regulatory figures,” says Rocío Robles, Partner, Tenet Consultores.

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from the

Q: CoDi has been one of Banxico’s efforts to establish the right market conditions. What challenges have you faced in increasing its penetration?

A: CoDi is just a fraction of the ecosystem we have been developing. The Interbank Electronic Payments System (SPEI), for instance, is a powerful infrastructure that powers others in the financial system. We have peaks of around 17 million transactions a day, have already processed more than 1 billion transactions this year and expect to have 2 billion transactions by the end of 2021. Every month, we see increases of up to 100 percent over the previous year. We are talking about millions of transactions, so growth of this magnitude is quite amazing. We believe that SPEI is a core functionality for the financial ecosystem and we have to keep improving it so that more users can join the electronic payments party.

To get people on board with electronic transactions, we look for ways to simplify them, such as CoDi, our request-to-pay solution.

We have other projects to lay more foundations for building an open financial ecosystem. At Mexico’s Central Bank, we want users to have the power to start their payments from wherever they want and not from wherever their financial institution wants them to.

Q: What are the next steps for SPEI and how do you plan to manage an increase in transactions while keeping them secure?

Miguel Díaz Díaz

A: Security is not an issue because it can be scaled very efficiently.

However, scaling up processing power and payment settlement processes is an interesting challenge. At Banxico, we have been

General Director | Banxico

working for about six years to improve SPEI. We have already generated a structure that allows the system to clone itself to duplicate its ability to process transactions. With this solution, we are just buying time because we already have a project in the pipeline: SPEI-2. This new platform will have a fully scalable system

Banxico Boosts Digital Payments Ecosystem

where it is not necessary to clone the whole ecosystem, only the necessary components where bottlenecks are occurring.

Q: Mexico remains a cash-loving country. In addition to this, what other challenges have you identified in the market and how do you plan to overcome them?

A: We understand that cash is highly efficient. When a customer goes to a shop all they have to do is take out cash and pay; the worst that can happen is that the seller has no change. Even if the 40 million users who have a bank account in Mexico wanted to carry out digital transactions, most of them live in communities where the local corner shop does not accept electronic payments.

It does not matter if a person can make electronic payments if they do not have a place to do so. Faced with this reality, users are naturally expected to keep withdrawing cash every payday.

For shop owners to accept electronic payments, the best strategy is to drive the ecosystem through a tool that almost everyone has: a smartphone. We know this process will take time and people will have to get used to the new way of making and receiving payments. Some say that this system has not advanced because

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financial education is necessary but I do not think this is true.

Banxico and financial institutions have not been active enough with marketing campaigns to let consumers know about the different solutions we have developed. But perseverance will win the race at the end of the day.

T

he decreasing use of cash in recent years has been a reality in many countries, particularly within urban environments. Emerging markets, however, tended to remain particularly tethered to the use of paper money, with many small and medium enterprises (SMEs)

handling their operations almost exclusively in this manner. When the pandemic hit over a year ago, everything changed. Hundreds of businesses had to rethink their models overnight, with many being forced to figure out remote ways of conducting transactions.

According to the 2020 Payment Methods Survey carried out by the Bank of Mexico, the use of cash went from being preferred 93 percent of the time to 86 percent of the time.

This is, in part, a direct consequence of companies finding a lifeline in e-commerce. The study on SME Online Sales for 2020 released by the Mexican Association for Online Sales (AMVO) showed that six out of 10 SMEs currently sell through the internet, a stark 94.6

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percent increase over 2019.

The Cash-Free Future of SMEs Jorge de Lara Vice President and General Manager for GCS | American Express Mexico and Latin America

While the pandemic continues to present enormous challenges to the economy, SMEs should not seek to roll back any digital tools adopted and must instead aim to capture the opportunity to revolutionize the core of their operation, reducing the time to recovery of their markets and jump-starting long-lasting competitiveness. Digital transactions, which present considerable advantages to small organizations in terms of agility and optimization, will very likely become the norm in the coming years, and business owners who dive fully into digital tools will find completely new growth paths within a global marketplace.

Perhaps what is most important for the market is to recognize the challenges this motion will have to cope with and ultimately overcome. These are some of the biggest challenges I think SMEs will face in the coming years: Cost: As mentioned, automated payment solutions are undoubtedly more accessible today than ever before, particularly given their scalable nature. Nonetheless, they do represent a cost that should be duly considered, particularly for a small business. If the upfront expense is strategically planned for, even considering financing if necessary, this investment should eventually prove its soundness.

Security: At first, it might seem like the tangibility of cash holds a certain trustworthiness. However, this quickly becomes less apparent as a business begins to operate and cash flows are much harder to keep track of, with financial leakage becoming an everpresent threat. An appropriate automated payment solution should greatly reduce such risks, while also providing increased reliability in terms of financial management.

Learning curve: Every organization taking steps toward a fully digital operation will face a specific learning curve, determined in large part by their industry and business model. That said, emerging markets still face a great challenge when it comes to their population’s preparedness in digital skills. Businesses, both big and small, have a fundamental role to play in this regard,

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with investment on training and upskilling employees and collaborators being paramount. This will make a company more innovative and competitive while feeding the ecosystem and the market, building a stronger economic platform upon which to carry out their business.

O

ne of the purposes of fintechs is to provide users with better services that respond to their new needs. With the pandemic, it has become clear that progress has been made in this area by providing a wider and better range

of solutions for those who already have financial products and even for those who are still unbanked. In this regard, a study by Statista estimates that by 2022, there will be a total of 74.62 million fintech users, 86 percent attributed solely to digital payments.

In this context, fintechs have been a complement to the traditional banking system in Mexico and other countries.

Backed by the Law to Regulate Financial Technology Institutions, they have enriched the financial environment, aided by various technologies, such as open banking.

Open banking makes it possible to automatically and securely

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consult, through application programming interfaces (APIs) or

Regulating for the Benefit of People: The Case for Open Banking Aitor Chinchetru Founder and Co-CEO | Fintonic

web scraping, the transactional but anonymous information of financial services customers. With this, companies and banking institutions themselves benefit from a complete diagnosis of the customer’s financial behavior to offer the right products at the right time, thus gaining a more complete view of the customer. In the case of users, accessing applications, products or services based on open banking allows them to better manage their money, access budgeting tools or savings goals to optimize their finances, as well as compare different products in one place or cheaper loans, investments with better returns and better insurance, among others.

One of the most important resources for users is the Personal Finance Manager (PFM) — a result of open banking — which is a tool that helps people to understand their finances and improve their financial management in a simple and fast way.

According to data from ITAM and Nacional Monte de Piedad, 67 percent of the population is in a critical situation in terms of financial literacy.

Open banking allows a wide variety of benefits for both parties, since it provides companies with better knowledge of users and potential customers, automation of KYC (Know Your Customer) processes, creation of new products and services, cost reduction by using third-party infrastructure, expansion and loyalty of the customer base, new business models and fraud reduction, among others.

According to a study conducted by Finerio, called Open Banking in Mexico, Diagnosis and Trends, 90 percent of the executives surveyed believe that open banking represents a great opportunity for their companies and 72 percent say that it will foster the development of better digital services.

However, this technology, like several others that fintechs have adopted, has a much greater impact on the user because it has made it possible for them to empower themselves, allowing them to share their information securely with third parties to obtain added value in financial products and services with the

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understanding that only they are the owners of such data. At the same time, Mexico can gain valuable lessons about what is being done in other countries and take note, developing usercentric laws, understanding that the democratization of data provides benefits for both individuals and financial companies.

O

ver the past few months, we have heard, proposed and discussed new ways in which the future of payments will evolve alongside the current pandemic. Logically, technology has been at the very center of these conversations. There is no

shortage of examples of how technological developments have received widespread adoption since the sanitary emergency began. In Mexico, the number of SMEs selling online has increased by almost 97 percent. End-consumers have also turned to their phones and screens to solve day-to-day issues, pushing the overall value of e-commerce up 81 percent compared to 2019.

As we continue on the path toward digital transformation, we must ask ourselves what are the limits of current adoption trends and how we can avoid hitting roadblocks in the future. While many businesses are implementing new technologies to overcome new challenges, we still need to ensure that these technologies achieve adoption. Ideally, technology adoption would follow the steps of

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innovation, early adoption, early majority and late majority. But in

In Journey Toward Digital Adoption, the User Always Leads the Way Héctor Cárdenas CEO and Co-Founder | Conekta

Mexico, as in many Latin American countries, the journey toward adoption is not linear. There are considerable differences in how people approach, use and understand technology, depending on the level of access they have had to digital tools.

If we accept as technology providers — and especially those of us in the fintech sector — that we operate in uneven markets, we arrive at the uncomfortable conclusion that one product does not fit all. Even if this sounds like a complicated landscape, there is a simple rule that can connect innovation with adoption in these markets: the user calls the shots. Always.

Traditionally, the conversation around cash payments in the financial and fintech sectors has oscillated between two opposing takes: the first, argues that cash is king, the other argues that the future is cashless. Neither of these views recognizes that the user has real, everyday needs that could be solved today, regardless of the form of payment that is available to them.

It seems paradoxical that an offline form of payment could become the key to technological adoption. However, this is the case. Here’s why: There are more than 40 million Mexicans without bank accounts who would be effectively excluded from the digital economy and the e-commerce dynamic if they were not able to pay in cash for online purchases. For businesses, being able to process cash payments for online sales, also means access to 100 percent of the Mexican population — a direct incentive for their potential growth.

Today, the technology that allows cash payments to become a part of the digital landscape, is also bringing people and businesses one step closer to digital adoption, and bringing those who would not have participated in the ecosystem within the boundaries of fully integrating technology into their operations or day-today activities.

With payments, it is equally important that we offer our clients the possibility to receive all forms of payment available (debit and

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credit cards, cash, bank transfers) and that we offer the payment technologies that adapt to varying degrees of adoption: from payment links for those who don’t yet have an online presence, to specialized solutions for those who have gone further in their adoption journey.

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from the

Q: What are the features that will allow PayPal to stand out from its competitors amid the growth in e-commerce?

A: In 2020, e-commerce grew by over 81 percent compared to 2019, according to the Mexican Association of Online Sales (AMVO). During the past year, 5 million people stopped or reduced the use of cash and 3 million turned to credit and debit cards for digital platforms, according to Mexico’s Central Bank (BANXICO). These data illustrate the large shift that was unleashed by the pandemic. PayPal is the oldest electronic payment platform in existence. In Mexico, we are still spearheading online payments and we are positioned as the leading platform.

Although we are a payment platform, we are also a risk management company at our core. The actions PayPal takes to minimize risk for those who use our platform are incredible. We have several offices around the world that are focused on fraud prevention and risk containment. Additionally, PayPal users have Buyer Protection, which backs them against businesses.

If someone buys earrings from an online shop and the wrong product arrives, we support the customer with its claim and, if applicable, refund the money. This benefit is also available to sellers. It is important for us to support SMEs as they are such an essential part of the Mexican economy.

Juan Luis Bordes

We also reduce risks for users. When users check out from an online store using PayPal, they only have to provide their username and password. They will never have to type their card details and in many cases not even their address.

General Manager | PayPal Mexico

Q: Beyond strategies to attract new customers, how does PayPal take care of its existing customers?

A: In PayPal’s double-sized network, the user needs the

Digital Inclusion: PayPal’s Approach to Financial Empowerment

merchant and vice versa. Sometimes, sellers install our platform because their buyers ask for it. We are constantly running education campaigns about PayPal’s features and benefits to attract more users to the platform and retain them.

PayPal’s user services aim to improve the online shopping experience. The difference between shopping online and shopping in a brick-and-mortar shop is the experience.

When someone goes to a physical shop, they get to touch a product and see how it works. At PayPal, we try to make the online experience as smooth as possible. Digital shoppers get frustrated if they have to click 20 times to complete a purchase, especially at check-out.

On the merchant side, we are constantly working with them to offer the best experience. First and foremost, with anti-fraud tools. We are also constantly innovating and creating new products. One of the biggest pain points for e-commerce, apart from chargebacks, is the conversion rate. PayPal’s main goal is to achieve the highest possible conversion rate and to avoid as much chargeback fraud as possible. This is done using a large amount of historical data on customer behavior. We can see the

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speed at which people are typing and whether they are logged in from a smartphone or a computer; we can even see the tilt of the mobile phone to check that the person behind it is who they say they are. This achieves two objectives: preventing fraud and helping businesses gain the highest possible conversion rate.

Conference

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Highlights

Fintech Filling the Gap for Frustrated Consumers Rocío Robles Partner | Tenet Consultores

Stefan Moller Co-Founder & CEO | Klar

Pablo Viguera Co-Founder & Co-CEO | Belvo

Aitor Chinchetru Founder & Co-CEO | Fintonic

Marlene Garayzar Co-Founder | Stori

F

rom long lines at the bank to high interest rates, the average consumer in Mexico is fed up with the traditional banking system, creating an opening for fintechs to rise to the challenge and capture market share. “The Mexican market is screaming for

disruption in its financial and banking markets. This is why so many startups and fintechs are coming to Mexico, since they can provide better products and services,” says Aitor Chinchetru, Founder and Co-CEO of Fintonic.

The continuing reluctance of traditional banks to provide better customer service, coupled with a perceived disinterest in providing financial services and capital access to the broader Mexican population, has come at a cost in the era of digitalization. Fintechs have turned Mexico’s traditional banking model on its head, accelerating the democratization of access to capital that has been historically available to only a small percentage of the population. “Only 15 percent of Mexican citizens have access to credit cards and most of them are highincome earners,” says Marlene Garayzar, Co-Founder of Stori.

The nascent fintech sector found significant success by disrupting the traditional banking model that had limited financial services to a select few. As market disruptors, fintech companies have deliberately made the financial services market better for the consumer by driving up market competition in a sector that was complacent and reluctant to change. Fintech emphasis on business to consumer services has driven the rapid growth of many companies but this is not to say that they will completely replace traditional banks. “Undoubtedly, alliances between both parties will have to emerge because the banking infrastructure traditional banks created will not disappear overnight,” says Stefan Moller, Co-Founder and CEO of Klar. An example of this is user demand for cash-outs, which require physical infrastructure that fintechs do not have and is expensive to install.

Other challenges also abound. Fintechs have to comply with a regulatory system that is incomplete and unprepared to address the needs of the sector. Related regulations are still evolving, posing a further challenge that does not concern traditional banks. This requires individual fintech companies to formulate robust and ethical growth strategies with the best interest of their consumers in mind. Despite the hurdles, a revolution is necessary. “Only through pushing the existing

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limitations can we expect structural change. Otherwise, we can only expect marginal change,” says Pablo Viguera, Co-Founder and Co-CEO of Belvo.

T

he shock that the world received with the appearance of COVID-19 has had profound implications in all areas of life. The economic and financial sphere has not been the exception. Taking a first look at how the financial services landscape

has changed in emerging economies, the trend toward digital services is clear. According to data from a report prepared by the Cambridge Center for Alternative Finance and The World Bank, which surveys most financial service providers in the world: + 65 percent of respondents report a significant increase in the use of digital payment and remittance services + 24 percent report significant increases in the use of digital banks + On average 15 percent of those surveyed report significant increases in the use of digital loan and capital raising platforms With the restrictions that were experienced in 2020, most

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users migrated to digital channels. However, digital channels

Digital Finance in Post-COVID Mexico Juan Carlos Castro Co-Founder | Briq Fund

are an area that most traditional players in the financial sector are in the process of exploring. On the other hand, there is a vibrant ecosystem of new companies that were born in the digital channel and that have already been offering services via this medium: the fintech world. For these companies, an unprecedented scenario was proposed in which they went from being initiatives that were in the process of validating their business model, to real alternatives for millions of users eager for financial services. The adoption of the digital channel accelerated at a dizzying speed and it seems that there is no going back.

In Mexico, the government chose not to implement supportive anti-cyclical policies. This created an additional need for financial services. And finally, the paralysis of some traditional institutions in the face of the risk posed by a crisis created a demand for financial alternatives. This demand has been met to the extent possible by traditional financial institutions that already had digital channels operating, by companies with traditional financial models but with innovative value proposals, and by the fintech world (such as crowdfunding, digital payment processors and others).

According to AFICO (Association of Crowdfunding Platforms), new users increased 120 percent and volume of money funded increased 50 percent YoY during 2020. These figures are just a first glance, but from my trench at briq.mx, this trend continues in 2021 and at an increasing rate. The void in financial services in Mexico created the perfect runway for alternative players to become relevant for the economy.

Like any crisis, for some it poses risk and for others an opportunity.

A positive outcome of this crisis is a more competitive financial system. The leap that some business models were able to make, validated them. The need for online seamless financial services pushed many traditional institutions to force the advance in digital channels. And all this translates into improvements

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for users. Less friction and waiting times, more and better service options, fairer rates, more flexible and tailor-made schemes. In short, as a result of this crisis, it seems that the promise of a more democratic and inclusive financial system is increasingly close.

E

mbedded finance is the new cool term adopted by fintechs and corporations to define the fusion of any product and financial services. To give a clear example of embedded finance, let’s talk about Apple, which has a LARGE user base and decided

to promote a financial product: the Apple card, within its portfolio of services. The card is powered by Goldman Sachs but is offered in an Apple flavor.

In Latin America and Mexico, there are several companies that are trying to do the same thing to get more value from their customers (and more data). Some companies have made a strong bet on this, like Rappi, which went hard on fintech (at least in my opinion) to be able to keep raising massive amounts of money while it figures out how to get closer to profitability. Others, like Oxxo, are trying to leverage their footprint to build a financial company and digitize their

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user base.

‘Embedded Finance’ Is the New Cool Kid on the Block

The huge difference in these two companies is that one of them was born digital, has a board that is fully aligned with losing money while building an amazing product, and has a stockholder base that is OK if the company fails and goes bankrupt.

I carefully chose these examples to talk about what, in my opinion, are the do’s and don’ts of embedded finance.

Cristian Huertas

Rappi understands the product management principle but

Country Manager | BNEXT

is paying off: it has been able to raise superb rounds for its

lacks the massive amounts of money that Apple has. Its bet fintech units in its most attractive markets, although it still has the challenge of taking the company closer to profitability. If it is able to achieve outstanding results then it will be closer to profitability but if it accomplishes moderate results, the hole in the budget will be so large that it might have to close the company sooner, or at least heavily restructure the business.

Finally, there is Oxxo, which is trying to launch a fintech product on its own. Oxxo is one of the most recognized brands in Mexico, with one of the most formidable footprints and highly recurrent customers. But it is part of a conglomerate, not very digitized, with a shareholder base that is very profitdriven and trying to do tech. It relies on its footprint to drive clients to its product but it can’t be very aggressive on the incentives because of its profit-first mentality. Also, Oxxo is entering into the regulated ecosystem. Any wrongdoing will not only affect the number of cards distributed but also the number of cokes sold.

If you happen to own or manage a large corporation and see the opportunity to embed finance products within your value proposition, remember: + Fintech is regulated; if something goes wrong your core business could be affected. + Fintech is capital intensive, especially if you are considering lending.

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+ Fintech is a tech-heavy business. + Partnering is a good way to speed-up the experiment and learn. + Verticalizing will be hard and capital consuming, especially if you weren’t born digital; also, you will sacrifice time-to-market.

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new wave of Buy Now, Pay Later (BNPL) services, which allow consumers to buy an item and pay later in interest-free installments, have lately been shaking up the traditional credit card business. In the US, this solution grew 215 percent year over

year in the first two months of 2021, according to an Adobe analysis. BNPL is most popular among millennials and Generation Z, who prefer to have access to a variety of payment options and have proven to be quick adopters of new technologies. Users are attracted to the feature of receiving their purchases right away while organizing repayment for weeks or months. In some cases, it serves as a supplement to credit cards; in many cases, BNPL serves as an alternative, which essentially provides free financing for the consumer.

In Mexico, this solution represents a huge opportunity if we consider the little access to traditional banking, low banking, high cash flow and the limited diversity of payment methods. But,

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adapting to this business landscape has represented a difficult

The Latest Disruption in Finance: Buy Now, Pay Later Lisset May Cervantes Senior Director Sales | Kueski

challenge for foreign BNPL providers. For context, 60 percent of the population does not have access to banking services and approximately 82 percent do not own a credit card.

Currently, 95 percent of global commerce takes place using traditional methods of payment, whereas the new online systems cover only the remaining 5 percent. However, thanks to digitalization creating new alternatives to conventional payment methods, this situation is steadily changing. Besides new ways to move money, entirely new ways to make business and safe transactions are being born.

If we add to this the high level of fraud and chargebacks in the country, successful implementation of this payment method in the country would mean safer transactions, e-commerce growth, and access to new markets. In Mexico, Kueski Pay is a pioneer in this industry.

Kueski Pay has allowed hundreds of national and international companies to increase their online sales by up to 70 percent, eliminating chargebacks and increasing the average ticket by up to 50 percent. It also allows users to generate a credit history since we report when customers pay on time (or default on a payment), which is something that the large global BNPL leaders typically do not track.

COVID’s impact on income was undoubtedly an accelerator of this trend and there is no turning back; even users, unlike any other banking product, enjoy sharing their experience buying online and partializing their purchases.

We are living exciting times for the BNPL industry. This year, we saw the biggest takeover deal in Australian corporate history when Square announced that it is acquiring Australian BNPL giant Afterpay in a US$29 billion all-stock deal. There’s no doubt this is an indication of a rapidly growing industry.

As the former commercial chief at PayPal, Dana Stalder, wrote,

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“Every five to 10 years, the global payments industry undergoes a critical innovation cycle that determines the winners and losers for the next several decades. The last major transition was the shift to NFC-based mobile payments.” Today, it is the turn of the BNPL solutions because, let’s face it, millennials don’t like credit.

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he world has seen a dramatic change in financial services in the past decade. Big data analytics, decentralized payments, peer-to-peer platforms, electronic transfers and mobile access to financial services have changed the way we save, spend, and

transact. And yet, while some of us have been able to enjoy a myriad of financial services at our disposal, others still lack access to basic financial services.

In the case of Latin America, the region has historically depended on the use of cash for payments and transactions and still has much to overcome in terms of bank penetration and financial services reach. According to figures from INEGI, only 47 percent of Mexicans have a bank account. The bulk of the population that does have access to these services lives in urban areas that have a medium to high level of income.

The opportunities enabled by financial technologies to bridge

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gaps in financial inclusion is enormous, and this is where crypto-

Using Technology to Bridge Latam’s Financial Inclusion Gap Javier Martínez Chief Product Officer | Bitso

backed solutions come in. Beyond speculative purposes, specific use cases for cryptocurrencies in Latin America can address many of the rigidities and weaknesses found in the region’s traditional banking system.

Crypto-powered solutions can enable efficient, faster and cheaper cross-border payments than traditional processes. These solutions can increase response time by up to 3x and decrease commissions by more than 50 percent. According to Banco de México, remittances from the US to Mexico grew by 21.75 percent between January and May 2021, introducing US$19 billion into the Mexican economy. If we consider that the estimated average commission fee for sending remittances through traditional methods is 10 percent, this translates into Mexicans having paid more than US$1.9 billion in commissions during the period under review.

Cryptocurrencies can also play an important role in countries that have been troubled by the regressive effects of inflation and capital controls, such as Venezuela and Argentina. In these countries, using cryptocurrencies as a store of value can help to bypass the erosion of purchasing power. This can be accomplished not only via commonly known crypto assets such as bitcoin, but also through stablecoins, which are less volatile and enable exposure to traditional fiat currencies. Furthermore, as a borderless means of exchange, cryptocurrencies also offer an alternative to interact with the global economy.

There is still much to be done in terms of perfecting products and services that are simple and intuitive enough to be used by everyone and this is a mission that, at Bitso, we have taken on with great responsibility. Added to these factors is Mexico’s smartphone penetration and the steady increase in its use. A main challenge, therefore, is to create products that leverage this increase in digitization and internet access. Doing so accurately may open the door of basic financial products and services to tens of millions of previously unbanked Latin Americans, and hence bode well for the region’s financial inclusion and development.

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To help ensure permanent change, and drive the new generation of financial services, we must continue to create and promote digital tools that are easy to access and simple to use. To foster trust in financial technologies, these tools should also be as secure and transparent as possible.

What to Expect From the Latam Open Banking Ecosystem in 2022 Pablo Viguera CEO and Co-Founder | Belvo

Transforming the Lives of Mexicans Through Investments Javier de la Madrid Head | GBM+

Giving People Control of Their Money Emilio González General Manager México | Nu

Companies Want Credit Card Traceability, Flexibility: Clara Gerry Giacoman CEO | Clara

Let Your Money Make Money Fernando Padilla CEO | Pretmex

Knowing When to Decline a Transaction Leads to E-Commerce Success Víctor Islas Country Manager | ClearSale México

Digitization Still a Roadblock to True Financial Inclusion 01/24/2022

Personalizing the Banking Experience Federico De Simoni Head of Latin America | Flybits

Transforming Freelancers’ Transactions Christian Jacobsen Co-Founder and CEO | Crema

AI Can Help Startups, SMEs Access Credit Sonia Michaca Regional General Manager | Tribal

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Tech Mexico’s industrial manufacturing sector has been crippled by the ongoing semiconductor shortage, a multivariable challenge that has been felt across the world. The issue has dragged long enough for industry leaders to begin looking for alternative solutions. As they look toward the future with learned experience, they are weighing the country’s capacity for domestic production against the country’s opportunity to play a supportive role in US production.

Amid these supply chain hurdles, the digital transformation continues for companies across different industries. In the manufacturing sector, companies are faced with the everlasting hurdle of increasing efficiency while reducing costs. Meanwhile, digital transactions are fueled by a disrupted marked dynamic in which e-commerce has become the new normal. Companies are now trying to keep up with demand while targeting consumers more effectively through new channels.

Digital success has come at a cost, however.

As companies move to the digital sphere, the threat of cybercrime becomes increasingly present. Gradually, companies are becoming more aware of their responsibilities in this area but awareness is still necessary to prevent breaches that may cost companies and users dearly.

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Tech

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Analysis Semiconductor Shortages: Which Direction Should Mexico Take?

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View From the Top Julio Velázquez | Managing Director | Google Cloud Mexico

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Expert Contributor Joaquin Saldaña | Director of Strategy and Marketing Latam | Huawei

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Expert Contributor Alejandro Caparelli | President, Americas Region | Rockwell Automation

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Expert Contributor Ricardo Lopez-Tello | Corporate Sales and Government Director | Intel Mexico

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Expert Contributor Carlos Robles | Vice President, Central Region | FEMIA

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Analysis Cloud Computing Interoperability: Ongoing Business Need

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View From the Top Pilar García | General Manager | Salesforce Mexico

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Expert Contributor Jaime Morales | Regional Sales Vice President | Docusign

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View From the Top Gretta González | General Manager | Uber México

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Expert Contributor Aldo González | CEO and Co-Founder | Heartbest Foods

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Expert Contributor John Clayton | Director of Operations of Mexico | Arista Technologies

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Conference Highlights Tech Enables the New Digital Workplace

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Content Links

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Semiconductor Shortages: Which Direction Should Mexico Take?

Semiconductor shortages continue to plague the automotive industry. In Mexico, production and sales figures have hit their lowest levels in the last decade, while exports have not recovered entirely from the pandemic. Some industry experts say that while Mexico has the potential to produce semiconductors, the country should play a supportive role as the US opens new factories.

A number of factors are behind the chip shortage. The surge in sales of electronic devices during the pandemic certainly hit semiconductor production, which is also affecting production of laptops, smartphones, gaming consoles and household appliances.

US-China tensions and sanctions imposed in recent years have worsened the situation. The globalization of the supply chain and COVID-19 variants spreading across Southeast Asia only add to the problem. “When the delta variant spread across Southeast Asia, home of Tier 2, Tier 3 and chip suppliers, the problem got worse because countries entered into lockdowns and economies shut down. The reopening cycle usually takes between six and eight months,” says Guido Vildozo, Senior Manager, Americas Light Vehicle Sales Forecasting at IHS Markit. The US and the EU have been addressing the situation with different initiatives to attract investment and produce their own chips. However, it can take around two years to bring a semiconductor factory online due to the level of complexity of these components’ manufacturing.

Taiwanese semiconductor manufacturers lead the semiconductor market, with 65 percent of global revenues. Taiwan Semiconductor Manufacturing Company (TSMC) stands above the rest, with 56 percent of global revenues and a market cap of around US$550 billion, ranking it as the world’s 11th-most valuable company, according to The Wall Street Journal. This position led the publication to describe the world’s dependency on TSMC as a vulnerability. Semiconductors have also been a focal point of tensions between the US and China, as Taiwan claims the industry “as its own,” according to the newspaper. The government of Japan, which is mindful of economic security and supply chain stability, is ready to invest JPY$800 billion (US$7.15 billion) to subsidize a currently-in-discussion joint venture project to build a semiconductor factory in Japan between TSMC and Sony Group, reports MBN. Meanwhile, the US has drafted a bill called CHIPS for America Act to support semiconductor manufacturing, research and development, aiming to guarantee supply chain security.

Many argue that Mexico could strengthen the entire semiconductor supply chain and acknowledge it is capable of producing semiconductors, from design to programming, but as Mexico cannot compete with the tax incentives offered by the US to attract the investment needed to manufacture semiconductors locally, it should play a complementary role, taking advantage of USMCA, says Mónica Duhem, Head of the Global Economic Intelligence Unit of the Ministry of Economy. “It would be a mistake to go head to head with tax incentives because we do not have the economic capacity to offer what (President Joe) Biden is Read the complete article More about this topic

doing, but we do have the conditions to compete in the long term and complement what the US is doing,” said Duhem during an event organized by COPARMEX.

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from the

Q: What is your elevator pitch to convince a company to migrate to Google’s cloud?

A: It certainly depends on the type of company but, in general, I would say that the cloud is a vehicle by which organizations are solving their challenges and finding opportunities, both in these complex times, and as a possibility for them to grow and innovate in the future. To explain why companies need to be in the cloud, I would like to mention three big trends. The first trend is that every business needs a digital gateway. Physical presence is no longer enough to sustain a growing business. For example, retailers can connect with their customers through a mobile app, website, chat, and call center with Artificial Intelligence. Digital solutions also promote new ways of working. The adoption of technology is a fundamental element because it allows you to do what you’re used to, but with a lower cost and with a much greater capacity for innovation.

The second trend is that with the cloud, companies have the possibility of data management. Data has become one of the most important assets of all companies today. All businesses and industries generate a lot of information, the problem is that it has been collected and accumulated but not put to any useful purpose in most cases. If a business is looking to reinvent itself and continue to innovate and improve the way it reaches customers, the cloud is an ideal mechanism. And the third trend is that the

Julio Velázquez

cloud provides companies a faster and different way to compete in an increasingly challenging and hybrid world. Collaboration and remote working are here to stay. Because of that Google’s technology to promote high productivity has become a helpful ally

Managing Director | Google Cloud Mexico

for companies now and in the future.

Q: How does Google Cloud stay ahead of the competition?

A: Google works with free and open-source software. This does

Giving Purpose to a Companies’ Most Valuable Asset: Data

not mean free code but software that is available to all companies developing a project, this is to prevent the creation of locks. In other words, if you develop an application in the cloud that runs on Google and tomorrow you want to migrate to another cloud, you can do so without hindrance. We promote free competition and make a large part of our cultural and technological heritage available to the rest of the technology ecosystem. We also care about optimization. The cloud is a fantastic vehicle, not only to innovate and transform but also to look for financial and operational efficiencies. For example, according to a Forrester Consulting Study, customers that adopt Anthos, our application which allows a frictionless experience for multi-cloud and hybrid cloud environments, can achieve a range of up to 4.8x Return on Investment (ROI) within three years.

Security is at the heart of everything we do. We have a zero-trust policy. Our approach is to devise all possible points of attack.

Cybercrime is an industry with highly trained people who are looking for any vulnerability in the systems to carry out an attack.

We are constantly improving our systems and helping customers to bring this mindset into their businesses. Additionally, our expertise in real-time data and analytics continues to differentiate

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us in the Data Cloud, one of the fastest-growing segments of the market. Also, our deep expertise in AI and machine learning remains a key differentiator. Finally, Google Workspace. We have designed this product to meet the challenges of hybrid work and have strengthened it with innovations in recent months.

D

uring the last couple of decades or so, the world has experienced huge changes due to ICT-based businesses. New services, such as home delivery, phone-based cab apps, cinema at home and e-commerce, have emerged. Most people took those

for granted, not even thinking of the overall ICT (information and communications technology) ecosystem behind them. That’s the beauty of those services. ICT in general became a kind of utility service that supports new services and products.

Today, we hear that 5G is coming, that ultra-bandwidth connections are coming; based on Huawei’s 2030 Intelligent World white paper, the evolution of ICT will lead world growth in general computing power, reaching 3.3 ZFLOPS by 2030, which means 10 times the computing power we had in 2020. There will be 200 billion connections worldwide, supporting machine to machine communication (M2M), wearables, robots, and others; 1.6 billion subscribers will have fiber broadband service; 23 percent of homes

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will have 10 gigabit broadband access; 40 percent of companies

What to Expect in the Coming Future Joaquin Saldaña Director of Strategy and Marketing Latam | Huawei

will have 10 gigabit Wi-Fi networks; 1 million 5G private or virtual private networks will exist; and the list goes on. Let me try to picture the effect of all that in our daily life.

Health. By 2030, sensitive biosensors will be of widespread use and a massive amount of health data will be stored on the cloud, making health computable. People will be able to proactively manage their health, shifting focus from treatment to prevention.

Driven by technologies such as IoT and AI, personalized treatments will become a reality. Food. By 2030, we will be producing visualized data graphs, which will make precision farming possible. Collecting data will enable us to control factors affecting crop growth, such as temperature and humidity, so that we can build vertical farms unaffected by uncertainties of climate and weather. 3D printing technologies are also introducing the possibility of artificial meat designed according to taste and dietary requirements. Living spaces. By 2030, we will no longer have to live with clutter. We will manage our possessions with digital catalogs powered by a 10-gigabit network, holograms and other technologies. Automatic delivery systems will bring household items from shared warehouses to our doors whenever we need them. Next-generation IoT operating systems will enable people to live and work in adaptive environments that understand their needs.

Transportation. By 2030, vehicles using green energy and controlled by autonomous driving will provide us with a mobile third space. Electrical vertical take-off and landing (eVTOL) aircraft will make emergency rescue faster, reduce cost of delivering emergency medical supplies and may even change how people commute. Mobility solutions will be efficient, customized and shared, meaning that vehicles will be used much more consistently and travel will become greener. Enterprises. By 2030, digital transformation will have brought a new wave of modernization to enterprises. They will use more productive machines, such as collaborative robots and autonomous mobile robots. New business models will be more people-centric, with increased flexibility in manufacturing, logistics, and other activities. Digitalization

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will help companies interweave and graphically monitor their supply chains for better resilience in the face of a dynamic market environment. And most importantly, they will eliminate human intervention for repetitive, hazardous and dangerous activities, preserving human safety.

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he pandemic has uncovered fundamental lessons for companies with regard to their digital transformation.

Enterprises worldwide have sought out strategies to build a more sustainable world through efficient operations, cost and risk reduction. Companies have

adopted new practices and technologies for remote operations, all designed to promote staff well-being while remaining resilient and productive in the face of the evolving COVID-19 crisis.

Across all industries, manufacturers have addressed their resilience and sustainability goals by reducing the points of failure in their operations, increasing remote activities assisted by new software tools, deploying automation capabilities and using augmented reality to provide added value to customers. Due to various restrictions resulting from COVID guidelines, more than ever before, today’s companies need to increase investments to expand manufacturing capacity and eliminate potential failures.

These improvements have already been applied in several Latin

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American countries across different industries, always considering

Sustainability, Resilience: Lessons From Today’s Challenges Alejandro Caparelli President, Americas Region | Rockwell Automation

a global perspective to support customers, as the industry’s transformations require flexibility.

In critical industries, a clear example of health emergency demands is the use of tools to simulate equipment conditions using 3D simulation software.The vast majority of companies were already working on industrial automation projects such as these. But the pandemic greatly accelerated digital transformation efforts across all industries. A key element of that accelerated change is the convergence of information technology (IT) and operational technology (OT) on the plant floor.

IT/OT convergence in industrial operations is driven by the need for better data visibility and utilization, full realization of system and software ROI, and enhanced cybersecurity. It’s also an enabler for industrial companies to achieve their digital transformation goals. While the value of business drivers is increasingly apparent, executing IT/OT convergence remains challenging. The technology is a given but it is people who are the biggest factor in the success of IT/OT convergence. The “connected company” concept enables those from both the IT and industrial operations to develop common policies.

Three tips to get started: + Outline specific business outcomes driving IT/OT convergence. + Identify and address IT/OT cultural convergence challenges. + Proactively develop a well-defined IT/OT convergence policy.

Three main benefits: + Resilience: Innovations regarding safety, operation, and remote diagnostics. + Agility: Analytical technology, information management, and software to facilitate the decision-making process. + Long-term sustainability.

Whether you are at the beginning stages of planning for IT/

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OT convergence, or are in the process, experienced consultants can provide beneficial guidance. Working with teams who have been through IT/OT convergence projects with other industrial customers can help you avoid common points of failure and establish a roadmap for success.

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lthough there are endless ways in which a business can start its digitalization journey, there are certain technologies that can provide an unparalleled competitive advantage for your business, and that will allow them to generate

value while ensuring better management, better control of their business, assets, and closer contact with customers. Let’s take, as an example, artificial intelligence.

This technology has started to be implemented on a larger scale, which is no surprise: companies are turning to smart computing to help accelerate growth and drive their business transformation. As the International Monetary Fund clearly expresses, the next phase of automation, relying on AI and AI-powered machines, will be even more disruptive, especially if it is accompanied by other technologies ready to improve processes. Data analyzed with artificial intelligence, correct large volumes of inventory distortion and, at the same time,

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allow supply chains and product development to be incredibly

SMEs Have a Chance to Grow Through Technology. Are They Ready?

Ricardo Lopez-Tello Corporate Sales and Government Director | Intel Mexico

efficient. Can you imagine an SME having the same IT power to operate its business as a transnational company? But with such incredible benefits, what stops this business sector?

Throughout my career, I have been in conversations with businessmen who are still discussing whether it is worth investing in the modernization of their operations, wondering if the investment puts them at risk of eating their profits in the short term, even though in the future it will offer them, and give them, great returns. I am aware that it is a complex conversation in which many elements have to be weighed, ranging from the intrinsic nature of a business to the capital available to invest.

But there is a very simple idea that I am convinced of, and it is this: If you don’t invest in technology, your business will most likely disappear in the next five years.

It is a harsh reality, but a reality nonetheless. Once accepted, it presents a wide range of options that will allow us to act accordingly to prevent that outcome. More than just making the investment and installing wires and hardware, the concept of digital transformation is also about taking advantage of current trends to be more efficient and contribute to the growth of companies. Today, SMEs need to turn to see what is happening in the world, and to put aside the belief that technology is only necessary for bigger companies. Moreover, technology companies need to make a joint effort to share the benefits of adopting the latest innovations, such as artificial intelligence, and continue working more and more to make these same solutions accessible and inclusive for every single company.

At this point, I would like to share what Inma Martínez, digital pioneer, AI researcher and member of the Advisory Council of the Government of Spain, thinks: “Data has always been a cornerstone of civilization. Artificial intelligence makes possible a world in which, suddenly, every object has the possibility of obtaining information, information that can be extracted and used in real-time.” I am convinced that AI is, perhaps, one of the most fascinating emerging technologies

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that humanity has developed. Among the many benefits that it can provide to your company is the ability to filter activities, especially those that are repetitive, allowing human talent to focus on strategic tasks that add agility, enabling the future success of your operations.

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istorically, the defense industry has behaved like an innovation, research and development laboratory for the aerospace industry; therefore, we can say that the fact that the defense industry is looking for a digital emphasis that will result in a 50 percent cost

and delivery schedule reduction is a prediction of what will happen with the aerospace industry. This is not happening only in the design of new components or to accelerate technology adoption.

Technology in many fields of science has evolved rapidly and we want to integrate that into our new aircraft and spaceship programs but complexity has also increased and from a regulatory and certification standpoint, there is no way that it will be possible or fast enough other than through the use of digitalization. The application of technology will range from design using digital twins to simulation being used for testing and to analyze large quantities of data. The aim is to reduce the cost but mostly the time by years. We also need to be very conscious that the electrification of

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products is increasing exponentially, and this will not slow down;

Digitalization Will Boost Aerospace Life Cycles

on the contrary, it will accelerate and probably will not stop for the next decade at the very least.

As if all the above were not enough, we need to take in consideration globalization. Tthe distance between the tiers of the global supply chain can be reduced, implying a reduction in time, resources, communication and consequently cost. Today, digital models are allowing us to do all testing and proofing virtually. It

Carlos Robles

means no physical material, waste or risk. Iterations are needed but

Vice President, Central Region| Mexican Federation of the Aerospace Industry – FEMIA

to the OEM destination that often because if digitalization has been

now you can run multiple, simultaneous tests on your computer that simulate all kinds of conditions. You do not even have to travel vertically adopted there is nothing to see other than computer models, which you can get delivered to your email. The world has gotten smaller for the supply chain.

The digital transformation will allow companies to innovate faster and accelerate product development, offering modern and adaptable solutions in flexible and open ecosystems. Product digital twins will improve time to market, drive innovation and accelerate testing, allowing companies to anticipate and predict behaviors in service and driving toward proactive solutions. At the same time, digital process twins will connect disciplines across the life cycle and improve manufacturing efficiency, supply chain tiers and first-time assemblies.

In terms of disciplines, the new systems integrated into air products will be based on digital models. Everything will happen in virtual reality environments. Any iteration will be fast, safe and agile. It will be integrated into product design and engineering, including procedures for verification management and manufacturability. Program management will integrate easier and faster program planning and execution, while the supply chain will streamline supplier collaboration at all stages of the life cycle and its management. The impact then for manufacturability will be huge as processes will be designed with those digital models, allowing process engineers to design, test, modify and iterate as much as possible to find the most efficient manufacturing

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materials and procedures or manufacturing sequence. New advanced manufacturing technologies would be tested and assessed to justify adoption and automation, which to date has been difficult to adopt, can be more flexible and intelligent, easing the process and decreasing return on investment cycles.

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Cloud Computing Interoperability: Ongoing Business Need Even though cloud computing services have been celebrated as an enabling solution for the digital transformation, their rapid assimilation has inadvertently created unique risk opportunities for cybercriminals to exploit. In particular, misconfigurations between cloud assets have become a favored pain point: a metastasizing problem that jeopardizes the benefits of greater cloud adoption. With cybersecurity as a focal point for enterprises, addressing this challenge will require cloud service providers to establish and agree to interoperability standards, a significant undertaking with the potential to engender the next generation of cloud-based systems.

Market urgency demanded companies to integrate cloud service solutions hastily and often imperfectly, a process that inadvertently created risk opportunities for cybercriminals to exploit and initially collided with an indifference to security preparedness in Mexico. The synergy of these two conditions made Mexican companies a prime target for cybercriminals in 2021, enduring a daily onslaught of more than 427 million cyberattacks, the most of any Latin American country, according to data compiled by Fortinet. This represented a 170 percent increase over 2020 when Mexico only contended with an average of 38 million daily cyberattacks, thereby marking a definitive inflection point for cybersecurity awareness in Mexico.

In the past year companies have struggled to secure their cloud infrastructure given that their inherent disaggregated design has introduced multiple entry points for cybercriminals to exploit. These security gaps, which normally form during the initial onboarding process and more commonly during changes between different cloud service providers, constitute the leading cause of cloud data breaches according to various expert reports. Currently, around 62 percent of organizations already rely on at least two cloud deployments, a figure that is likely to balloon to 90 percent, according to projections

by International Data Corporation, a trend in direct conflict with the 79 percent of respondents of Cloud Security Alliance’s survey who reported struggling with handling cloud deployments and a largely remote workforce.

Configuring a dynamic cloud environment is highly complex and prone to mistakes given that there is little to no standardization between different architectures, platforms or applications.

This challenge requires a multidisciplinary understanding of load balancing, optimization, configuration management and the know-how of adjusting both products to the needs of the company’s infrastructure.

Failure to overlap cloud services perfectly leaves a security gap for cybercriminals to identify and exploit. Furthermore, since it is not in the best interest of service providers to suggest the use of multiple clouds, many companies are left without guidance Read the complete article More about this topic

for their migration. Without proper direction, companies are left to fend for themselves, often spending too much time, money and resources on often faulty multi-cloud deployments.

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from the

Q: How did the pandemic change the way Salesforce helps companies improve their relationship with customers?

A: Salesforce is the world’s No. 1 CRM company, targeting all industries. Our mission is to bring companies closer to their customers in a digital and totally innovative way, using the best technology, such as cloud, social media, and AI, to achieve personalization and an optimal customer experience. One of our differentiators is that Salesforce’s platform allows the personalization of the customer experience with a true 360-degree view of all customer data. If one area of the company has one piece of information but another has a very different piece, it significantly affects the customer experience. Our platform provides a single point of customer information. No matter which channel a customer accesses, the information will always be centralized.

As well as fostering internal collaboration between teams, this can ensure a unique customer experience and greatly improve customer satisfaction due to a more efficient service. In fact, 80 percent of customers believe that the experience is just as relevant as the product or service, according to the State of Service study developed by Salesforce. This trend is growing with the pandemic and the resulting boom in digital businesses and e-commerce.

Customers are becoming even more demanding, so it is becoming increasingly relevant to have a platform like Salesforce.

Pilar García

Q: What trends is Salesforce watching in Mexico?

A: A recent survey of the country’s CEOs showed that their outlook is optimistic overall, assuming the vaccination process is

General Manager | Salesforce Mexico

accelerated. There is great potential in the new normal but demand from customers will remain the same. Customers will increasingly appreciate the experiences that companies offer them: the feeling of being known and appreciated. Companies will also continue their accelerated digitalization process. Those that are ahead will

Salesforce Helps Partners Keep Pace With New Consumer Demands

naturally continue to lead in their industry and those that are a bit behind will continue with their digitalization process. Consequently, they are going to need better-skilled human capital to be able to sustain that demand. Salesforce, which is driven by four core values, is the perfect partner for this transformation. In addition to being the market leader in CRM for four years in a row, we have excelled in leadership.

Building trust with our business partners, customers and employees is a value that drives our behavior every day. That trust has contributed to Salesforce’s growth and financial results.

Another value is innovation, as we launch three new solutions every year that are available to all of our customers. It does not matter if you are an SME or a huge corporation. Customer success is the third value, which is where Salesforce’s success comes from. We know that if we make our customers successful, we will automatically be successful ourselves. We make sure that our customers are satisfied with the adoption, usage and results they expect from us.

The fourth and no less important value is equality. Salesforce is outspoken about fairness and equality around the world.

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Salesforce believes companies are the best agents of change. We have a program called “1-1-1,” where employees give 1 percent of their time to volunteer while the company donates 1 percent of its capital annually to nonprofit institutions and 1 percent of its products to universities or philanthropic enterprises.

Every company, from the smallest to the largest, from the most change-resistant to the most innovative, is resetting its digital priorities. We are facing a “no turning back” situation in the fact that users, customers, employees and partners have developed new digital habits, not only in the way they work and are productive but in the way they choose products. Simplicity, agility and mobility have never been so important.

That means going digital is key for business success. However, the digital world comes with a flood of new challenges companies must address, namely trust. Mostly every user or customer is online, using new technologies, sharing data and voicing their opinions, which could be liabilities. At the same time, as the cyberthreat volume increases, the regulations evolve to address the changes. So, as new trust priorities arise, a new landscape is emerging, and quickly, leaving many companies unprepared.

Just as you can’t love someone you do not trust, customers will

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not choose a brand they can’t rely on. Trust is the foundation

Trust First: A Winning Strategy for Going Digital Jaime Morales Regional Sales Vice President | Docusign

of absolutely every relationship; and every relationship is an exchange. So, every organization should work to nurture it. But how?

In the digital world, security must be a priority. Every organization is accountable for and should take security measures. Successful companies build ecosystems that have security as a key pillar. That means, their products, processes and people are part of a comprehensive approach designed to maximize security.

However, this is only the beginning of the conversation. A company truly committed to safeguarding its stakeholders’ interests creates more than just a robust, secure portfolio. You should commit to comply with the norms — in your industry, in your customers’ industry, in the different countries where you do business — and do it in an efficient manner. Compliance and legality also lean toward establishing a culture of transparency and trust with employees, partners and vendors.

So, legality is another key aspect of trust. The legal framework for the digital world has evolved a great deal in the last 10 years, from both a global and local perspective. Some countries have progressed more than others, but it is a fact that every company must comply with the legal requirements of security, privacy and smart agreements to do business and ensure its customers are protected by law.

You can deploy technologies and tools to build a secure environment. You can create policies to comply with regulations in every country where you do business. This will help address most liabilities. But trust is the intangible essential. You can’t see trust, but it’s certainly more than just a feeling. It rises because your users, customers, employees and partners see for a fact your company is committed to driving a great experience based on efficiency, security and compliance.

The ultimate truth about trust is that it requires relationships.

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People are behind every agreement, every transaction and every ecosystem. Without trust, it’s incredibly difficult to be successful.

When companies ensure every aspect of their business is secure, legal and relationships are healthy, they will start seeing their stakeholders trusting them.

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from the

Q: How is Uber taking advantage of its position to drive a change in mobility in Mexico?

A: At Uber, we continue to innovate. We have invested more than US$1.5 billion in Mexico, with operations in almost 70 cities in 27 states, reaching over 8 million Mexicans and generating income for over 200,000 people.

As a company, our goal is to continue having a positive impact on Mexican lives and innovation is an important element in this objective. Technology has enabled us to be agile and launch a series of important mobility solutions, such as Transit, Uber & Transit, Uber Flash, Uber Planet, Ellas and more. All these solutions reinforce our commitment to smarter, inclusive, and more sustainable mobility.

Q: What is your perspective on vehicle ownership versus ride-hailing?

A: Cities throughout the world are growing at unprecedented rates and technology is at the center of how they face new challenges.

We are convinced that, through our platform and mobility expertise, we can play a fundamental role in new urbanism where mobility is more pleasant, accessible and sustainable.

We want to participate in alternative mobility models that deter the

Gretta González

individual use of vehicles to reduce urban pollution and improve air quality, so everyone can enjoy public spaces. Uber’s commitment is to be fully sustainable by 2040. We believe in efficient, sustainable mobility and it is indeed becoming easier for individuals to live

General Manager | Uber México

without a vehicle. We are seeing that the automotive sector is betting on hybrid and electric models that go hand-in-hand with a more sustainable mobility model.

Q: What is Uber Mexico’s approach toward sustainability?

We Are Here to Support Mexico’s Economic Recovery: Uber

A: Uber Planet is our first step in the sustainability revolution. In the US, we have Uber Green, which connects the user with an electric or hybrid vehicle. In Mexico, the availability of these vehicles is limited but through Uber Planet the user is helping offset the carbon footprint of the trip. We have allied with Anaconda Carbon, a broker that uses proceeds from Uber Planet to help us buy green bonds for conservation projects approved by the UN. The next step will be to use these funds to help a certain percentage of our partner drivers to change their current ICE vehicles to hybrid or electric models. Uber Planet has surpassed all of our expectations in just three months. Users have traveled more than 12 million km with Uber Planet and acquired almost 4,000 tons of carbon credits.

Q: How advanced is Uber Transit’s project to integrate public transportation into the platform?

A: We are committed to promoting multimodal mobility, so integrating other transportation systems is important. Done right, it will help us reduce the individual use of the automobile. Uber Transit and Multimodal help users to find alternative routes and

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complementary transportation that will help the user to move from one place to another. This service is operational in Mexico City and Guadalajara, where we connect to the subway and other transportation systems. Our platform enables inclusive, sustainable and efficient mobility while promoting economic recovery.

“F

ood is this lovely language we all speak and understand. It connects us in many ways, represents who we are, our culture, tastes, personality, so what would it look like if what connects us (what we eat) truly represented

us and shifted the planet toward a positive change?” I wrote down this personal manifesto five years ago. At that moment, I was only 22 years old; it seemed like an idealistic mindset. Today, I cannot believe there is no bigger intersection between opportunity and necessity in any other industry than in the food and ag-tech sector.

If we continue with business as usual, we will blow every planetary boundary. We need rapid innovation and a food future that does not include using more land, while lowering emissions and eliminating animal mistreatment.

Despite a stalwart customer base, the food industry is facing unprecedented challenges in production, demand and regulations stemming from consumer trends. Consumer demand and focus

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have changed in recent years. An increasing focus by consumers

Why FoodTech is Becoming Relevant and Why You Should Care Aldo González CEO and Co-Founder | Heartbest Foods

on sustainability, health and well-being has placed significant pressure on the food industry to innovate. In just the past few years, alternative proteins have transformed from a niche category to a mainstream phenomenon. Plant-based applications are now a fixture at fast-food restaurants around the world, plant-based milk is a household essential, and you can taste meat grown from animal cells in restaurants in Singapore and Israel.

As everyone needs to eat (multiple times a day), there remains a huge opportunity for investments in innovative food and beverage technology, or foodtech, that better the health of our food ecosystem through novel ingredients and improved diets via better food distribution, preservation, price and access. The opportunity is massive and extends to improving food usage and decreasing waste. In examining total VC investments made in Mexico, foodtech represents the second-biggest VC gap opportunity compared to the US investments realized last year, with US$2.3 billion, only behind e-commerce and with a CAGR between 2014-2020 of 105.2 percent in the US and 56.5 percent in Mexico, according to Euromonitor & Pitchbook.

Today’s consumers are not only looking for convenience and consistency, they are also seeking nutritious food that can be accessed with ease, limits waste creation and aligns with their personal brands through new digital experiences. In reality, it has never been more difficult to be a food company. Consumer demands have expanded to include ethical mantras but have not given way to requirements of convenience. However, spending trends show that consumers are ready and willing to pay a premium for foodtech innovations that can meet their everincreasing needs of convenience, health and low environmental impact. The opportunity for food innovators to capitalize on these market demands is growing at a tremendous pace.

Consumers measure a brand’s purpose in part through its wellness impact. The purpose is real to consumers when a brand improves their lives, their community, and the environment — all characteristic of a holistic wellness brand. Wellness makes purpose

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tangible, but customers have higher expectations. Wellness in terms of food has been extremely correlated to plant-based applications and innovations, opening a bigger market opportunity with the intersection of the plant-based market with the US$4.5 trillion wellness economy.

I

have heard this common saying so many times: “I’ll do it tomorrow.” In fact, tomorrow is often too late. Being involved in cybersecurity, I make it my business to carefully study and analyze growing trends and, of course, statistics – keeping my finger completely on the pulse. In doing so, I want to give

you facts and stats that are not from me or Arista Technologies but from independent research from various sources in relation to cybersecurity in Mexico and Latin America.

It should be noted that so far in 2021 there have already been more than 78,000 cyberattacks per hour in Mexico. Mexico has suffered more than 800 million attempted cyberattacks against personal computers, public organizations and companies.

Recent analysis by the International Telecommunications Union shows that Mexico ranks 52 out of 182 countries in terms of cybersecurity levels.

These are easy obtainable sources from various online articles

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and the threat is real indeed. What most people do not

‘Tomorrow’ May Be Too Late John Clayton Director of Operations of Mexico | Arista Technologies

understand is the devastating consequences of cyberattacks, who they are attacking and why it is increasing.

Ten years ago, when smartphones appeared, criminal gangs and hackers hacked into phones, stealing information, taking data and using that data. Now the trend is changing. These days, hackers prefer Industrial Control Systems (ICS). This is a term used to describe different types of control systems that include the devices, systems, networks and controls used to operate and/or automate industrial processes. They are very different to Information Technology (IT) and hackers are seeing more benefit from hacking ICS and that has a consequence, potentially creating much more damage.

Imagine this from an ICS context. You have a manufacturing plant, a hacker hacks into your system and stops your entire production line. There is nothing you can do. It causes financial damage to your business because it stopped producing, causing a huge backlog, potentially causing a supply chain problem and damaged reputation, to name a few. The hackers will demand a ransom which can run into millions of dollars, which then causes an even bigger problem. Do you pay and rely on them to be true to their word and reactivate your production line and return to some normality? If you do this, then you run the risk of two things: one, they may receive the payment from you and not fulfil their promise or, secondly, you have just created a reputation among organized criminals that you pay ransom attacks.

The worst-case scenario, however, is loss of life or serious injury to people. For example, if you are a business manufacturer that deals in highly flammable or toxic products and hackers take control of your automated industrial process, they have the power to destroy tangible assets, potentially harming or killing people.

We now live in a world where increasingly, everything is going online. As I state on a regular basis, we live in a different world

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compared to 20 years ago, where we once worried about our IT systems going down and, at worse, we might have our credit card information stolen. These days, the risks to businesses and society are becoming bigger, more dangerous, and having more of a lasting effect.

Conference

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Highlights

Tech Enables the New Digital Workplace Edgar Medina Country Marketing Manager | Workday

Verónica Peña Modern Work, Security & Surface Business Group Director | Microsoft

Agustin De la Maza Chief Solutions Officer | Softtek

Amilcar Alfaro Head of Field Marketing GCP - Mexico and Emerging Markets | Google Cloud

Office spaces and their importance were taken for granted for so long that the COVID-19 pandemic initiated quite a shock: not only was remote work possible but it became highly desirable. Now that in-person contact is possible again, the modern workforce is shifting to a hybrid system, trying to meet demands from both sides. Verónica Peña, Modern Work, Security & Surface Business Group Director at Microsoft, calls this the hybrid work paradox.

“Sixty-three percent of employees said they wanted to work remotely when asked in a survey. But at the same time, 77 percent did want to have meetings in person. This paradox is difficult to facilitate for employers,” she says.

Such changes require a significant amount of financial investment, as well as a commitment to change. “Perhaps companies should accept that not everything will be as smoothly implemented as it is in a traditional office,” suggests Amilcar Alfaro, Head of Field Marketing GCP for Mexico and Emerging Markets at Google Cloud.

Regardless of these bumps in the road, the benefits could far outweigh the negatives. For one, employees can spend more time at home, a major boon as long as they can maintain a healthy worklife balance. Alfaro furthermore emphasizes that people have been more productive working from home. Agustin De la Maza, Chief Solutions Officer at Softtek, also highlights the higher efficiency.

“Remote work requires a higher level of autonomy too, but this needs to be repaid with this improved efficiency.”

The move to remote work increased the willingness of companies to spur on their digitalization, although that in itself has created anxieties over job security, which Alfaro says is unnecessary, if understandable. “People are always scared of how technological advancements will affect work. But just like after the founding of the internet, these developments actually breed opportunity instead of harm employment. Digitalization is making it easier to access higher levels of employment for many.” Medina agreed.

Rather than seeing it as a problem, training workers can be turned into a major weapon for any company. “According to the same report, 94 percent of workers say they would stay at their company if it were to invest in their skills. Because replacing workers is much more expensive than retraining them, the costs of training are justified,” says Peña.

In terms of speed, Mexico is not exactly at the forefront of digitalization. Fortunately, it is not far behind either and the USMCA opened further room for improvement. “(The USMCA) has

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allowed us to get the right level of investment to adopt the latest trends, albeit a year or two later. But this does get us on a good level of forward movement,” says De la Maza.

End-to-End Solutions Help Spur Mexico’s Digital Transformation Ricardo Galicia Mexico Country Manager | Lenovo Infrastructure Solutions Group

Three Decades of Preparation: A Singular Network Infrastructure Hugo Werner Regional Latam Vice President | Akamai

Migrate to the Cloud Efficiently, Not Just Quickly Rodrigo Martineli Vice President and General Manager for Latin America | Rackspace

Hyperconverged Infrastructure Can Help Maintain Competitiveness Andrés Hurtado Vice President Latin America | Nutanix

Data Protection Policies Based on Collaborative Security David Taboada President | CONSEJOSI

International Influence Is Driving Cybersecurity Compliance Carolina Ruiz CEO | Brier & Thorn Mexico

Hardware Plays Critical Role in Strengthening Cybersecurity Polo Sánchez CCO | Absolute Software

NFTs, the Metaverse and the Human Experience Brenda Zetina Territory Director Mexico | Datadog

GUS Brings Chatbots to All Industries Pablo Estevez CEO | GUS

JOKR’s Online Grocery Experience Is Catching On Germán Peralta Co-Founder and CEO | JOKR Latin America

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Entrepreneurship In recent years, Mexico and other Latin American countries have attracted the interest of investors from the US, Europe and Asia, as the region appears to have a great environment for entrepreneurship. In 2021, the restructuring of supply chains, changes in consumption dynamics and the acceleration of digitalization allowed e-commerce, logistics and finance startups to see an investment boom, growing to levels never seen before.

Only last year, Mexico significantly increased financing for startups, making the country one of the top hubs for entrepreneurs. In 2021, seven unicorns emerged in the country: Kavak, Bitso, Clip, Konfio, Clara, Incode and Merama, all with a valuation equal to or greater than US$1 billion. The creation of these companies has not only benefited the private sector but also the country as it has brought greater investment, technology and innovation. Most of these unicorns are headquartered in Mexico City, for which experts say that the next step is to decentralize investment so the economic spillover impacts a larger population.

Mexico is expected to remain one of the main hubs for entrepreneurship in 2022, hopefully welcoming 10 new unicorns to its ranks. Experts say that the market and trends show that this year, those startups related to financing, especially fintech, will have the greatest opportunities.

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Entrepreneurship

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Analysis Mexico Shows Promise as Startup Hub, Unicorn Incubator

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Expert Contributor Liliana Reyes | Director General | Asociación Mexicana de Capital Privado (AMEXCAP)

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Expert Contributor Nico Barawid | CEO & Co-Founder | Casai

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Conference Highlights Mexico’s Virtuous Ecosystem: A Startup Dream

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Expert Contributor Gerry Giacomán Colyer | CEO and Founder | Clara

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Expert Contributor Deepak Chhugani | Founder and CEO | Nuvocargo

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Expert Contributor Vincent Speranza | Managing Director of Mexico and Latam Regional Adviser | Endeavor

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Expert Contributor Aitor Chinchetru | Founder and Co-CEO | Fintonic

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Expert Contributor Pablo Ricaud | President | Rising Farms

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Expert Contributor Santiago Morales | Director General Mexico | Morada Uno

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Expert Contributor Ulises Vázquez | CEO | Mureni

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Content Links

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Mexico Shows Promise as Startup Hub, Unicorn Incubator The growing number of startups that could become unicorns highlight Mexico’s attractiveness as an entrepreneurial hub. Big capital and tech development are among the perks available in the country but more remains to be done in terms of inclusion and getting greater individual buy-in on data-sharing for Mexico to live up to its potential, say experts. “This is a game with a longterm vision. We have to remember that we are creating value and transforming lives in the long term through better companies.

What is exciting today is not just a round announcement, it is that we are succeeding in creating products and services that transform lives and bring better solutions to market,” says Fernando Lelo de Larrea H., Partner at ALLVP. The entrepreneurial ecosystem is not a work of magic, Vincent Speranza, Managing Director and Latin America Regional Adviser for Endeavor Mexico, told MBN. In the first decade of the 2000s, this ecosystem in Mexico was only focused on retail, food and beverages and family businesses, with no public policy, little female participation and no technology. “We needed to close the gap that was created in that period,” Speranza says. Since around 2017, however, innovation and technology have taken root. To date, Mexico has 394 startups just in the fintech sector, compared to 2017 when there were 230 companies.

One of the country’s first milestones was the first round of capital raising that exceeded US$100 million, organized by Mexican fintech startup Clip in 2019 and led by Softbank. “This made international funds look at Mexico for the first time,” Speranza says.

Kavak would become the first Mexican unicorn after reaching a valuation of US$1.15 billion in its 2020 funding round. Later, in early May 2021, Bitso raised US$250 million in a Series C investment, bringing its valuation to US$2.2 billion to become the first crypto unicorn in Latin America. “The growth of the cryptocurrency ecosystem this year has been remarkable. It took Bitso six years to reach its first million customers. Now, a year later, we have reached 2 million,” says Adriana Villaseñor, the company’s Corporate Development Lead.

In a sure sign of growth, Mexico has even overtaken Brazil as the region’s startup development hub. Fintech will continue to thrive in this ecosystem. According to Mexico’s Fintech Radar, the number of players in this sector has grown at a yearly average rate of 23 percent. This high growth is fueled by the greater adoption of tech and new digital solutions during these unprecedented times, adds Gerry Giacomán Colyer, CEO and Founder of Clara.

The country has shown remarkable entrepreneurial solidity, especially considering that it was during the pandemic that all Mexican unicorns were born. These innovative companies are capable of reaching extraordinary levels of growth, backed by private capital that provides smart money (resources and advice), explains Reyes. “We are witnessing how international VCs and Read the complete article More about this topic

growth funds are participating in the subsequent investment rounds of companies that obtained their first investments from Mexican funds.”

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enture capital in our country is experiencing one of its best moments and, without a doubt, this is only the beginning. The birth of five unicorns from September 2020 to date is the best cover letter of what is possible for our country when it comes to

problem-solving, with the help of tenacious entrepreneurs with innovative ideas on how to solve issues (usually working hand in hand with technological tools), and above all, a venture capital fund that bets on entrepreneurial talent and supports the startup and growth of companies.

This is all happening in the midst of a pandemic and demonstrates that even in difficult times, these innovative companies are capable of reaching extraordinary levels of growth, hand in hand with private capital that provides smart money (resources and advice). Likewise, we are witnessing how international VC and growth funds are participating in the subsequent investment rounds of companies that obtained their first investments from

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Mexican funds.

Mexico’s Venture Capital Boom Liliana Reyes Director General | Asociación Mexicana de Capital Privado (AMEXCAP)

This growth or boom is largely due to how attractive the development of new technologies has become for national and foreign private capital funds, in the context of the Mexican economic recovery, in addition to an overall improvement to last year’s public health situation caused by COVID-19.

Another factor that makes Mexico an attractive destination for investment is its privileged location and well-connected population: 72 percent of Mexicans have internet access and 54 percent have a smartphone. This means that fintech and other ventures that are based in digital technology, which make up 76 percent of the investment from private equity funds, can provide services that meet the needs of the population, including digital banking services, delivery, or intermediary services in the purchase and sale of property.

Mexico has even been overtaking Brazil as the region’s startup development hub. This is largely due to the trust that investors, both national and international, have placed in local ventures such as Kavak and Clip. These unicorn companies are valued at $8.7 billion and $1 billion respectively. The common characteristic among these ventures is their work in the digital space.

Local funds, such as ALLVP, Angel Ventures México, Dalus Capital, DILA Capital, Ignia, Nazca, and Cometa, have fostered this growth through their investments in local ventures together with international funds, such as Accel, General Atlatic Sofbank, Kazek and QED. Even banks and credit institutions have sought to be part of the growth of this sector. In one example, Credijusto acquired Banco Finterra to provide facilities and services to Mexican fintechs, such as direct access to the global banking infrastructure, a loan portfolio, reduction of fund costs and credibility of the entity.

Additionally, retirement funds (Afores), which oversee US$236 billion, have entered the venture capital ecosystem as limited

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partners and private equity investors through instruments such as CKDs and CERPIs. Currently, public and private retirement funds have a 43 percent participation rate in the entire private equity industry in our country and it is expected that more will participate in the venture capital segment.

I

n the world of business, “innovation” and “technology” are keywords that have allowed companies that were once risky startups to become unicorns. New and attractive ideas, along with identifying specific industry needs, are the perfect combination that has led startups to belong to this group of

unicorns.

According to Statista, the most profitable businesses over the last decade in Latin America belong to the finance, e-commerce, logistics and real estate industries. This led us to create Casai two years ago, a hospitality startup that is the new face of accommodation for travelers and digital nomads, where experiences, local value and technology brought to the home guarantee a more personalized and relaxed stay. One of the main challenges we faced when we started was raising the funding required to support this ambitious project. This, considering the Latin American market has an excellent performance outlook, has led to more than 900 percent growth in venture capital

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investments between 2016-2019, according to data from the Latin

The Rise of Latam Unicorns and the Future of VCs Nico Barawid CEO & Co-Founder | Casai

America Private Equity and Venture Capital Association (LAVCA).

The latest innovative tech startups and the sustained growth of the middle class in the region are encouraging investors to join the startup revolution. The Inter-American Development Bank’s innovation lab, IDB Lab, expects more than $40 billion in VC investments for Latin America by 2030. Tech startups would not be the same without VC, which is Casai’s main financial engine.

In 2017, Global Network Perspectives identified this region as the second-most entrepreneurial in the world. According to IDB Lab, its value has multiplied 32 times within the last 10 years, reaching a record high of US$221 billion. As more unicorns are born, Latin America is seeing a significant digital transformation that spells economic growth.

In my experience, if you want to succeed in today’s entrepreneurial ecosystem of tech startups, there are a few things to consider: + Explore markets that have not yet been disrupted by technology and digitalization. + Adopt an international outlook to find venture funding opportunities and consider expansion beyond your home country. + Build your teams around a positive thinking and growth mindset.

Team turnover can cause delays and stumbling blocks; therefore, your recruitment processes need to be thorough and serious. + Sound data management is the new invisible gold for businesses, as it is important to understand consumer preferences and needs through the use of technology. + Although everything revolves around technology, prioritize the human factor. This means planning organizational and social responsibility campaigns aimed at helping specific vulnerable groups or benefiting society as a whole. + Finally, don’t give up hope of achieving your dream. With care and the right tools, new startups can also join the unicorn club, and become a pivotal economic accelerator for our region.

Given that venture capital is on the rise across Latin America, the future looks bright for those with great ideas and the ability to turn them into thriving businesses. It is estimated that 90

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out of every 100 startups do not survive beyond the first two years. The remaining 10 startups are able to generate significant economic and social value, with the potential to generate prosperity and leave a positive footprint on society on their way to becoming the next unicorns.

Conference

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Highlights

Mexico’s Virtuous Ecosystem: A Startup Dream Alejandro Diez Barroso Managing Partner | DILA Capital

Alan Karpovsky Co-Founder | Mendel

Nima Pourshasb CEO & Co-Founder | minu

Sujay Tyle Co-Founder & CEO | Merama

Iván Ariza Founder & CEO | Cargamos

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avorable conditions have led to a sustained startup boom in Mexico, which is growing thanks to a unique community of entrepreneurial mentors who created a self-feeding ecosystem that has drawn investment and talent from all corners of the world. “The stars

have aligned,” says Nima Pourshasb, CEO and Co-Founder of Minu. “Capital access, ambitious entrepreneurs and a diversified talent pool have emerged.”

In the past, Mexico had typically been selected as a starting point for many international businesses based on its geographic proximity to the lucrative US market. But internal conditions have also changed, turning Mexico into a favored strategic business entry point for businesses of all sizes.

Funding has also been a major factor. Previously, access to venture capital was difficult and limited to about US$27 million, which in turn, shut out the participation of businesses with the potential to disrupt stagnant industries. Since then, however, this figure has ballooned upward of US$10 billion, coming mainly from the US, says Alejandro Diez Barroso, Managing Partner at DILA Capital.

Mexico City in particular is an important hotspot. “It is a country within a country. It is possible to build a successful business in one city alone due to the population density. It is as if New York was combined with Silicon Valley. It is very unique,” says Sujay Tyle, Co-Founder and CEO of Merama. Other important metropolitan centers include Guadalajara and Monterrey. “If you thrive in these cities, you are sure to thrive in all of Latin America,” adds Ivan Ariza, Founder and CEO of Cargamos.

The startup sector has enjoyed sustained growth mainly due to a unique sense of community between CEOs and entrepreneurs who, through investment and mentoring, have continued to drive the ecosystem forward. “Second- and third-time founders are coming forward from other successful companies to invest and/or build businesses to meet recognized market needs that their predecessors failed to address,” says Alan Karpovsky, CoFounder of Mendel.

Beyond monetary investment, CEOs and founders are mentoring their own employees to develop the business leaders of tomorrow by nurturing their skills and giving them a realistic picture of the business environment in Mexico. This fraternity

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has successfully drawn in international talent from adjacent business sectors, which inversely has contributed to a more dynamic and innovative workforce.

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he Mexican fintech ecosystem has reached new heights in the past year. According to Mexico’s Fintech Radar, the number of players in this space has grown at an average rate of 23 percent every year, with at least 441 active startups registered to date. This high growth

is fueled by the greater adoption of tech and new digital solutions.

Fintechs in particular are introducing new technology to one of the largest and arguably the most strategically important sectors in the economy: financial services.

Although historically many fintechs have focused on the needs of consumers, particularly the unbanked, there is also enormous opportunity to address the needs of businesses. According to Finnovista’s 2020 Fintech Radar, fintech startups with a B2B focus total around 100 companies, or less than a quarter of the Mexican fintech universe. Business lending makes up less than a third.

According to a 2020 report by the International Labour

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Organization, 40 percent of companies worldwide did not have

Why Targeting B2B Is an Opportunity for Entrepreneurs Gerry Giacomán Colyer CEO and Founder | Clara

access to financing products to support their COVID-19 recovery.

Of the companies that did have access, two-thirds reported the available financing was insufficient.

In the past two years many companies have become more open to technology by adopting new digital solutions, while others have been forced to do so to remain viable or competitive. The pandemic drove companies to accelerate their digital transformations by three to five years, according to renowned consultancies. Unsurprisingly, data from Clara reveals a rapid adoption of software solutions with a 7x monthly spending increase.

Financial Impact According to an International Labour Organization report, COVID-19 drastically compromised companies’ financial health, with 86 percent saying it had a high or medium detrimental impact on them. SMBs were the most affected segment. With traditional financial institutions retracting and becoming more conservative, fintech can step in to help restore the financial health of SMBs. Two of the main reasons startups fail are financial mismanagement and cost overflows. At Clara, we’ve focused on developing an endto-end corporate spend management solution to help companies move with agility and sound financial controls. Our goal is to empower businesses, helping teams focus on higher-value-added activities rather than repetitive or menial accounting tasks.

There are still great opportunities in B2C — where consumers will continue demanding better and more agile solutions — but the current context also demands a special focus on companies’ needs. Companies empowered with better software translates to more competitive companies and better work opportunities. There is enormous value to add by becoming a company’s strategic partner during their transition to the digital era.

Challenges, Opportunities Latin America is finally experiencing its moment in the innovation

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economy spotlight. Though the local system is not yet as developed as other hubs, such as the Bay Area, Latin America is experiencing a very exciting moment: for the first time there’s a critical mass of talent, investors and entrepreneurs to build massively impactful businesses faster than ever before.

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hough still lagging compared to most of the developed world, in the last decade, Latin America has taken considerable leaps toward becoming one of the world’s most important economic regions. In 2017, Global Network Perspectives found that Latin

America was the second-most enterprising region in the world, and in 2019, all records were shattered with US$4.6 billion of venture capital investment.

What are the factors contributing to last decade’s thirty-twofold increase (from US$7 billion to US$221 billion) in the region’s startup ecosystem value?

Latin America’s composition is changing rapidly. Countries are becoming more urbanized; the middle class is expanding (and so is its spending power) and internet access and usage are finally reaching their true potential. A new generation of digital-native leaders is emerging, and the ecosystem is ripe for disruption, all

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of which highlights the region’s potential to become the next big

2 Reasons Investors, Entrepreneurs Should Set Sights on Latam Deepak Chhugani Founder and CEO | Nuvocargo

startup hub.

A quarter of Latin America’s population is also between the ages of 15 and 29 (about 163 million) and in the last 10 years, the gross enrollment rate in higher education in the region increased from 23% to 52%, the second-best performance worldwide. These point to a generational relay that is seeing millennials rise to executive positions, bringing innovative ideas and an eagerness to use the technology they have grown up with to optimize processes and propel their companies into the future.

Latin Americans have craved connectivity for a long time and governments are finally providing the right opportunities for a more widespread digital culture. Some examples include the “Plan Solidario” in Chile and the “Programa Nacional de Alfabetización Digital” in Costa Rica, both aimed at making digital tools more available to underprivileged populations.

Though still lacking in infrastructure, the potential is huge with internet penetration in the region at around 70 percent, surpassing the likes of China and India.

To succeed in Latin America, one must be brave and think not only about making a profit but about solving issues with the potential to improve the lives of millions of people. That’s what David Velez did when he decided to take on the big banks in Brazil, and what we at Nuvocargo are working to achieve by modernizing global trade, starting with the biggest trade lane in the world, US- Mexico.

Latin America’s size (600 million people) and economic activity (US$6 trillion in GDP) make it one of the largest economies in the world. The opportunity is immense, and some sectors are already feeling the impact of tech investment. We’ve seen this trend particularly close-up in Mexico and the logistics industry. During the last year, 4 percent of all tech investment in Latin America went to logistics, making it the fifth-biggest sector in the region.

This number is bound to increase in the near future, not only because of what the data shows — 2,500 percent growth in

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supply chain tech investments in the last decade — but because of considerable macro shifts in the industry: Mexico has become the US’ largest trading partner, US-China trade relationships have weakened, the USMCA has been signed and nearshoring has exploded, all of which uncover even more growth opportunities.

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n less than a year, Mexico managed to crown two technology startups as unicorn companies, meaning they were valued at over US$1 billion. This is an elite and very select group, with names like Facebook, Xiaomi, Uber, LinkedIn, Airbnb, and Dropbox topping the list. And now, our Endeavor companies

from Mexico, Kavak and Bitso, have joined that hall of fame.

What is best: they will not be the only ones; I am sure that the next ones are already on the way.

The Mexican moment detonated when Kavak became the first modern unicorn in Mexico (the Mexican companies KIO Networks and Softek were recognized many years ago). The all-in-one used cars startup founded by three Venezuelans in 2016 got a valuation of US$1.15 billion during its last financing round, supported by Softbank. And, in April 2021, the startup reached a valuation of US$4 billion. Bitso is another winner and the news is worth celebrating. The cryptocurrency exchange platform that allows users to buy and sell bitcoin and other

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cryptocurrencies grew its valuation 9x in five months. In

The Real Magic of Unicorns Vincent Speranza Managing Director of Mexico and Latam Regional Adviser | Endeavor

December 2020, it raised US$62 million, at a valuation of US$250 million and, at the beginning of May, it raised US$250 million, at a valuation of US$2.2 billion.

It is quite a milestone to achieve these valuations but the impact goes beyond the numbers of a successful investment round. Achieving unicorn status is not magic. Rather, it is the result of years of effort and work by the founding team and, broadening the vision a little more, of a Mexican entrepreneurial ecosystem that is beginning to bear fruit from several decades of harvest.

Why does Endeavor celebrate the existence of two new Mexican unicorns? We are not only happy for what it means for our Endeavor Entrepreneurs Carlos and Loreanne Garcia and Roger Laughlin (Kavak), as well as Pablo González, Ben Peters, and Daniel Vogel (Bitso), but also for the great impact that their organizations will leave on the country and the ecosystem.

Firstly, a unicorn company generates economic growth and quality jobs, which can change the lives of many families.

In addition, it becomes a source of inspiration for other entrepreneurs and investors, and even for their employees.

Why? By working for them, they closely experience the vision of a high-impact company and they can learn directly from its founders, which could inspire them to start their businesses.

Entrepreneurship is contagious.

We are also very excited about the level of innovation and incredible things created around unicorn companies, which serve to transform the world we live in and solve everyday problems. We know that their founding teams have their sights set not on the services they offer today, but on those they will provide in the future.

We are experiencing incredible moments in the Mexican entrepreneurial ecosystem, and the best thing is that the good news will continue to arrive in the coming months. It is

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truly exciting because these were the first steps taken in large entrepreneurship ecosystems such as Tel-Aviv, Silicon Valley and Boston. There is a long way to go to get there, but for now, Mexico is in the eye of the world, and we have a unique window to take our rightful place in the global entrepreneurship scene.

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he COVID-19 pandemic, although we did not expect it, has pushed us to adopt other options to live our daily life. One of these alternatives, which has turned out to be one of the big winners during the pandemic, is online shopping. According to

the Mexican Online Sales Association (AMVO), e-commerce registered growth of 81 percent in 2020 in Mexico following the health crisis.

The pandemic was the trigger for people who were not yet convinced to buy online and preferred physical contact, both with products and with salespeople and money. Consequently, although the growth of e-commerce was evident and had been effectively reinforced in recent years, 2020 was crucial for its adoption, which has supported almost 4 million small and medium-sized enterprises operating in the country.

For this reason, today, we are at a point where e-commerce

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has taken a leading role and has provided significant

E-Commerce and Fintech: The Perfect Pandemic Marriage Aitor Chinchetru Founder and Co-CEO | Fintonic

relevance to initiatives such as Hot Sale and Amazon Prime Day, especially in 2020. For example, according to data from the AMVO, the 2021 Hot Sale edition registered an increase of 40.5 percent in company participation.

Therefore, the adoption of e-commerce not only positively impacts businesses that have opted for the digital world but it benefits consumers by providing more purchase options.

Moreover, the e-commerce boom affects directly or indirectly several sectors. Such is the case of fintech.

In the fintech sector, 441 companies are now operating in Mexico, which is 14 percent more than in 2019. That makes Mexico the country with the most significant number of fintech companies in Latin America. Even in a year as challenging as 2020, this growth has provided more substantial financial services for people.

During the pandemic, people were urged and pushed to adopt electronic tools or platforms to stay safe. In this way, consumers have been able to use digital tools to carry out many actions, such as payments through access to small levels of credit (e.g. KueskiPay) or to access credit cards through applications (e.g. Rappi).

However, for those looking to access debit cards or loans, options such as Fintonic have been available to complete their purchases. For businesses, solutions such as OpenPay and Conekta have been their allies during the pandemic.

Although there is still a segment of the population that does not have access to financial services, fintech can be the answer to them to access loans, credit, debit or credit cards, and payment platforms or tools, among others.

Fintechs, for several years, have known first-hand the

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population’s needs and have learned how to capitalize on the demands that came with the pandemic. In addition, fintech companies have the innovation gene, which has allowed them to arrive with timely solutions for the banked populations and for those that remain on the margins.

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e long ago arrived at a point where a lot of people are wondering if the right incentives are being rewarded in the entrepreneurial scene. According to data released by Pitchbook, early-stage

valuations hit all-time records in 2Q21of $50 million (median) and $105.4 million (average), as did late-stage valuations, with the trendline suggesting that average late-stage valuations could top $1 billion by year-end. One can’t help but feel like the fever is running rampant, with valuation now viewed more systematically rather than the reality-driven discipline it should be.

Whether you look at Deep Water Horizon, mortgage-backed securities, or any other example of a fever running higher than it should be, bypassing common sense, they all result in a circle of validation among very smart people that creates a leading effect where none of these very smart people has the incentive

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of calling bananas on the other, resulting in a lot of patting on

The Ponzi Schemes Right Before Our Eyes Pablo Ricaud President | Rising Farms

the back and few dissenting opinions.

Investors’ returns used to come from companies’ profits, and yes, exits, produced from profitable businesses but, when looking at the early- and even late-stage investing at this point, the relationship between investments and returns is in some cases resembling a Ponzi scheme.

One would think the chief thing investors would be looking for are viable unit economics and a clear path to profitability, apart from operational excellence and good technology, and most do, but there is a latent trend, where exaggerating the role of technology within a business, and to forcibly fabricate a social impact mission around it, is way more important. Moreover, when did the ability to burn through cash at staggering rates become a desirable thing? Somewhere along the way, the line between raising money for growth and raising money to survive the cash burn got blurred, and not just blurred, but the ability to burn cash at accelerated rates became sought after, coveted. his has become possible through a remarkable alignment of incentives. Founders, employees, and investors at every stage all want and need the same thing: for the company to be worth more and for it to raise more money, so they can get out and have a return. No one is incentivized to check on the other one because they all need the same thing. Valuations are paid and expected to be paid later at an inflated rate. And they are being paid. Not because of a reasonable valuation, but because that is the price to get in, expecting to be paid back with the same currency.

The last link of this Ponzi scheme? The mystical IPO, where all things go full circle, where the hyperbolic, pumped “bag” is dropped to the unsuspecting retail investor that will materialize the last link’s return and carry the equity of the huge, moneylosing machine. By this point, the investment is so validated by so many extremely educated people, that few retail investors can resist, or have the technical tools to lift the veil.

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No matter how much we talk, numbers don’t lie and are right there in black and white for us to see. Crises have taught us that when too many smart people oversell something too much, someone is getting burned.

I

n the last few years, our constant interactions with the internet have created huge amounts of data about our behavior. With the help of technology, we are now able to process all this data and have a better chance at making a more accurate guess about the future and, therefore, make better choices.

Applying data analytics to tenant underwriting and digital tenant experiences results in increased efficiency in real estate. As recovery gains pace, being able to make more informed choices about tenants and offer digital onboarding experiences bring data analytics to the core of the transaction in rentals.

Data analytics can be broken down into four components: descriptive, diagnostic, predictive and prescriptive analytics. The first gathers information to understand present market concerns, and diagnostic analytics looks to explain why past conducts occurred. In this real estate context, predictive analytics, which estimates future outcomes, presents the biggest opportunity to

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accelerate rental transactions and create better experiences and

In God We Trust, Everyone Else Please Bring Data Santiago Morales Director General Mexico | Morada Uno

higher market liquidity. Nowadays, there are great amounts of data produced through credit use, social media and the internet of things, which allows artificial intelligence to find accurate behavior patterns that were previously unthinkable to process.

Why is predictive analytics a much-needed breakthrough in Mexico’s rental market? It is simple: a very large and growing part of the population is looking to rent as its only housing alternative and is unable to meet outdated lease requirements. Millennials, the generation born between 1984 and 1999, represent approximately 40 percent of the total Mexican population. They are the country’s largest demographic and productive bonus. Nonetheless, they face very different professional circumstances compared to their parents or grandparents. The increase in housing prices that has widely outpaced the increase in average wages for the last couple of decades has made it nearly impossible to save up for a down payment. According to an Apartment List Survey in 2019, 12 percent of millennials plan to “always rent,” up from 10.7 percent in 2018. The increase in the reported preference is also fueled by the desire to maintain a flexible, and sometimes nomadic, lifestyle.

In Mexico, 16 percent of households rent the place they live in, and in main urban areas, this number rises to 27 percent of households.

Renting a property can represent a fundamental part of someone’s livelihood but the transaction in Mexico is characterized by oldschool procedures based on distrust and excessive requirements.

Morada Uno is a proptech/fintech company committed to streamlining the leasing process in Mexico. We use technology and data analytics to predict tenant behavior and eliminate the barriers and friction of the traditional transaction. Our predictive analytics allow us to underwrite potential tenants with a holistic approach and evaluate their past and present behavior, similar to a bank’s lending models and procedures.

American statistician W. Edwards Demming — with his legendary quote, “In God we trust, everyone else please bring data” — defined a new orientation of decision-making, from intuition-

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based to fact-based. If we are looking to improve confidence in lease transactions, we need to use data more intelligently. Our technological solutions are providing better information for decision-making and, therefore, more trust and agility in rental transactions, all through the power of data analytics.

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ith this year’s unicorn fever in Mexico, more and more entrepreneurs from traditional businesses are venturing into hyper-growth companies and, thus, I have been receiving a lot of questions that show there is a deep lack

of understanding of how VC and high-tech companies work. The most frequent misunderstanding is questioning why a company that loses a big amount of money is valuated so highly. Another is how a project on paper could be valued in millions of dollars.

The reason behind all of that is growth speed. The unicorn market would not exist without technology that allows exponential growth. Tech startups, when successful, are capable of generating revenues of more than US$100 million or even billions in a relatively short time (around 10 years). Thus, in maturity, they are able to turn their losses into huge profits. Thus, the road to a US$100 million company starts with the market. If your project is intended to serve a market under US$1 billion, you are starting on the wrong

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side. The bigger the market, the higher the possibilities for your

How To Switch From a Traditional To a Hyper-Growth Mindset Ulises Vázquez CEO | Mureni

company to become a unicorn. Now, how on earth can a company possibly get to that revenue in that amount of time? The answer is technology and the concept of scalability.

So, what is the most scalable company? Software. Physical limitations on the real-world hinder growth while serving software to a billion users over the internet can be done in seconds.

Every time your business model has to interact with physical components, your scalability decreases and so does your growth speed. Customer service, sales people, hardware and inventory are the challenges to avoid. So, how do you build a company like that? You will need a very special team, which is one of the main components VC firms evaluate. Obviously, you will need software developers and normally a tech founder with a hyper-growth mindset and excessive energy and passion to disrupt an industry.

Entrepreneurial background, know-how in the industry and especially hyper-growth experience are valuable assets for VCs. The main difference with a traditional business is that your main focus is growth, not profits. It is OK to lose money if that means your revenues are growing fast (do not forget that a path to profitability is needed) because that means to a VC that the product you developed is taken well by the market. And as we are talking about a tech-product that could be consumed by millions in a short period of time, VCs are willing to put money in and support your growth.

Investors are expecting growth of 20 percent a month to run after you. This requirement deeply affects the operation of a company.

Instead of trying to deliver a perfect product for your clients, you have to launch immediately to receive feedback and iterate on the run. Perfectionists do not thrive in this environment and you will need people with no fear of failure and the resilience to try over and over again. Positions such as vice president of growth, product manager and things like growth marketing have to be your new jargon. As you go from 0 to 10 in such little time, normally you need a Gap Filler or Human Band Aids to be able to fill all the new positions and functions the startup needs while you hire

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the right people. Also, you have to hire people thinking about the next 12 months, not forever, as the function they serve in one year will be completely different. As you grow, you will need higher profiles and people will have to adapt to new bosses and a new organization of the team. Not that many adapt.

Private Companies Step Up, Change the Gig Economy for the Better José V. Fernández CEO and Founder | Bankuish

Latam and Mexican Startups Going from Private to Public Guillermo Cruz US Managing Partner | Maquia Capital Financial Group

Startups as Economic, Social and Environmental Solutions Luis Manuel León Marketing and PR Director | CasAgua

Is Democratization the Solution for Financial Inclusion?

Isaac Kohab Co-Founder and COO | Klu

Why Speed-to-Market Matters in Fintech Jim McCarthy President | i2C

The World Favors Those Who ‘Launch’ Jonah Greenberger CEO | Bright

The Beginning of a Journey to Entrepreneurship Liz Coraima CEO and Co-Founder | Cora Blends

A Decentralized Safe Space: Web3 and The Future of Online Privacy Fran Villalba Segarra CEO and Founder | Internxt

The Metaverse Is Not Here Yet Nicolás Brandoni CEO and Founder | Peek Latam

The Next Phase of Digital Payment Adoption in Mexico Héctor Cárdenas CEO and Co-Founder | Conekta

5

Infrastructure Like many industries, the real estate sector has been reconfigured after the COVID-19 pandemic. A new lifestyle brought new dynamics to the market, among them the necessity for bigger and better spaces that allow hybrid work models and safe social interaction amid an ongoing pandemic.

Despite the challenges, the real estate sector has experienced significant growth in Mexico.

According to the Mexican Association of Real Estate Professionals (AMPI), the sector achieved 20 percent growth in 2021, which was mainly driven by the sale of homes in metropolitan and coastal cities.

Experts say challenges lie ahead, such as growing unemployment, low wages and rising inflation, which will reduce purchasing power.

Still, the sector is expected to continue growing in 2022 as the flexibility and integration of technology will further whet the appetite of buyers. This year, the sector will experience a digital transformation, promoting the acceptance and implementation of hybrid environments. In addition, it will continue to advance in the use of new means of payment, such as bitcoin for the acquisition of assets.

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Infrastructure

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Analysis A Look Into the Future of Office Real Estate

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View From the Top Christopher Gill | Commercial Director | SIMCA Desarrollos

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View From the Top Jacobo El Mann | Corporate Director | Parks Desarrolladora

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Conference Highlights Residential Real Estate Is Changing. Can the Sector Keep Up?

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Expert Contributor Francisco Andragnes | CEO | Homie

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Expert Contributor Enrique Suárez | Co-Founder | MountX Real Estate Capital

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Expert Contributor Alvaro Villar | General Manager| WeWork

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View From the Top Luis Cuevas | Commercial Director | IACSA & Asociados

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View From the Top Enrique Lomnitz | Director General | Isla Urbana

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View From the Top Marco Vidal | Managing Partner | Rizoma

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Expert Contributor Marie-Pierre Mercier | Country Director | Autodesk Mexico

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Content Links

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A Look Into the Future of Office Real Estate Never before have people been forced to leave their offices and work in a remote environment at the scale experienced in 2020.

However, even before the pandemic, offices were beginning to drift away from traditional rows of desks to focus on designs that induced collaboration, flexibility and innovation. The pandemic was just the drop that tipped the glass for traditional offices as it forced teams to reassess priorities and focus on what matters most.

One of the top findings in PWC’s US remote work survey was that remote work has been an overwhelming success for both employees and employers. There has been a positive attitude regarding this work shift, with 83 percent of employers now saying that the shift to remote work has been successful for their company. Not everyone is convinced, however. “It is important to clarify that what we have experienced is not home office,” says José Antonio Cheng, Director of Consulting Services at Coldwell Banker Commercial Mexico. “Moving to work from home was not voluntary and without the pandemic, home office would still not be relevant in the country.” The fact that there is no set date for the true return to the office space means that offices need to adapt to this new hybrid mode. “A redesign of spaces will be necessary to accommodate smaller teams. At the same time, offices will need more playful and open spaces,” says Cheng.

Millennials will soon make up the largest share of the labor market — they are projected to make up 75 percent of the workforce by 2025. This new generation prefers home office and work flexibility over going to an office, says Enrique Suárez, co-Founder of MountX Real Estate Capital. It is all about improving the office experience. This goes beyond the time spent working, adds Álvaro Villar, General Manager of WeWork, and this should be reflected in the office space. “We should feel inspired from the moment we walk through the door. With attention given to small details, a simple journey such as getting a coffee becomes an entirely different experience. Creativity based jobs are heavily influenced by the immediate surrounding environment.” In PWC’s US remote work survey, the firm notes that newer workplace designs are likely to include improvements to office decoration and an increase in collaborative hubs, including even private offices or quiet spaces in a deliberate move away from cubicles and open floor plans.

Younger generations also consider sustainability and environmental impact in all aspects of daily life. For them, a responsible project is one worth spending their time and money on, according to Luis Cuevas, Commercial Director of IACSA. The importance of sustainability in infrastructure also cannot be understated. Newer offices will have to integrate HVAC systems that meet new post-pandemic standards, with proper air filtering systems and the proper sensors that regulate carbon dioxide levels, says Cuevas. This allows workers to reach their peak performance.

“If you are working in an environment free of carbon dioxide, you no longer feel tired and sleepy even after a big meal. In addition, by installing lighting sensors that constantly scan the active lighting, Read the complete article More about this topic

you can dynamically increase or decrease the light, which helps to reduce eye strain,” he said. All of these improvements allow for a better workflow and optimal employee performance and wellness.

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from the

Q: SIMCA has been developing properties in the Mexican southeast for more than 15 years. What is your greatest contribution to the region?

A: Beyond the jobs that SIMCA has created, we have promoted the region. People are now aware of everything the region has to offer.

Today, we are one of the largest developers in southeast Mexico, with real estate in Merida, Cancun, Playa del Carmen and Tulum.

We are connected to the world, which is difficult to find today.

We have signed major agreements with the various associations of real estate professionals and we are official sponsors of major international federations and the Mexican Association of Real Estate Professionals (AMPI). We belong to large associations in the US and support events like the National Association of Hispanic Real Estate Professionals.

Real estate benefits greatly from everything that a destination like the Mexican southeast has to offer. It provides great accessibility, climate, gastronomy and an enormous diversity of services and activities. The region is experiencing an incredible growth boom.

It has theme parks like Xcaret, which was recently named the best theme park in the world, above Disney. The region also has unique natural areas, including the world’s second-largest reef and archaeological sites.

All these features make the Yucatan Peninsula an ideal destination

Christopher Gill

for retirees from the US and Canada. Today, Mexico is the No. 1 destination worldwide for retirees from these two countries. It is an economic destination that is experiencing significant growth, especially in the northern region, which has one of Latin America’s

Commercial Director | SIMCA Desarrollos

best golf courses and country clubs. The region is starting to connect with Progreso, Yucatan. We recently acquired a marina in Yucalpeten, which brings together the best of two worlds: the modern world and the colonial culture that Merida has to offer.

On the other hand, the Riviera Maya offers this echo-chic concept

Southeast Mexico More Attractive Than Ever

where luxury merges with the natural environment without harming it. Every destination in the southeast peninsula is diverse.

Q: How will the return to the office impact the remote work trend in the Riviera Maya?

A: All the people who came to the Riviera Maya during the past few months have already tasted a bit of paradise and that means they will come back. Also, the pandemic is far from over and as long as it lasts, there will be digital nomads and that will allow many people to get to know this destination. Thanks to this phenomenon, many people are already considering living here permanently.

Q: What measures is SIMCA taking to reduce the carbon footprint of its developments?

A: SIMCA has always been committed to renewable energies but we definitely have a long way to go. As a construction company, it is difficult to be 100 percent environmentally friendly but we are doing everything we can to make that happen. We are the first developers to install charging stations for electric vehicles in Playa del Carmen. We are also focusing on water treatment and

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are considering the use of solar energy. It all stems from design.

SIMCA seeks to design intelligent buildings that reduce the need for electricity consumption, incorporating large amounts of natural light and LED technology. We also always try to look for environmentally responsible suppliers.

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from the

Q: What new opportunities emerged as a result of the pandemic?

A: The pandemic had an impact on all industries. The real estate business experienced some difficult times as well.

Nevertheless, during a crisis, it is best to learn and adapt.

We have had to implement new practices and modify our old ones, as well as pushing more innovations to attract more investment. We did not expect prices to drop, which allowed us to make better decisions. The pandemic allowed us to further differentiate ourselves from our competition. We were able to be a lot more flexible with our renters and provide new and improved experiences to our clients. We also made changes to our operations so that when we go back to normal, we will be one step ahead. When the pandemic began, we recognized the necessity of changing certain plans right from the getgo. For instance, proper air circulation is crucial. As a result, we changed some projects that are under construction to include terraces.

Q: What long-term changes will disruption in work and living spaces bring to the office segment?

A: I do not believe the future is solely home office. It will be a hybrid modality for working. The cramped workplace will be a thing of the past. We will start to see an increase in recreational

Jacobo El Mann

and open areas, as stationary workplaces start to decline. This will revolutionize the workplace. The space will still be needed but how it is used will be modified.

Corporate Director | Parks Desarrolladora

Q: What are Parks’ plans and how have they evolved as a result of the office disruption?

A: We quickly recognized that the market was changing. We took our data and discussed it with experts and industry

Real Estate Recovery Looks Promising

leaders. Soon after, we began redistributing the workspace and redesigning existing projects. What we offer now is the gray work, conditioned spaces, as well as already furnished offices, which are optimized. The final product we offer are mixed use, where we specifically adapt the workplace to our clients’ needs.

Q: In terms of recovery expectations, how do different markets compare and where are you setting your priorities?

A: I believe that commercial real estate will be the first to recover, due to its simplicity in terms of attracting investment.

Office real estate will have a slower recovery but we remain optimistic that next year will bring better times. As a company, we remain diversified, which gives us an advantage in uncertain times.

The tourism industry is also presenting a good rate of recovery, especially the beach destinations. The business side of tourism is slowly recovering. We believe that by the end of the year, tourism numbers will reach 2019 levels.

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The retail industry has evolved over time and recent technologies have allowed companies to sell their products through online platforms. This has allowed us to adapt to the changes resulting from the pandemic. It all has to do with flexibility.

Conference

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Highlights

Residential Real Estate Is Changing.

Can the Sector Keep Up? Gustavo Marcos Partner at Grupo DAGS & Co-founder | Real Start Business Academy

Tonny Hánna CEO | Tiburon Inmobiliario

Ricaro Amack Senior Director of Investments and Development | Greystar

Federico Cerdas CEO & Co-Founder | Global Businesses Inc & Skyhaus

Rodrigo Rivero-Borrell Founder & CEO | Reurbano

A

fter nearly two years of the pandemic, it is a different world for residential real estate, following broad-based lifestyle changes. Demand has shifted significantly, generating long-term changes that developers must embrace to thrive. The main

driver of this new reality has been the decentralization of work that sparked transformations in mobility, demand and availability of resources to invest. Work from home modalities and online schooling increased the value of space within a home, says Federico Cerdas, CEO and Co-Founder of Global Businesses Inc and Skyhaus. “Notable priorities are outside spaces, such as balconies or terraces, as well as flexible areas to study, work or exercise,” he says.

“Amenities within apartment complexes or residences are also decisive factors,” adds Tony Hánna, CEO of Tiburon Inmobiliario.

The question is whether or not these lifestyle changes will be permanent. “The only thing that is certain is that home office is here to stay,” Hánna says.

The challenge for the real estate industry is that the sector itself might be slow to change with the times in comparison to other sectors, says Rodrigo Rivero-Borrell, Founder and CEO of Reurbano. “Development in this industry is slow. It is not going to immediately arise from what is trending, so while the market research is ready, we must listen to the immediate user for ideas.”

Large cities are usually the hubs for residential real estate sales and rentals, so they are the first to feel market changes and represent significant opportunities for developers. “Mexico City is a major hub for employment and commercial activity. Like other large metropolises with high costs of housing, people in Mexico City are forced to live on its outskirts and spend several hours commuting to work on public transportation or in traffic,” says Ricardo Amack, Senior Director of Investments and Development at Greystar.

Another critical change is the use of big data and data analytics.

“Millennials are now the ones who buy real estate and Gen Z is already entering the market,” says Hánna. These are the generations that are comfortable doing things online and that is reflected in the real estate market. While companies wait for a robust database, social media can be an optimal alternative to generate leads and identify trends, says Gustavo Marcos, Partner at Grupo DAGS. “Social media has been a truly innovative tool for the

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construction industry because it requires a lot of planning and is quite challenging to maintain. Nevertheless, every single company in the industry should have its own social media platform,” he says.

T

he pandemic translated to an increase in house relocation among tenants. In many cases, tenants required a dwelling that would provide the necessary space for multiple household members to work or study at the same time. However, many of them

could not move to a new dwelling due to the excessive number of requirements by landlords. For many years, the list of requirements to rent a property in Mexico has been getting longer and longer.

This has forced tenants to stay in the same place because they cannot find a suitable place to live where they can easily qualify.

The traditional rental process is time-consuming, expensive and unsafe. Consequently, owners have increased the renting requirements that are now very difficult or almost impossible to fulfill for many would-be tenants.

Today, owners do not have the right tools to do an exhaustive investigation of each candidate who wants to rent their property.

Most landlords rely heavily on the strength of a guarantor or

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“aval” because either they do not have access to a tenant profile

Rent Collection Uncertainty Puts Real Estate Sector at Risk Francisco Andragnes

at all or can only perform a superficial background check of the prospective tenant. Additionally, a landlord can spend substantial out-of-pocket funds to showcase a property in media and listing platforms. Further, the property could take several months to rent, which results in extra leasing and vacancy costs. Often, signing a leasing contract requires burdensome in-person paperwork that slows the process even more. After a contract is successfully signed and the tenant moves into the property, manual rent collection results in delayed payments and uncollected rents. Also, the tools available to collect rent and recover any associated costs, such as damages, missing payments and evictions, are very limited.

CEO | Homie The pandemic further exposed these systemic market risks related to rent collection with an abrupt increase in defaults, contraction of rental demand, increase in vacancies and a hardening of landlord requirements. If this trend were to continue, the Mexican real estate industry would see a fall in the rental market in the coming years, affecting the economy and the interactions between landlords and tenants. This creates a unique opportunity for companies that can create products that solve the problems of landlords, tenants, and brokers, and several.

Several companies have entered this space to provide better solutions through technology, such as Homie, a leading solution provider. This Mexico-based proptech startup has developed a sophisticated, real-time, machine learning algorithm that is designed to solve these exact problems. The company’s proprietary software provides an optimal rental price for any apartment and progressively adjusts prices to minimize vacancy costs by 50 percent. Also, Homie provides its clients an exclusive AI-powered screening tool, which reduces the time that landlords and brokers need to evaluate a potential tenant by seven times and reduces default risk by 10-15 times. Further, this feature allows Homie to reduce the requirements for tenants making the rent application deposit and guarantor-free.

Reducing rent collection risk and lowering leasing requirements results in more tenants and consequently lower vacancies for Read the complete article More about this person More about this company

owners. Lowering these risks makes the opportunity to invest in rental properties even more appealing. Allowing tenants better access to housing also results in better quality of life. More supply and demand because of new technology translates into a broader, fairer, and stronger rental market and spurs economic growth.

E

very generation influences the economy but Gen Y and Z have grown up in a time of rapid economic change, which gave them higher career expectations than previous generations. Millennials are, in fact, poised to reshape the economy. They are often

referred to as the “instant-gratification generation,” with high expectations for their professional and personal lives. Gen Y and Z are also the first truly digital generations, raised amid laptop computers, cellphones and rapidly advancing technology.

It is projected that by 2025, three out of every four workers globally will be millennials. Is the real estate industry ready for this new consumer? This new generation prefers to use their savings to live experiences rather than to buy a house or saving to build a house in the future; they choose home office and work flexibility over going to an office; 36 percent are interested in working abroad; they have a nomadic DNA, which makes them reluctant to live their entire lives in the same city or house; the

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concept of “workation” (work and vacation) is gaining more and

The Next-Generation Digital Future of Real Estate Enrique Suárez Co-Founder | MountX Real Estate Capital

more relevance. Meanwhile, Gen Y and Z see sustainability and environmental impact in all aspects of daily life. They are aware of the consumption of resources such as water and energy in homes and corporate buildings; they have no children or will have fewer than previous generations; they will not last with the same partner for the same period as the baby boomers or Gen X. What do these buyers want when it comes to their homes?

“For Gen Y and Z, wellness is a daily active pursuit,” according to Goldman Sachs, which concluded that, “their active lifestyle influences trends in everything.” In their home-buying decisions, neighborhood quality and safety ranked highest for millennials and centennials and healthy homes ranked closely below, followed by closeness to open space, walking trails and activities, all of which point to the health potential of communities. The interest in health extends to an interest in creating a healthier planet. They have a preference for gardening, composting and cooking organically; all three blend wellness and sustainability. Healthy homes to this generation include smart home technology, home fitness spaces and large yards. The home’s community setting should ideally include gardens, rooftop amenities, co-working spaces and outdoor dining.

Leaving home is a seminal moment for many young adults. It generally occurs during a person’s 20s and usually coincides with the end of college, starting a career or developing an intimate relationship. Today’s millennials and centennials, however, are waiting longer to leave the nest. Nearly half of millennials still live with their parents in the family home and half of those actually moved back to the nest after having left once — the so-called boomerang babies.

Conventional real estate techniques have long become outdated. For a long time, we have been trying to optimize the existing industry with current tools at hand instead of inventing new innovative ways to do so. The result is a highly exclusive,

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illiquid and inefficient industry with a hoard of other concerns.

Now, with a new innovation at hand, there is a better way to do things using technology to transform the real estate sector.

Real estate is evolving into a multifaceted investment vehicle for growing wealth.

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he global pandemic will forever be remembered as a period of chaos, plagued with social unrest and unimaginable challenges. However, alongside the tests of this time also came unexpected opportunities, which in the long run may turn into

new realities that bring out the best of us. For me, one of these opportunities has been the chance to come together with my team at work and find new ways to remain connected, reassess our priorities and focus on what matters most. We focused on our well-being and tried our best to create a culture of empathy and wellness for everybody.

As we think beyond the pandemic, it will be critical for organizations to continue to focus on employee wellness. If this crisis taught us anything, it’s that these are topics that we cannot afford to ignore; going back to the old ways of working — long hours, long commutes and little time for ourselves — will mean we have missed the opportunity to make our culture stronger and

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our teams healthier, happier and more productive.

How Office Design and Flexibility Can Improve Well-Being Alvaro Villar General Manager| WeWork

Wellness in the workplace refers to any program or policy that a company offers to promote a healthy lifestyle among employees.

There are many different elements that fall into the “wellness in the workplace” category; we have healthy food options and on-site fitness classes, stress management, financial wellness and mindfulness, to name a few. But there is an additional element that every company should be thinking about: office design, flexibility and how these can improve our overall well-being.

Workplace design and hybrid working models are two of the top workplace wellness trends to watch out for this year. As a true believer and enthusiast of flexible spaces, I see tremendous benefits of incorporating these concepts as important pillars of our wellness strategy. Whether we are conscious of it or not, we are a product of our environment. We are the company we keep, the information we consume, and the places where we spend most of our time, among them our workspace.

The workplace has been redefined as a hub for collaboration and productivity — and workspace design needs to

evolve

to support this change. Well-designed workspaces will strike a balance between focus and collaboration, improving the employee experience and well-being.

The employee experience goes beyond the time spent working; we should feel inspired from the moment we walk through the door. With attention given to the small details, a simple journey such as getting a coffee becomes an entirely different experience.

Besides, the aesthetic and the energy of the spaces really matter for our creativity levels, ability to dream big and push outside our comfort zones. This is what wellness at the office is all about.

The pandemic has presented business leaders with a unique opportunity to think about office space in a new way. I am sure that companies that succeed at understanding the importance of workplace design as part of their wellness journey will have a clear advantage in the near future.

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Ultimately, we need to strip back preconceived ideas around wellness in the workplace and welcome a much more holistic approach where our environment and our freedom of choice play a pivotal role.

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from the

Q: How has Mexico’s adoption of global standards for air conditioning, heating, ventilation and electromechanical installations changed after the pandemic?

A: The importance of sustainability in infrastructure cannot be understated. Buildings consume vast amounts of energy during their entire lifetime and here in Mexico, buildings tend to have a 40-year life span. For the most part, these buildings are poorly designed, meaning that their energy costs are way too high. In addition, in Mexico there are not many preventive measures built into the design, meaning that if a part of the air conditioning system breaks, then everything must be replaced.

At IACSA & Associates, we approach the design from a holistic point of view. We have established three main pillars for sustainability: economic, social and environmental. Focusing on only one pillar will result in an ineffective system. You may have an environmentally friendly installation but you may hurt your users.

We tackle all three using ASHRAE, which is the global standard for air conditioning systems.

ASHRAE systems limit the amount of energy you use for the system, while also having rooms properly set up with air filters, temperature, extraction and insertion of new air currents, as well as air quality. IACSA introduced these standards to Mexico well over 30 years ago. Since then, all HVAC systems have been designed

Luis Cuevas

under those standards. This provided us a really big advantage during the pandemic because these standards are now becoming the new norm.

Commercial Director | IACSA & Asociados

At IACSA & TIC we are always seeking to improve the HVAC systems with designs to maximize efficiency and reduce initial and operating costs. However, since the beginning of the pandemic, we have been concerned about human well-being, ensuring the user´s health through strategies that allow confidence and provide a

Improving Performance and Health Through HVAC

sense of security and relief by offering high quality air, filtered with MERV - HEPA and ultraviolet light.

Q: What are the main benefits of an efficient HVAC system?

A: Cost reduction in an overall life-span system. Very high filtration systems, air quality and additional exterior performance, energyreduction, and low-contaminants indoor environments for better and healthier interiors.

Q: What are the benefits of IACSA’s energy simulations?

A: There are many benefits to having an energy modeling analysis in the very early stages of the design process of a project.

Nevertheless, the one that is most attractive to our clients is that all the output from these different building settings result in many interesting scenarios, where our clients have more accurate options to choose from. They can either choose a much more efficient glazing and slab system to reduce the costs and maintenance of the HVAC and lighting system or decide where to invest more in terms of architectural and engineer points of view. All of these options are completely adjustable and can vary according to each

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project´s specific requirements, minimizing the over-cost when the systems and building is already in construction or operating.

By doing this at an early stage of design, decisions encourage real efficiency and money-savings that are highly appreciated by both stakeholders and shareholders in every project.

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from the

Q: Why is water shortage such a prominent issue in Mexico?

A: Mexico is a particularly vulnerable country when it comes to water issues, a fact evidenced by the reality that over 10 million Mexicans still do not have access to even the most basic water services. This problem has to do with the uneven distribution of water geographically. It is further compounded by highly unsustainable management, particularly in areas like Mexico City.

Seventy percent of the water used in that city comes from aquifers directly underneath it, with overextraction so extreme that the city is literally sinking as a result. It is amazing that a city originally built on a lake is now among those most likely to run out of water in the world. Decisions made in the past, such as draining the lakes of the Mexico City basin and using the rivers as the main arteries of the sewage system, may have seemed to make sense at the time they were made. Nevertheless, the result is now an extremely unsustainable situation that is very difficult to reverse.

Q: What is needed to stop the process of continuous decay?

A: It is very difficult to fix the underlying causes of Mexico City’s water crisis. The infrastructure and management model that brought us into the crisis has four hundred years of inertia behind it. Furthermore, the city was built in such a way that halting the practice of draining water out of the city would result in immediate

Enrique Lomnitz

catastrophic flooding. In the most general terms, the city needs to reach an equilibrium between extraction and replenishing its major water resources. This means both cutting back on the amount of water pumped out of the ground and increasing the amount of

Director General | Isla Urbana

rainwater that makes its way back in.

We focus on promoting rainwater harvesting at a household level because it helps improve water access and resilience in the places that suffer the most. It also introduces a new way of thinking about

Is Rain Water Harvesting the Key to Mexico City’s Water Woes?

water infrastructure. Decentralizing water infrastructure, which bases it more directly on renewable sources, generating autonomy and local management, makes sense to us. Rainwater harvesting might not solve the city’s crisis by itself but it is an important part of the solution. What is more, it is technically, economically, and politically viable to do right now, which is not the case with many of the more structural changes that need to happen. The city must eventually begin to seriously reduce its water extraction and must increase infiltration. This will involve recycling wastewater, restructuring water tariffs, stopping the urban sprawl into recharge areas, among a host of difficult actions. Rainwater Harvesting is a sort of low hanging fruit that can help demonstrate that different models of water management could be both viable and effective.

Q: How can harvesting technologies help address other issues outside of providing water?

A: Rainwater harvesting has multiple benefits beyond the immediate improvement in local water access. It provides a great deal of benefit to any individual family adopts the practice, but when implemented at a district or city-wide scale, the benefits are multiplied. Mass implementation of rainwater harvesting helps

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mitigate of flooding by keeping heavy rain events from saturating the sewers. When multiple homes start harvesting rainwater, the result is a reduction in demand on the grid. This means less extraction from the ground, and more water available for other families.

VIEW TOP Infrastructure | 75

from the

Q: How have Rizoma and the Building Information Modeling (BIM) ecosystem evolved in recent years?

A: Although our firm focuses on consulting for design and virtual construction, we provide BIM services, as well as implementation and consulting. We have another branch that specializes in digital topography and another area into which we have ventured in recent years is generative design, which uses machine learning interfaces that help us optimize projects. We have found a great opportunity since the market of companies offering BIM solutions has become saturated.

Our spectrum has expanded in recent years for several reasons. We entered the BIM segment in 2008 when we worked at ICA. We realized that the design platforms we were using had a great deal of information that could also be used for the construction phase. We started extracting this information and using it in construction because we realized that we could better plan our developments this way. Later, we began to form technological alliances with software developers who understood that the technology they used for design had many uses in the construction phase as well.

In 2014, we founded Rizoma and began to capitalize on all that we had learned. We realized that in many countries there would be a great deal of movement in terms of projects and

Marco Vidal

regulations related to BIM in both the private and public sectors. However, in Mexico we saw that there was a certain lag and we decided to promote these tools, where the final objective is to deliver better projects with fewer resources. In

Managing Partner | Rizoma

recent years, there has been a joint effort among the private sector and academic and government institutions to promote these methodologies. In many countries, it is now mandatory to use BIM for projects developed with public resources. The UK is a great example, since nothing is invested in projects

Legislation, Adoption, Education Needed to Unlock Bim’s Potential

that are not modelled with this tool.

The BIM Task Group initiative was born in the UK, which came to Mexico and eventually led to meetings with the Ministry of Finance and Public Credit (SHCP) to promote a bill that made BIM mandatory for projects worth more than MX$1 billion (US$47.8 million). This is not easy because a manual has to be developed for the industry with standards and process designs that are adapted to the Mexican market.

Q: Besides the standardization of processes, what else is needed to be able to standardize best practices from other countries?

A: The private sector is almost always the first in the market to adopt these practices because it is the one that sees an immediate benefit, whether economic or in terms of productivity. In the US, when a contract has BIM requirements, it is easier to corroborate that they were met throughout the process. In Mexico, on the other hand, this cannot be verified.

The option we have chosen is to verify projects based on what can be extracted from them. This makes it easier to

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quantify the results. There are still legal gaps that complicate tropicalization, which has to be multidisciplinary. As a tool for transparency, BIM also makes the industry in Latin America uncomfortable due to the bad contractual practices in the region.

T

he global water crisis is mainly related to the pollution of lakes and seas, waste, and population explosion. Fortunately, we have at our disposal several alternatives to solve these situations. One is the use of technologies to develop infrastructure

that helps to collect, treat, distribute and store this resource more efficiently.There is still a long way to go but I am convinced that, with the collaboration of governments, companies and civil society, we will be able to mitigate causes that threaten the future of water. Technology has played a key role in the development and management of water infrastructure. Two examples are BIM methodology and digital twins.

The BIM methodology (Building Information Modeling) is defined as the intelligent process, based on 3D models, used for planning, designing, constructing, or managing buildings, mostly.

However, the value this methodology provides is not limited to buildings; it is also an excellent alternative for developing water

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infrastructure in less time since it promotes better collaboration

The Benefits of BIM, Digital Twins for Water, Wastewater Projects Marie-Pierre Mercier Country Director | Autodesk Mexico

between work teams and reduces mistakes. In addition, it generates very important impacts in terms of sustainability since it contributes to more efficient use of resources and materials.

BIM methodology has had positive impacts in the Latin American region. We were able to see this through an ambitious sewage system modernization project for the Brazilian Army, which was executed using Autodesk solutions. It involved an underground system that no longer had the capacity to contain floods, preventing the proper disposal of wastewater. The challenge was to direct the dirty water to a treatment plant so that it would not flow into the rivers. To achieve this, several engineers used BIM methodology to create a digital model of the area, from which they managed to develop a more efficient sewer piping system that would not affect other lines, such as gas or electricity. It is worth noting that with the help of the BIM methodology, this process resulted in savings of up to 40 percent in working hours.

A digital twin is a representation of a physical object that generates a thread of information from each of its components.

Its purpose is to efficiently manage the asset, reducing total costs, including maintenance costs. An example of the application of this technology can be found at Innovyze — an Autodesk company — which developed the Info360 platform to help cities and municipalities to monitor and manage their water systems and identify challenges before they become crises.

Problems such as deterioration, obsolescence, disconnected technological systems, or limited financial resources are common in water infrastructure. To overcome these challenges, the Info360 platform creates and feeds to a digital twin, using data related to all phases of construction, from planning to completion. This provides a true view of the performance of operations and the progress of maintenance activities. Water operators use all this information to make better and timely decisions.

Technology has come to facilitate many tasks that in the

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past were very complicated or impossible to achieve. The development of new infrastructure, side-by-side with the adoption of these tools, will help sustainable management of water resources, benefiting the lives of billions of people around the world. By taking care of water, we preserve our future.

The Pursuit of Resilience and the Potential of Smart Cities Alejandro Preinfalk President and CEO Mexico | Central America and The Caribbean, Siemens

Facing The Future With a More Experimental Approach José Suárez Picazo CEO | Suárez Picazo Arquitectos

Adaptability of the Built Environment in Times of Change Salvador Rivas Director General | S*ARC

Managing the Investment Perspective in Mexico’s Recovery Enrique Lavin Managing Director and Mexico Country Head | PGIM Real Estate

Industry Certainty Essential for Real Estate Growth Ricardo Amack Senior Director of Investment and Development and Mexico Country Leader | Greystar

Sustainable Edifications and Built Environment Resilience Pedro Azcué CEO Mexico and Chairman Latin America | JLL Mexico

A New Era for the Manufacturing Industry Marie-Pierre Mercier Country Director | Autodesk Mexico

Beyond 2022: Workplace Trends That Will Stick Long Term Álvaro Villar General Manager | WeWork

Orange Investments: Building a Proptech Sector from Scratch Carlos Rousseau Co-Founder and President | Orange Investments

Tech a Great Opportunity for Commercial Real Estate in Mexico José Carlos Alemán CEO | Buzz Street

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Talent Mexico’s employment rate has made significant strides toward recovery, particularly in the formal sector as a consequence of the Outsourcing Law. Nevertheless, pre-pandemic numbers are still out of reach.

While Mexico has not been as affected by the Great Resignation as its northern neighbor, the country has taken heed of labor-driven perspectives and values born from the movement. The predominant reckoning of the post-pandemic reality concerns employee’s newfound expectations, companies’ employment propositions and how these relate to employees’ personal lives.

Gone are the days when companies only had to worry about remunerative incentives and competitive benefits. The labor market has shifted in favor of the workforce, allowing employees to demand more from their employers, including flexible work arrangements, a healthy work-life balance and autonomy. Confronted with an ongoing talent scarcity, companies have been forced to evaluate and re-formulate their employee value propositions.

A new talent reality also means further demands from talent in terms of skills and experience, especially considering the rising levels of technification within companies. As companies embrace 4.0 strategies, new hires must be prepared to relearn and upskill.

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Analysis How Can Companies Face Employee Desertion?

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Expert Contributor Hugo Hernández-Ojeda | Labor and Employment Partnere | Hogan Lovells

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Expert Contributor Francisco Martínez | CEO | Adecco México

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Conference Highlights The Outsourcing Reform Broke Paradigms

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Expert Contributor Jorge Ponga | Partner | Humanologo Consulting

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Conference Highlights The Hybrid Model Alone Falls Short

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Expert Contributor Javier García | CEO | IOS Offices

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Expert Contributor Maite Delgadillo | Director of People, Experience and Services | Scania Mexico

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Expert Contributor Sandra Sánchez-Oldenhage | President | Pharmadvice

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Conference Highlights Inclusion in the Workplace: Making Everybody Count

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Conference Highlights The Post-Pandemic World Requires New Set of Skills

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Expert Contributor Santiago Gutiérrez | Vice President of Sales for Mexico and Central America | Pearson

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Conference Highlights Robots, Automation to Create Employment Opportunities

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Conference Highlights AI: The Future of Recruiting?

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Content Links

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How Can Companies Face Employee Desertion?

As companies gear up for a return to the office, many of the employees they expected to come back have, in fact, decided to quit instead. Dubbed “The Great Resignation,” this wave of workers leaving or preparing to change jobs is driven by a number of factors that have been building up since the pandemic hit.

A Microsoft survey of more than 30,000 global workers showed that 41 percent of employees were considering quitting or changing professions in 2021 due to inflexible labor policies. In Mexico, three out of four employers in the country will require at least 50 percent of their workforce to go to the office full time or most of the time, given the type of roles they perform, according to specialist human capital consultancy ManpowerGroup.

While workers have always been mindful about the environment in which they work, the pandemic brought a new perspective: employees now expect more from companies. “Associates have removed that blindfold and have begun to see and value things that they did not before. They have realized that they spend practically more than half of their time at work. Therefore, they have realized what they want to be investing half their life in,” said Maite Delgadillo, Director of People, Experience and Services at Scania Mexico, in an expert contributor piece for MBN. While the Great Resignation has yet to hit Mexico on a large scale, there are lessons to be learned from the US, the epicenter of the movement that is causing unprecedented labor shortages across sectors. In late March 2020, entrepreneur and investor Mark Cuban warned companies against forcing employees to return to work too early in an interview with CNBC. “How companies respond to that very question is going to define their brand for decades. If you rushed in and somebody got sick, you were that company. If you did not take care of your employees or stakeholders nor put them first, you were that company.”

In June, following Apple CEO Tim Cook’s email announcing employees’ return to the offices three days a week starting in early September, a group of employees wrote an internal letter to executive leadership teams requesting support in continuing to work remotely or in location-flexible ways. Employees argued that many of them had successfully worked outside the office and urged Apple’s upper management to understand that there is no one-size-fits-all policy for everyone. Other tech companies including Uber have also struggled to find the perfect balance between company and employee needs. In late June, less than three months after announcing that employees would have to return to the office at least three days a week, the ride-hailing company changed its mind.

With some companies unwilling to adopt a hybrid work system and others choosing to remain fully remote, CEO of iOS Offices Javier García says that “one extreme can be as detrimental as the other. Humans need face-to-face interaction. Most of all, certain Read the complete article More about this topic

aspects of the workplace are only great when you collaborate with another person face to face. A stiff system at either end can hinder a company’s productivity,” he says.

T

he Labor Reform, which has been enforced in Mexico since April 24, 2021, prohibits outsourcing of personnel in Mexico and includes legal consequences in case of violations of the new subcontracting rules for the employers in the country. Although subcontracting

labor structures were prevalent in Mexico for many years and even regulated under the former subcontracting regulation, several outsourcing schemes were also used for the underpayment of taxes and social security contributions, leading to massive tax fraud and reductions of the employee’s lawful compensation (including retirement and housing). Due to the foregoing, under the Labor Reform, subcontracting of personnel is now prohibited.

Companies had 90 days to regularize and transfer employees into the operating/contracting parties. This deadline was deferred up to the last day of August 2021.

There are several material consequences for using or benefiting from the subcontracting of personnel or not having the

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corresponding registration. These are administrative fines of up to

Is The Outsourcing Reform a Business Change Driver?

Hugo Hernández-Ojeda Labor and Employment Partnere | Hogan Lovells

50,000 times the Unit of Measurement and Update (2021, fines of US$224,050), the non-accreditation of value added tax and nondeductibility for income tax purposes of the payments made for such services for tax purposes. Criminal liability will be triggered for the use of simulated specialized services or specialized works or subcontracting of personnel and will be considered a qualified tax fraud crime (the penalty for qualified crimes will be increased by one half).

As you will gather from the analysis we have been assessing, the current subcontracting structure for many companies or business groups in Mexico will require revision. Any type of subcontracting, including internal services, such as insourcing, will imply a risk from the aforementioned prohibition. However, such risk may be mitigated by implementing certain measures.

One of these suggested measures is to amend the companies’ by-laws to limit the corresponding corporate purposes to the core business only. The goal is to narrow, as much as possible, the core business activities and “carve out” any other activity that is not a core business or the main economic activity of the companies.

This will give companies more flexibility to subcontract to third parties specialized services that are not expressly included in the corporate purpose or carried out as a core business.

Subcontracting services required for international companies that have a restricted headcount are not the only concern: profitsharing is also a concern for the top management of companies in Mexico. Hence, the scenarios for the 2022 tax year are being analyzed by accounting firms and internal departments.

It is a fact that there is no legal criteria stated by the Mexican labor, tax and social security authorities regarding the interpretation of the new rules; officers of such authorities have expressed different and, in some cases, contradictory criteria about what should be considered as specialized services and which companies and services must be registered before the Ministry of Labor.

Conservative advice for companies and investors, regardless if

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they are local or international, is that they initiate a business inquiry in Mexico prior to incorporation of a Mexican entity to define the specific activities that will be part of the corporate purpose of the company to avoid risk while contracting specialized services required for business operations.

I

n September of last year, the legislative process to reform the chapter of the Labor Law on outsourcing of personnel began with the discussion of the issue by the Ministry of Labor and other government entities, which gave rise to the president launching in November 2020 the formal initiative

to the legislative power for discussion and approval.

According to an analysis on the perception of the outsourcing of personnel in the Mexican market and society, carried out by the Adecco Mexico Institute, more than 94 percent of the country’s public opinion was focused on the reform due to the statements of the president of Mexico in his morning conferences, which created great expectations regarding the impact that this reform could have on the working lives of millions of people.

In this study, it is also mentioned that 68 percent of people had a negative perception about outsourcing, where the prevailing idea was that outsourcing or subcontracting of personnel

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favors the over-exploitation of labor and the loss of labor rights.

A Look at the Labor Reform Francisco Martínez CEO | Adecco México

However, 32 percent of the population had a positive perception of this activity, based on two main reasons. The first is that those who are in favor of eliminating outsourcing are people who have never created a job or who have never had to pay a payroll. The second is that they consider that the elimination of this model will trigger unemployment for thousands of people who work under that scheme in Mexico.

As a specialist on the subject, I can only agree with the idea of improving ​​ the rights and dignity of workers. I believe that this should be one of the main objectives in the world of work, both today and in the future, since human capital is the most important and relevant asset of any organization. At Grupo Adecco, we put that idea into practice through our vision, which is, “Make the future work for everyone,” based on dignified and formal employment; however, to know if this expectation has materialized, it is important to consider two points.

The first is to recommend the enrichment of our labor relations model to complement this new reform, with the enactment of a new Temporary Work Law to be able to use a new figure, such as the Specialized Temporary Work Service Companies (ETTs), as one more option for the management of temporary employment in any field or activity, whether it is core or not, of a company, generating formal job opportunities, especially in industries that due to this new normal are generating more jobs than ever and that are seasonal, such as tourism, mass consumption, e-commerce, retail and logistics.

The second point to consider is the time necessary to see the real results of this reform. Since its approval last July until its implementation on Sept. 1, companies that now offer specialized services had little time to transform the operating model for their clients, not to mention that in less than two months they had to comply with all the requirements requested by the Ministry of Labor.

My estimate is that we must wait at least until the beginning

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of 2022 to make an assessment of the benefits of this reform and confirm whether the expectations generated by it were truly met, since what we are now seeing is an increase in the labor model with schemes such as commission agents and payment of fees.

Conference

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Highlights

The Outsourcing Reform Broke Paradigms Gustavo Linares Founder | TalentHow

Alberto Alesi General Director For Mexico, Caribbean and Central America | ManpowerGroup

Francisco Martinez CEO | The Adecco Group Mexico

Melissa Pereda Nájera Head of Human Resources | Volkswagen de México

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he new Labor and Tax Reform regarding outsourcing and subcontracting is changing business operations across Mexico. While the new regulations have brought considerable challenges to every player, they have also opened a new range of possibilities,

industry experts say. “The biggest challenge, administratively and economically, is to incorporate the formerly subcontracted personnel who work in essential processes. In the long term, it is an opportunity to increase production thanks to a more highly motivated workforce. Human resources departments can take advantage of a robust onboarding process to equilibrate talent, know-how and increase productivity in the long term,” says Melissa Pereda Nájera, Head of Human Resources for Volkswagen de México.

Under the new legislation, it is considered outsourcing when an individual or legal entity provides or puts at the disposal its own employees for the benefit of another individual or legal entity.

However, this does not mean that staffing and employment agencies are going to disappear. These companies can still intervene in the hiring process of personnel and participate in recruitment, selection and training but they will not be considered as employers. We can still offer the subcontracting of specialized services, as long as they are not part of the core business activities of companies. Outsourcing is recognized and used across the world, including international companies operating in Mexico,” says Francisco Martínez, CEO of The Adecco Group Mexico.

The first two years leading to the enforcement of the reform were uncertain for most players, according to Alberto Alesi, ManpowerGroup General Director for Mexico, Caribbean and Central America. However, companies are now required to complete “thorough analyses” to define their main economic activities and smartly outsource specialized services. While companies will be forced to have larger employee workforces, with their inherent budget challenges, “outsourcing and subcontracting evolve and it is a matter of time before things stabilize,” says Alesi.

The new Labor and Tax Reform could be beneficial for Mexico but in the meantime, it is affecting thousands, especially following the pandemic, agree industry experts. The COVID-19 pandemic left 13 million unemployed, according to INEGI but between May 2020 and June 2021, 12.3 million people returned to active economic activities, according to IMSS, leaving around 650,000

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still unemployed. The outsourcing reform “increased the informal employment rates as around 900,000 lost their jobs,” while “the deficit caused by the pandemic is still not recovered,” says Alesi.

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hree percent of workers in the US resigned in August, according to figures from the US Labor Department.

In absolute numbers, this represents about 4 million people in an economy that had 10 million open jobs at that time. It is clearly not a phenomenon exclusive

to the US and could have serious implications for organizations in Mexico. But what is the Great Resignation? It is understood as a massive wave of voluntary resignations that can be linked to different causes: 1. Resignations accumulated from previous months that were not carried out, perhaps because of pausing and seeing what would happen with COVID-19.

2. Exhaustion of workers motivated by many reasons, including type of work, the sector in which they work, high levels of tension and demand, not very empathetic and narrow-minded leaders.

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3. Radical lifestyle change. The pandemic has taken things away from us but at the same time it has given us others. This includes time for reflection about what I want but, above all, what I don’t want in my life.

The ‘Great Resignation’ Versus the ‘Great Retention’ Jorge Ponga Partner | Humanologo Consulting

4. Desire to maintain labor flexibility. The benefits of the home office, self-management and physical and nutritional wellbeing are among the elements that have been savored.

Forty percent of workers worldwide have considered quitting and changing jobs. Ian Cook, who is an authority on issues of digital transformation and people analytics, recommends addressing the issue in three basic steps.

Quantify the Problem Using available information, he developed a study from 9 million employees in 4,000 global organizations and found that the resignation trend is growing by 20 percent more than usual among employees who are in the middle of their working career; that is, between 39 and 45 years of age.

Identify the Root Cause This implies work that goes beyond the function of the human resources department itself. It is about changing or reinforcing leadership habits at all levels of the organization, encouraging the genuine closeness of the leader to his team through frequent and sincere check-ins.

Setting clear, consensual and achievable goals is key. But also, the celebration or recognition of the achievements of others is highly appreciated by individuals and the team. There are actions you can take to this end that do not cost anything and are profound.

We must also remember the appropriate use of basic human capital: the right person in the right position, career and growth plan at the right pay scheme. These are the basic health issues of the strategy and execution of the human resources model.

Retention Programs This is the ultimate test of our Employee Experience model. The employer brand that we want to have with candidates, employees and alumni. Let us reflect on it and if it is necessary to redesign it, let’s do it for the good of the organization and to achieve the expected results.

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Let us rethink our human capital assets and make sure they are clearly reflected in our journey maps. If you don’t have a journey map, build one. Let’s challenge the “People” segments that identify our professionals.

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Highlights

The Hybrid Model Alone Falls Short Jorge Ponga Partner | Humanologo Consulting

Maite Delgadillo HR Director | Scania

Elisa Rebolledo Mexico’s General Manager | Casai

Blanca Ruth Ortuño Pacheco Sales HRBP Senior | Nestlé

Victor Velázquez Patrón Vice President, People & Organization Development | Clip

T

he Great Resignation, an ongoing phenomenon that began in information economies like the US, is projected to make its way to Mexico. Based on the observed consequences, companies should be prepared to meet the demands of the post-

pandemic worker. But is a flexible work schedule sufficient to retain them? Human resources experts argue that companies should strive toward a motivation-driven, hybrid work model.

“The Great Resignation is in fact an opportunity to develop the Great Retention. These resignation numbers, which in the US amount to 4 million people during the pandemic, respond to an exhaustion from the side of employees who seek to maintain greater flexibility or a newly found lifestyle,” says Jorge Ponga, Partner at Humanólogo Consulting.

From here on out, companies will need to make an effort to communicate and identify how they can add value and impart a sense of shared purpose, also known as “emotional salary,” says Maite Delgadillo, HR Director at Scania. When employees feel like companies have gone out of their way to accommodate their needs and ambitions, they reciprocate when the company needs them, argues Delgadillo. “Without this, not even the best ideas will work,” she adds.

International companies already know that they must strategically approach their target markets, so “why not employ that mindset toward employees?” says Victor Velázquez Patrón, Vice President of People and Organization Development at Clip.

The task from here is to formulate and incorporate conditions that add to career development and growth.

Businesses should also steer clear of generalized solutions, says Elisa Rebolledo, Casai’s Mexico General Manager. Company teams and individuals will require different amounts of support and work flexibility depending on their international function and life context. Ultimately, she says, individuals would be free to work in the manner that works best for them so long as they deliver results, a model that many applicants at Casai have found agreeable.

Adds Blanca Ruth Ortuño, Senior Sales HRBP at Nestlé: “People don’t leave companies, they leave experiences.” If a company has experienced an unusually high turnover rate, it may be time to reassess the current work environment, Ortuño says. This

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requires business leaders to be honest with themselves and learn from their staff, which will lead to a great diversity of ideas that will enrich innovation and ensure permanence.

H

istorically, companies have competed to attract the best talent. However, a new stage has been set: a stage in which companies have to adapt to the existing demand of individuals searching for a personal and professional balance by incorporating

into their DNA practices related to wellness, development, inclusivity and happiness. Now, they have to compete by being a place where people can be their most productive selves, and most importantly, where they want to go to work. In this effort to stand out, organizations tend to fall under the same mistakes in their recruitment and retention processes, leading to a necessary readjustment through the creation and construction of a love brand; a mixture of monetary and emotional benefits.

One of a company’s most outstanding expenses are its employees. According to a report conducted by research and polling company Gallup, the estimated cost of unhappy workers in the US is between US$450 billion and US$500 billion per

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year. In many cases, the primary cause for employee turnover is

2022: The Race for Talent Javier García CEO | IOS Offices

dissatisfaction, which can lead their productivity to take a turn for the worse. Companies that allow their employees to be creative and provide an environment where they can develop their skills and achieve self-fulfillment have higher satisfaction rates. In contrast, companies that do not attend these needs have a higher probability that their employees might leave their job if offered a compensation that is even 10 percent higher than their current salary, even though salary cannot buy satisfaction.

We tend to believe that companies are the ones interviewing candidates but it is now a bidirectional relationship where companies interview candidates and vice versa. The pandemic has taught applicants that they can choose where — and how — they want to work. As a result, candidates also interview the company that best matches their needs. The situation is very similar if compared to the acquisition of a product or a service: what are those value-added concepts that will make a buyer choose to purchase one brand upon another? The winning formula can be summarized in the following three key aspects: 1) companies must create a love brand that makes them unique by incorporating into their culture self-realization practices, so individuals will be passionate and excited about being hired there; 2) to make sure they provide the best recruiting experience for candidates.

Change, adapt, or innovate recruitment processes; make it friendly, fulfilling and rewarding; 3) and finally: talent retention. To hold onto their staff by creating an environment where employees can experience the company’s magic.

To build a love brand, organizations must identify the needs and drivers that will help a person achieve happiness in the workplace. A survey conducted by Boston Consulting Group and SHRM (Society for Human Resource Management), revealed that the most important satisfaction factor for employees is their potential for growth. It is essential for companies to revisit their development programs and make sure that they are aligned with their employees’ career-path expectations. Another important aspect that stood out was having a good work-life balance; therefore, it is vital for leaders

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to provide this balance to promote a stress-free workplace and prevent burnout. Lastly, some other essential aspects were work appreciation, creating good relationships with colleagues and superiors, job security and wage satisfaction (offering a competitive salary according to experience and skills).

“W

anted: Accounting Analyst, intermediate level of English, Bachelor Degree in Accounting or related, knowledge of Contpaq and current tax laws, female, 20-50

years of age, full-time availability.”

I remember a long time ago having seen an ad for an organization that was looking for personnel with these characteristics. Beyond judging the organizations and professionals that publish this type of vacancy, I would like to invite you to reflect: Are they recruiting staff based on personal characteristics rather than professional competencies or an attitude that can help them develop those competencies if they do not already have them? How is it that personal characteristics can contribute to helping an organization to achieve its goals?

Is it that a person over 50 or a man could not do this job and contribute to the success of the organization? (In the specific

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case of this publication), what message do these types of ads

Diversity and Inclusion: Much Discussed, Very Little Practiced Maite Delgadillo Director of People, Experience and Services | Scania Mexico

transmit about your employer brand and what do you want to transmit?

Throughout my professional career, what I have been able to learn the most is from people and from the diversity of ideas; the number of doors that open to you when there is diversity of thought in an organization is incredible. By diversity of ideas, I do not mean personal characteristics. I mean diversity of ideas regardless of personal characteristics and, at the risk of encroaching on a controversial issue, I do not mean professional ones either. That is, your gender, your race, your religion, your career, your years of experience, your marital status, your religion, the school in which you studied or the years of experience do not matter. What makes an organization richer and more successful is having true diversity in all these and more.

“OKAY,” someone might tell me, “I already have diversity in my organization, of many types, but still the organization is not as successful as you are saying it should be. So?” This is where the best part of diversity comes in: inclusion.

Ever heard on a podcast that diversity is not inviting different people to the party but inviting them to dance? What does it mean to invite them to dance in an organization? Well, invite them to contribute, to express their ideas openly, without fear of being judged or excluded. How many times have we been in a presentation of a project in the office in front of many people yet it seems like the room is empty? No questions. Were you actually that clear in your presentation? Is it really like this or is it that people do not dare to express their ideas, their opinions?

You can have a company with a lot of diversity but if you don’t listen to people, you don’t invite them to express their opinions; if you don’t consider them, then you are only halfway there. “I do listen to my collaborators,” Here, the serious question, for you, is, what is listening? Are you really open to listening to what the collaborators say without passing judgment on it?

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I invite you to think in an open way, to be able to develop someone and to sow something in each of those people. You will see that as time passes, you will see your contribution to their growth. You may even see that person surpass you in a lot of things. You can feel proud to have been part of their training.

G

reat products, services and solutions are born at the intersection of diverse ideas, experiences and challenges within work teams that display their capability to relate and work effectively across these differences. This cultural agility or intelligence

(CQ), is paramount to innovation and success in the new era. In an increasingly changing, technology-enabled, and disruptive world, close-knit and productive teams will provide the best innovative answers to challenges of the future. Team members that pose two-dimensional-diversity traits (inherent and acquired), such as different experiences, background, beliefs and cultures, will bring a wide range of perspectives and approaches to a problem, thus enabling identification of truly optimal groundbreaking solutions.

Most managers accept that employers benefit from a diverse workforce but the notion can be hard to prove or quantify, especially when it comes to measuring how diversity affects a company’s ability to innovate. New research provides compelling

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evidence that diversity unlocks innovation and drives market

Cultural Intelligence a Cornerstone of Pharma Innovation Sandra Sánchez-Oldenhage President | Pharmadvice

growth; a finding that should intensify efforts to ensure that executive ranks embody and embrace the power of differences.

There is a growing research that reveals that innovation requires the participation and deliberation of a group of voices. And, in fact, organizations with higher levels of diversity are far more likely to out-innovate and out-perform others.Unfortunately, despite the data, many pharma and biotech companies have yet to recognize that their future success will in part hinge on their ability to build a diverse, inclusive, and culturally intelligent workplace.

Although most executives believe the long-term success of their business depends on the flow, testing and development of new ideas, one of the problems is the old belief in the “creative genius;” that creativity and innovation belongs to a talented few. Because of this bias, leaders tend to source one or two essential individuals that they believe are innovative, offer them a leadership role and start looking exclusively to them for strategic ideas and direction.

The industry needs to recognize the crucial importance of establishing a workforce reflective of its customers and the ultimate end users of their products: patients who come from every culture, race, nation and socio-economic level and represent every type of religion, sexual orientation, and political group.

Companies can introduce true cultural intelligence to their innovative thinking and unlock their potential by: 1. Educating everybody on the value of diversity, equity and inclusion, as well as the toll of unconscious bias.

2. Selecting problems that empower people to participate and spot the greatest opportunities to create positive change.

3. Creating a place where those ideas can thrive on equal footing instead of always listening to the highest paid person’s opinion:

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+

Make it safe to propose novel ideas, test them and learn, regardless of failing – create a learning versus failure environment

+

Ensure everyone is heard

+

Give team members decision-making authority

4. Sharing credit for success.

5. Providing actionable feedback and implementing feedback from the team.

6. Making diversity and inclusion (as well as innovation) a part of every leader’s job.

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Highlights

Inclusion in the Workplace: Making Everybody Count Jorge Luis Garduño Camarena Camarena, Ethics and Business Integrity Manager | Sanofi México

Jorge Alejandro De Lara Novella VP & GM Global Commercial Services LATAM | American Express

Courtney Devon McColgan CEO & Founder | Runa

Denisse Cazú Regional HR Director LATAM | Mattel Latin America

Daniela Muñoz Jiménez

D

iversity and inclusion go beyond policies, programs or headcounts. An equal working environment outpaces its competitors by respecting the unique needs, perspectives and potential of all team members. As a result, diverse and inclusive

workplaces earn deeper trust and more commitment from employees, generating better social and professional outcomes.

The challenge is that discussions about diversity and inclusion often do not result in action, so the goal for companies in Mexico is to transform all that talk into everyday reality. Workplaces need to encourage an environment that redefines the way employees perform professionally and in society, says Denisse Cazú, Regional HR Director for Latin America of Mattel Latin America. “This environment needs to be based in respect and foster a culture that follows three core behaviors: curiosity, bravery and connection.”

Inclusion and diversity are not logos, banners or trends, says Ana López Mestre, Executive Vice President and General Director of the American Chamber of Commerce of Mexico.

Founder & CEO | ioio

“Diversity is important. We should promote it, from within the

Ana López Mestre

gender. “It is also about socioeconomics, sexual orientation or

Executive Vice President and General Director of American Chamber | American Chamber of Commerce of Mexico

family to governments,” she says. Diversity also goes beyond gender identity,” says Courtney Devon, CEO and Founder of Runa. To guarantee the integration of different groups in the workplace, Devon recommends measuring inclusion by the changes it generates for the company.

While many argue that diversity should be mandated by law, government mandates are not the ideal starting point. “The origin of our problems is not the government,” explains Daniela Muñoz, Founder and CEO of ioio. “Governments are often a reflection of society and we have seen that societal movements have the power to change what they do not like in their governments.” The initiative to change requires an open-minded mentality and a willingness to learn, adds Jorge De Lara Novella, Vice President and General Manager of Global Commercial Services for Latin America at American Express. “By doing this, we can communicate and create an environment in which we all feel comfortable being authentic. We must lead by example.

Employees should also be part of the discussion on diversity.

“One of the fundamental steps to begin breaking the ice on inclusion is being able to ask people what makes them more

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comfortable. It is about simple things like asking what pronouns they prefer,” says Jorge Luis Garduño Camarena, Ethics and Business Integrity Manager of Sanofi México.

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Highlights

The Post-Pandemic World Requires New Set of Skills Paulina Cavazos Director People Ops | Ben & Frank

Antonio Madrid HR Director | Soriana

Geny Oceguera Rojas Acting HR Head | Samsung Mexico

Alejandro Zenteno Sánchez

T

echnology had already been gradually changing people’s personal lifestyles and their approach to their jobs but the COVID-19 pandemic accelerated the pace.

Employers too are looking for a new combination of soft and hard skills in candidates across all economic

sectors, experts say. “Everything is changing rapidly. The train is going too fast and if you do not catch it when you have the opportunity, you will not understand the new realities,” says Alejandro Zenteno Sánchez, CHRO of Grupo Lala.

Automation and the exploitation of digital technologies have been key factors driving company operations. Advances in robotics and AI are enabling the automation of a greater range of tasks in industries across the world but human capital remains an essential factor. Expectations of candidates and companies have dramatically changed during the last two years, says

CHRO | Grupo Lala

Paulina Cavazos, Director of People Ops for Ben & Frank, with

Sergio Arturo Arangua Quiroga

companies looking for new skills that go beyond the technical

HR Country Director | OXXO México

ability to perform a job.

One component of that is the approach to learning, which in many cases means “unlearning” old skills, says Antonio Madrid, HR Director for Soriana. “The ability to learn is important but the ability to unlearn, which is not discussed very much, is key in companies. During difficult times, it is important to eliminate those experiences or skills that are not useful at the time and adapt ourselves to the new needs.”

Technology has not only changed the way companies and people work but also the way that headhunters and recruiters look for candidates. “Resumes are not the only way to hunt for talent anymore. Candidates have become more creative and we have better tools to recruit talent,” says Geny Oceguera Rojas, Acting HR Head of Samsung Mexico. Leadership skills, effective communication, innovation and being able to transmit empathy are key, he says. The pandemic also boosted the demand for talented people in data science and similar subjects and those hungry for knowledge, explains Zenteno.

While the resulting expansion of the labor market has been a positive development from the teleworking trend, the practice has also given way to many challenges, says Sergio Arangua Quiroga, HR Country Director for OXXO México. “Organizations must focus on implementing and perfecting the new tools of collaboration.

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Also, we have to migrate those processes that were originally done on paper to digital platforms. In this sense, government regulations in Latin America have to catch up with the speed of technology.”

I

n 2020, Mexico’s economic activity decreased by more than eight points of GDP, according to ECLAC figures, an unprecedented mark since the 1930s during the Great Depression. The health emergency destroyed millions of jobs and deepened social inequalities. In such a complicated

framework, an obvious question arises for any worker, professional or student: what choices should those who want to access an increasingly complex labor market make?

There are several answers to that question. On the job market side, recruiters identify English proficiency as one of the most important skills. In Latin America, the teaching of English is usually compulsory in school programs at all levels and it is assumed that students leave the educational system with elementary knowledge of the language. The reality, however, is very different.

According to a study carried out by Pearson, the world’s largest learning company, in Latin America there are no unified accessible

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statistics on the quality of English learned by students from public

Employability: English as an Antidote to the Pandemic Santiago Gutiérrez Vice President of Sales for Mexico and Central America | Pearson

and private institutions. The study, English for Employment: English Language Learning in Technical and Professional Education, indicates that the lack of unified and verifiable criteria for learning in our countries affects the quality of teaching. In summary: although children start with compulsory English classes from elementary school and continue until they are 17 years old, the vast majority do not develop the necessary knowledge to have a conversation in that language.

Pearson’s study had the collaboration of The Inter-American Dialogue, a non-governmental entity that promotes democratic governance, prosperity, and social equity in Latin America and the Caribbean. Surveys were conducted with companies in Chile, Costa Rica, Colombia, Ecuador, Peru and Uruguay. One of the results obtained was that knowledge of English can favor a junior applicant over a more experienced one.

Bilingual professionals are an important factor for the tourism industry, which until 2019 (before the pandemic) represented more than 8 percent of GDP and generated almost 4.5 million direct jobs in Mexico. Of the total number of tourists who visit the country each year, a third come from the US and Canada and, to serve them, professionals who are fluent in English are required.

Improving the quality of English that children and teenagers learn is urgent if we want to open up better opportunities for them to insert themselves into better-paid jobs linked to the most dynamic sectors of the economy. There are tools to evaluate how students are learning, one of which is the Pearson English International Certificate (PEIC) that is already used by hundreds of schools, universities, and governments around the world to continuously assess the knowledge achieved by students of all ages.

Some days ago, a panel of experts invited by The Inter-American Dialogue recommended that the countries of Latin America and the Caribbean include representatives of the productive sector when designing English study programs for schools and universities. I share that point of view: the private sector

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must dialogue with the public sector so that the teaching of the language to students and teachers is equal, of high quality for people of all social classes, and creates better and vital job opportunities for the generation that will succeed us. If young people are better educated, countries grow, improve and advance.

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Highlights

Robots, Automation to Create Employment Opportunities Daphne S. Leger CEO & founder | Atrevidea

Federico Barcos Von der Heide Founder & CEO | PeopleOPTI

Lissy Giacoman CEO & Co-Founder | Vinco

Felipe Armando Villareal CEO | Alian Plastics

A

rtificial intelligence (AI), robots and automation are commonly seen as threats to employees in all industries. Although these technologies could make certain human skills obsolete, they also create opportunities for workers to relocate

themselves in their companies while accessing more secure, lessrisky positions, according to industry experts. “Whether or not robots will take human jobs is an unfair discussion. Humanity has come this far thanks to the help of technology, which has already superseded tons of jobs throughout history,” says Federico Barcos Von der Heide, Founder and CEO of PeopleOPTI. Machines, and technology in general, have ended jobs for centuries. About 400,000 jobs were lost to automation in US factories from 1990 to 2007, according to Time. However, technology is advancing more rapidly than ever before and the COVID-19 pandemic accelerated numerous processes. Around 50 percent of the jobs in Mexico eventually could be lost to automation, according to the World Bank. Although it is clear that robots will continue substituting repetitive, simple tasks currently performed by humans, they will transform demand for human capital, according to Felipe Armando Villarreal, CEO of Alian Plastics. “The pandemic gave us a view that we may have never seen otherwise. Technology and humans are stronger together.

Soft skills will play a key role for humans to keep their jobs or migrate safely to a new position.”

The labor market is suffering a radical transition, generating big gaps between jobs, adds Daphne Leger, CEO and Founder of Atrevidea. This gap has made data scientists among the most in-demand professionals in recent years. “Some years ago, between 50 and 54 percent of companies faced issues attracting talent and that number has increased to 75 percent, according to ManPower Group. This means that academia, schooling and preparation have failed to cover industry demand,” says Giacoman.

One of the biggest challenges for all players is what to do with those employees who have been replaced by machines, says Lissy Giacoman, CEO and co-Founder of Vinco. “The first alternative is reskilling. Our job is to help the operating staff in the transition to their future jobs in our companies or elsewhere.” Automation also requires that employees acquire new sets of skills, which can be accomplished through reskilling or upskilling to meet the

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current needs of companies, explains Giacoman. Soft skills, such as effective communication, leadership, creativity and customer service, have become more important than ever.

Conference

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Highlights

AI: The Future of Recruiting?

Jordi Ciuro Partner and Vice President | Recruiting of Bain & Company

Selene Diez CEO & Founder | Forte Innovation Consulting

Pol Morral Dauvergne Co-founder & CEO | LaPieza.io

Monica French Head of New Business Hispanic America | LinkedIn Talent Solutions

Maria Fernanda Miretti

A

I allows recruiters to leverage their application systems, hire more efficiently, shortlist accurately and screen resumes with greater fairness. This tool is increasingly necessary after the disruptions caused by the Great Resignation. “Attraction and

recruitment have become our largest challenges,” says Jordi Ciuro, Partner and Vice President of Recruiting at Bain & Company.

Talent management, acquisition and demand are now centered on finding specialized talent with certain competencies, such as soft skills, according to Selene Diez, CEO and Founder of Forte Innovation Consulting. “Digitization, customer centricity and how we strengthen and create better conditions for our human talent have become the priorities for HR departments.” In this new environment, AI will play a leading role. It is one of the five trends that have transformed the world during the COVID-19 pandemic, according to Diez. “AI has demonstrated the capacity to transform interactions in all aspects of our life.”

Global Talent Acquisition & DO | Multiplica “Companies need to hire the best talent as quickly as possible,” says Pol Morral, Co-Founder and CEO of LaPieza.io. In Mexico, hiring processes are still very manual as recruiters receive CVs from platforms and review them one by one. “Less than 5 percent of companies use data services for candidate management, so companies take an average of 40 days to hire,” says Morral.

As AI grows, some are concerned that it might replace humans in the workplace but this concern is unfounded, Morral says. “Human intervention will continue to be very important, especially during the final stages of recruiting as recruiters are the ones who decide if the selected candidates share the same vision as the company.”

AI also breaks barriers by allowing companies to hire employees from anywhere. Says Maria Fernanda Miretti, Global Talent Acquisition and DO, Multiplica: “AI allows to reach more allies, not just locally. and re-find talent within the same organizations.”

Recruiters’ needs and expectations have changed but so have the expectations among workers. Monica French, Head of New Business Hispanic America of LinkedIn Talent Solutions, describes these times as “the age of the employee; they make the rules and they have certainly changed all parameters.” These changes include diversity in the workplace and the remote work modality. Companies also need to revamp outdated hiring practices. “We can no longer base decisions solely on Read the complete article More about this topic

experience, education institutes or acquaintances. That has been left behind. Companies are now basing hiring decisions on present and future potential,” says French.

Beyond the New Normal: 3 Key Labor Trends for 2022 João Nunes Managing Director Michael Page & Page Executive MX y CA, Michael Page Mexico

Understanding -and Improvingthe Employee Experience Sergio Porragas COO, OCC Mundial

Why Is ESG So Important?

Alberto Alesi General Director Manpower Group, Mexico, Caribbean and Central America, Manpower Group

IMCO: Mexico Fails to Provide Ideal Working Conditions for Women 03/08/2022

Culture: Three Business Pillars for Success Alma Rosa García Puig CEO, Great Place to Work Mexico

Conekta: Building Agents of Change Miguel Castuera Vice President of People, Conekta

The Urgency of STEM Education in Latin America Santiago Gutiérrez Vice President of English Language Learning, Pearson

A New Era for Edutech Zyanya Bejarano Vice President of Latin America, Instructure

Pay-On-Demand Pioneer Minu Offers Payroll Win-Win-Win Nima Pourshasb CEO and Co-Founder, Minu

Mexico Must Unite to Fight Labor Informality Héctor Márquez Human Capital Commission President, COPARMEX

7

Logistics The importance of logistics operations really became apparent after the challenges brought by the COVID-19 pandemic. With the application of technology solutions and supply chain management, the operational effectiveness of this sector has grown dramatically, resulting in an indispensable transformation serving as both a lifeline and business enabler as economies endured backto-back COVID-19 resurgence waves.

Sudden exponential market demand for on-time deliveries from businesses and consumers alike catapulted the traditional logistics industry in Mexico into a rapid digital metamorphosis. The modernization of this vital horizontal industry implies also a direct impact on the competitiveness of the country’s supply chains. While great strides have been achieved in the operational fluidity of this sector, the persistence of global supply chain disruptions and their reverberating setbacks mean further collaboration is necessary between logistics providers and clients so the former can play a more active role in business strategies.

In this chapter, leading executives from logistics providers focused on different retail and industrial operations share their views on the challenges of an ongoing pandemic and what this means for costs and effective delivery timeframes.

7

Logistics

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Analysis Technology Transforming Health Logistics, Supply

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Expert Contributor Mario Alberto Aguilar | President | Association of Logistics Operators of Mexico (AOLM)

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Expert Contributor Deepak Chhugani | Founder and CEO | Nuvocargo

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Expert Contributor Iñaqui De La Peña | Country Manager | Dostavista

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Expert Contributor Albert Go | Regional Manager | Lalamove

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Expert Contributor Carlos Godinez | Vice President of Sales and Marketing | Transplace

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Expert Contributor Antonio Tejedo | Vice President Investor Relations | Traxión

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Expert Contributor Mario Gamboa | CEO | Intelimétrica

106

Expert Contributor Carlos López | Director General | Medix

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View From the Top Andrés Birlain | CEO | Rivus Material Handling

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Conference Highlights Delivery, CX Determine Outcome of E-Commerce Battle

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Content Links

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Technology Transforming Health Logistics, Supply Technology adoption has been a key trend across the healthcare industry. As the sector moves toward a value-based system, logistics and supply chain management technology becomes essential for companies to streamline processes and thrive in a demanding environment. “Thanks to technology, we can generate the necessary solutions, redesign of routes, calculate the demand levels of our customers and generate the services they require,” says Ingo Babrikowski, CEO of Estafeta.

The logistics industry has already demonstrated its leadership in tech disruption. Amazon’s fast-paced delivery service is testimony to how fast and efficient deliveries can be through the use of integrated shipment-tracking systems, IoT sensors linked to monitoring and information transmission systems, autonomous trucks and drones. These tools can be easily adapted to different sectors. However, their use in healthcare involves additional complexities to fully respond to care provision while reducing cost without compromising care. A Cardinal Health survey in 2019 indicated that 42 percent of respondents said supply chain work takes too much time away from patient care, while 45 percent of frontline providers said that manual supply chain tasks have a “very” or “somewhat” negative impact on patient care.

A study by Deloitte points out the primary goals of health providers in optimizing logistics and supply chain operations: + Optimizing costs. The healthcare industry’s transition from a focus on volume to value is driving providers to look for new ways to manage resources. Using data analytics to monitor resource management and utilization can help to minimize and/or eliminate redundancy in the healthcare supply chain and to provide an opportunity to optimize from 2-10 percent total supply chain cost. + Reducing unnecessary variation. This can be achieved through the collection, cleansing and analysis of data. From hospitals to API manufacturers, tools such as machine learning and process automation can streamline redundant, transactional tasks and provide accurate, repeatable and standardized processes that help to reduce variation and errors. + Enhancing patient care, delivery and engagement. Efficient supply chains can improve the patient experience by increasing their time spent with caretakers, reducing waiting times and lowering the number of rescheduled appointments due to expired or unavailable products. + Addressing new value-creation priorities: Digital supply networks are fundamental for operating model changes to spur clinical and business innovation. For instance, digital supply networks in telemedicine can go beyond virtual meetings and provide wearable devices to track patient outcomes, delivering specialty prescriptions and medical equipment to a patient’s residence.

Mario Alberto Aguilar, President of Mexico’s Association of Logistics Operators, adds that the COVID-19 pandemic will undoubtedly cause traditional supply chains to change. He says there is a great need, while maintaining economies of scale, for a more distributed, coordinated and traceable supply of components across multiple geographies and suppliers.

“This would require the creation of global platforms that Read the complete article More about this topic

use sophisticated technologies such as 5G, robotics, IoT and blockchain to help to reliably link multiple buyers through a ‘mesh’ of supply chains with multiple suppliers.”

S

upply chains were impacted in a number of ways over the past year due to global instability.

Logistics operators were forced to integrate prevention plans for future crises, as well as to improve communication channels with their

suppliers and adopt new technologies to monitor the performance of the entire supply chain. Change is, without a doubt, one of the constants that we must consider in our plans.

This is also true for the Association of Logistics Operators of Mexico (AOLM), which I have represented for the past two years. Faced with a global crisis, the impact on our members and their customers was immediate. Therefore, we moved to put in place different strategies to move forward and ensure the continuity of the business, which forced the association’s board to develop emerging strategies and important alliances

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to continue providing value to all of its members.

Being United Equals Strength for Logistics Operators Mario Alberto Aguilar President | Association of Logistics Operators of Mexico (AOLM)

During my time as president of the AOLM, I have always been guided by the principle that strength comes from being united. This was particularly relevant during the economic crisis resulting from the global COVID-19 emergency where my main concern was to keep all members united and to safeguard our direct and indirect collaborators, as well as to generate strategies to attract new members to further strengthen the association.

As a result of our prevention and planning, we can proudly say that we are members of international associations and we will continue to grow gradually until we become the logistics benchmark in Latin America.

With the support and participation of every AOLM member, we represent major companies that provide outsourcing services and contribute to the generation of more than 50,000 direct jobs, serving all sectors of the Mexican industry.

Today, more than ever, it is clear that large corporations are taking over those companies that will strategically contribute to the integration of global solutions and with the help of technology will undoubtedly dominate international markets in different industries.

A prime example of this is 5G technology, where world powers are striving to be the first to market by offering high-capacity technological solutions with the aim of automating as many operations as possible and thus slowly displacing human intervention. This is the case of unmanned and remotecontrolled cargo trucks, which are expected to prevent accidents, delays and cost overruns which may result from late shipments to production chains, known as just in time or just in sequence.

Outsourced logistics operations will be an important part of automation and data generation efforts, so the more united

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and strengthened 3PL companies are, the better prepared they will be to adapt to the needs of the new global and multiindustry supply chains, by combining the best practices of the market and consolidating increasingly efficient operations supported by technology.

T

hough still lagging compared to most of the developed world, in the last decade, Latin America has taken considerable leaps toward becoming one of the world’s most important economic regions. In 2017, Global Network

Perspectives found that Latin America was the second-most enterprising region in the world, and in 2019, all records were shattered with US$4.6 billion of venture capital investment.

What are the factors contributing to last decade’s 32-times increase (from US$7 billion to US$221 billion) in the region’s startup ecosystem value?

Latin America’s composition is changing rapidly. Countries are becoming more urbanized; the middle class is expanding (and so is its spending power) and internet access and usage are finally reaching their true potential. A new generation of digital-native leaders is emerging, and the ecosystem is ripe

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for disruption, all of which highlights the region’s potential to

Two Reasons Investors, Entrepreneurs Should Set Sights on Latam Deepak Chhugani Founder and CEO | Nuvocargo

become the next big startup hub.

However, beyond composition, the last 10 years have made a real difference in people’s mentality and aspirations. Inspired by the success of companies like Rappi and Nubank, more local talent, once lured away by opportunities in New York and Silicon Valley, are now looking inward and rolling up their sleeves to bring change to their home countries.

As I read David Velez’s story in a recent article by Sequoia Capital, I thought about my own personal journey and how it reflects in many ways the current shift. Latinxs are moving from a reactive “why try, when so much is broken?” mentality to a “can-do” attitude, in which no challenge is too big, to solve some of the biggest issues in the region through technology.

I was raised in Ecuador by Indian parents and moved to the US in 2010 to pursue a degree in economics and finance.

As early as six years ago, 15 of my closest friends and I were bankers, most away from home. Today, 13 of us are in startups, many with headquarters or business ties to Latin America. Oh, how times have changed ... and how far we still have to go.

Latin America’s size (600 million people) and economic activity (US$6 trillion in GDP) makes it one of the largest economies in the world. The opportunity is immense, and some sectors are already feeling the impact of tech investment. Fintech and e-commerce represent 72 percent of the ecosystem value in Latin America, which has also been historically concentrated in two countries: Brazil and Argentina. However, momentum in the region has seen more countries like Mexico, Uruguay and Colombia increase their footprint by producing their first set of unicorns, and most in record time: Kavak, Dlocal, and Rappi.

In 2020, venture capitalists invested over US$4 billion in

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Latam-based projects for a record-breaking 488 deals. In the last 12 months alone, six new unicorns were born in the region.

The winds of change are at our backs and opportunities are there for the taking. Now, it’s up to us brave Latinxs to reach out and grab them. The best is yet to come.

T

he COVID-19 pandemic has forever changed the relevance of logistics and business structures. With an increase in deliveries of up to 100 times by 4Q for our service, 2020 marked the before and after for logistics and businesses of all kinds. Amid optimism

for the future, the new challenges and roles for this sector will be key for society’s progress.

With the lockdowns in 2020, the logistics sector adapted to the new world’s rules and focused on becoming the best ally for people who were stuck at home. Logistics went from being a convenience to a necessity for clients and businesses.

Dostavista México increased its on-time deliveries up to 93 percent and although the distance our deliveries had to cover also grew, we still reduced the time to final delivery. Now, as stores are reopening and traffic returns, logistics companies should focus on maintaining and improving their numbers. To

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this end, Couriers must always be a logistics priority. During

Post-Pandemic Logistics and the Role of Businesses Iñaqui De La Peña Country Manager | Dostavista

the lockdowns, we supported their effort by constantly improving processes and making sure each delivery was safe for them.

The lockdowns also provided businesses with lessons on the importance and relevance of optimizing resources, processes and most of all, raising their e-commerce game. By exploring each new opportunity and channel to grow their business, companies took advantage of adversity, verifying the effectiveness of online campaigns, experiencing the transition of their customers’ preferences and gaining the trust of clients by creating a great customer experience through their e-commerce site and with a good logistics partner.

According to AMVO data, 84 percent of Mexicans prefer home delivery of their products, so the courier and parcel service has become a key element for companies, which also need to guarantee the delivery of their products in the shortest possible time.

Can we project the future of logistics? We can try, by taking advantage of our international expertise: + Logistics is rapidly becoming a commodity all over the world. + Technology has accelerated development and the pandemic has placed the logistics sector on top of the e-commerce chain.

Every company requires a successful logistics partnership. + Clients will become more demanding regarding the service level logistics companies provide and the ease of ordering, changing, replacing and canceling orders logistics-wise through e-commerce. + Businesses that are reopening stores are starting to see a reduction in sales due to clients buying through other channels or a re-distribution of the sales volume for those who already had an omnichannel solution before the pandemic or were developing one.

As I said last year, the years to focus on are 2021 and 2022 because these are the years that will decide who wins and who loses in e-commerce.

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The professionalization of e-commerce has become key to winning clients and bolstering a company’s reputation. More importantly, expertise in this massive e-commerce boom will lead us to a new era of consumption. Companies and people learning today will lead this trend tomorrow.

W

e have just finished a difficult year, but one in which many of the lessons from 2020 were represented in terms of growth, especially in the business ecosystem, which, according to World Bank estimates, is expected to

recover by 57 percent in 2022 and beyond. Obviously, we know that positive results or developments do not happen on their own.

A significant investment of talent, experience, time, and, above all, innovation is necessary. This word is extremely relevant for the times we live in and the years that are yet to come.

Digital transformation has touched every aspect of the business universe. One area that has proven essential for the growth of micro, small and medium-sized enterprises (MSMEs) is that of lastmile logistics. Along with the e-commerce phenomenon, today, it is difficult to think of a store or marketplace that doesn’t sell online and offer delivery. But you must take into account that today’s deliveries have certain peculiarities that make them different from

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what occurred before. Traditional processes have been left behind.

How Can Entrepreneurs Optimize Their Logistics in 2022?

Albert Go Regional Manager | Lalamove

The revolution in mobile applications has taken the preponderant place as a strategic ally of small merchants, startups and businesses that represent the main economic force in the country.

But why have these platforms been so successful? There are multiple differentiators, depending on the company that provides the service. From Lalamove’s point of view, I can offer various points that have made us a benchmark in the industry of immediate and on-demand deliveries. These include: + Route optimization tool to save time and money + Zero commission on dishes (in the case of restaurants) + Lalamove API to automate shipments from online stores + Increased safety and benefits for driver partners + Multiple stops on the same route + On-demand deliveries 24/7 To better manage your logistics in 2022, it is important that you pay attention to the differentiators of last-mile services because it does not help much to have good e-commerce if the product reaches the client in five days or more. This can cost you potential customers, since they will not speak highly of the service and experience you offer. In addition, through same-day or 24-hour deliveries, as a merchant, you have significant savings in time and operating costs. These characteristics are among those that partners, such as Shopify, Chilim Balam or Jericoo, like the most.

Another relevant way to boost your logistics is to open up to omnichannel. In addition to immediate shipments, the trend of click and collect (buy online and receive the product in-store) will hit hard this year. This strategy combines the convenience and speed of e-commerce with the speed of delivery of the product at a physical point of sale, which gives the consumer the possibility of choosing the time from a range of options that best suits them to pick up their purchase. Even on the same day.

As a digitalized startup, you can take advantage of omnichannel to

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have better control of your inventory, further reduce logistics costs and enter a market segment where some users still do not feel confident about a 100 percent online shopping model. If you can combine omnichannel with the last mile and offer both services, the customer experience will get a big boost.

T

he cross-border supply chain in North America is the equivalent of a master orchestra as it involves the swift coordination between different entities and parties “touching” a shipment, truck or container.

Normally, a Mexico-US cross-border truckload

move would involve at least five “touches:” the Mexican carrier, the Mexican customs broker, the transfer company, the US customs broker and the US carrier. This requires a lot of control and “syntony” among all parties involved. The lack of shipment documents to clear or a miscommunication between players can disrupt the “cadence” of the move, resulting in high and expensive delays at the border. All this is naturally impacted by the huge and increasing imbalance between north-south trade flows between our economies. If the trade imbalance, driver scarcity and overall capacity crunch was a constant issue before COVID times, international shippers in North America are facing one of the most challenging times in transportation history after the COVID

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recovery. With truck to load ratios at Laredo reaching double digits

Challenges, Best Practices in CrossBorder Supply Chain Carlos Godinez Vice President of Sales and Marketing | Transplace

and in excess of 14 or even 20 to one (20 available shipments ready to ship per one available truck) finding and securing competitive and reliable capacity is what keeps international supply chain managers up at night.

That is when other transportation modes or options come into play. Unfortunately, rail and ocean also face capacity and other particular issues. Rail capacity is almost at full, with practically no stacked containers in terminals, and railroads are trying to maximize container utilization on the street to free up equipment (containers and chassis) while improving train speed. Efficiency and productivity is the name of the game. In the case of ocean freight, the story is not very different; vessels are normally sold out, with black sailings across the board, with congested and imbalanced ports in Asia, America and Europe.

Certainly, navigating through the cross-border storm is not easy and logistics experts need to be creative and disruptive in trying new ideas. Although there is no “secret recipe,” here are some of the recommendations and best practices that, in combination, will help companies to better face and solve these challenges: + Design and implement a mode diversification strategy. There is too much risk in relying on only one transportation mode. + Try new borders and crossing points. + Transload as another capacity source. If intermodal, rail or ocean are not an option for your product or lanes, then try to incorporate transload as an alternative in your truckload flows. + Maximize the use of technology. There are several tools available in the market to improve load control and bring “light” to the cross-border supply chain. + Synchronize and build strong partnerships in the cross-border supply chain.

By combining all the different strategies described above, developing a robust Business Continuity Plan, putting technology in shippers’ favor and streamlining the overall process (from documentation and information to security, financial and the physical move of the products), international shippers will

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strengthen the resilience of their supply chain and be in a better position to sort out the inherent challenges and dynamic environment of cross-border logistics. In the end, all these actions should help to develop a more cohesive and “synchronized” crossborder supply chain, acting in syntony as a best-in-class orchestra.

M

uch has been said about the exponential growth that e-commerce has experienced in Mexico in the last year. Despite being a global trend, the country still did not have the adequate infrastructure available to meet demand, or in the worst case,

most companies did not have this form of sale. Companies had to adapt quickly to be able to efficiently fulfill requests or seek professionalization and incorporation of new technologies.

To make the final delivery to the consumer efficient, the strategic areas of the company need to work collaboratively, including marketing, operations, sales, commercial, finance, systems, and customer service. Together they must understand the customer’s needs, define the added value and design each stage of this last phase of the distribution process. This last step is vital for the growth of a business, as it is the part where the circle with the customer is closed. It is far from simple. As its name suggests, lastmile logistics involve technological development that combines

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quality personal service with constant innovation. Trends in the

Last-Mile Logistics: The E-Commerce Value Promise Antonio Tejedo Vice President Investor Relations | Traxión

last year have involved hubs, urban micro-hubs, consolidation centers, shared logistics centers, a network of intelligent points and deliveries in all types of transportation, as well as the implementation of state-of-the-art technology.

Logistics costs for an SME with an efficient delivery chain can represent up to 30 percent of total sales. In addition, customer demands for “fast, convenient and free” have an impact on customer image and satisfaction. This operational process could be optimized by outsourcing the service through a dedicated company, such as Traxion.

Doing so can effectively solve the problem, while the company focuses on whatever its core business is. Overnight, you can have intelligent logistics assistants planning routes and monitoring orders, and gain access to shared warehouses and digital order tracking, which represents a supply chain solution, not just an ordinary last-mile service.

The current times pose a challenge that has forced us to rethink how the future of last-mile delivery should be approached, with some of its main features being the use of new technologies that are integrated into the shipping and delivery process, as well as robotic automation. New delivery options, smart addresses that make route planning more efficient, sustainable deliveries through low or zero-emission fleets, urban micro warehouses with immediate delivery options, among others, are key features. In addition, today’s service must avoid contact between the customer and the person who delivers the goods, consider changes in the reception of deliveries, have greater restrictions in the handling of goods, and have simpler return processes.

The final delivery to the customer is an enormous opportunity for growth. The key lies in the technology, the talent, the strategic alliances developed, and the proximity to the consumer. Many companies are unaware of last-mile logistics and believe that everything will return to the context before the pandemic; however, current circumstances have caused a paradigm shift in

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consumption patterns that is here to stay.

As a mobility and logistics company, we at Traxión know that flexibility, adaptation, and innovation are absolutely necessary for success in e-commerce.

T

he term “last mile” is often used in supply chain and transportation planning to describe the last part of the process where the product is delivered to a final destination. This field is increasingly being studied since business deliveries have soared due

to e-commerce and companies trying to find ways to improve efficiencies and cut costs on their shipping logistics. As new logistics technology is developed, venture capitalists have also taken notice. According to McKinsey, venture capital funds in the logistics arena favor the last mile. Most funding, around US$11.1 billion, was raised by startups offering last-mile delivery services to retailers and individuals. This suggests investors see opportunity for growth on the last mile as companies cope and transform for the “new normal.”

As major consumer changes took place because of the COVID-19 pandemic and foreseeing the “new normal” at their doorstep, one of Intelimetrica’s Top 10 clients, a consumer goods company,

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was struggling with major disruptions on last-mile delivery

Digital Routes Cut Costs on Last-Mile Delivery Planning Mario Gamboa CEO | Intelimétrica

logistics. Economic shutdowns, selected store closings and shifts in consumer preferences due to shortages presented challenges with a major impact on last-mile delivery costs. The company’s main problem was to design a route-planning process focused on prioritizing costs and delivery time. At Intelimetrica, we know distribution and logistics generate billions of structured and unstructured data every day. Artificial intelligence can harness this data to provide significant competitive advantages.

For this project, the Intelimetrica team analyzed key factors, including client orders, in-warehouse merchandise, route distance, traffic predictions, the delivery truck model (based on weight and height per city’s legal restrictions), client delivery schedules, crew members’ experience and availability, and interaction time per client. Our team delivered a new planning platform that streamlines operations and significantly reduces costs through the automation of route planning for the last-mile delivery process, with special focus on cost optimization.

Today, in 40 minutes, and with the help of artificial intelligence, the company’s last-mile delivery team is able to design — on its own — an efficient route-planning process, through a back-to-back automated route-planning web platform. The main dashboard displays in-warehouse merchandise, client orders, drop-off addresses, delivery truck models, available crews and key route information with delivery recommendations and an overall focus on savings.

Artificial Intelligence algorithms provide much better solutions compared to the statistical models used in the past for last-mile planning, which were based on rule-based solutions. AI algorithms are faster and dynamic and can cater to last-minute changes or demand fluctuations from one point to another.

The project’s first phase has presented extraordinary results: the company registered 75 percent gas savings on last-mile delivery routes based on an in-depth data analysis of both the delivery truck’s equipment and the merchandise’s weight and volume.

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By combining the company’s commercial and distribution and logistics data and providing it with back-to-back transparency, the organization discovered key business insights to boost innovation and its competitive advantage. This, in a nutshell, is the power of data.

T

he COVID-19 pandemic has brought changes and new challenges to all industries. We have learned a great deal, as we have had to adapt to new conditions and learn to operate under different and unanticipated environments, perspectives and procedures. Supply

chain disruptions have spread globally, mainly due to problems in China and India, as 70 percent of all precursors used in API manufacturing in India come from China. India is also responsible for 20 percent of the world’s pharmaceutical production in terms of volume and the leading API exporter, also according to Euromonitor International/Cámara de Comercio de Bogotá.

Transportation overload and restrictions on air and maritime operations led to an increase in transportation costs and delays in the delivery of raw materials required for manufacturing drug products, as well as a bottleneck in suppliers’ distribution capacity. If we also add the increase in e-commerce and B2C and the decrease in B2B, the shipping industry became saturated due

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to the increased demand for final customer deliveries. Therefore,

Improve Logistics to Strengthen Healthcare Industry’s Benefits Carlos López Director General | Medix

the need to adapt, change and innovate is paramount.

The COVID pandemic increased the importance of selfsufficiency in drug and medical equipment production to address an unprecedented health crisis and to face a supply chain problem such as the one we have experienced in the last year and a half. In particular, and as a country, developing greater resilience in the supply chain is essential. This involves reviewing and fostering incentives, policies, and support to rebuild the Mexican pharmachemical industry, and also analyzing the convenience of having viable and diversified precursor supply alternatives.

These are the main supply chain lessons learned from the pandemic: + Understanding key risks in supply chain operations and that cost is not the only or main element to be considered. + Evaluating the feasibility of making deliveries with own units or contributing to the development of new logistics operators. + Developing more flexible and preventive inventory strategies and new distribution alternatives. + Improving communication with different stakeholders within the supply chain. + Avoiding budget concentration in a few suppliers, since, although this may simplify management, it increases vulnerability if something happens to any of them. + Maintaining open communication channels with all supply chain members and establishing timely monitoring mechanisms to enable better decision-making.

The value chains with the highest export share are pharmaceuticals, apparel, and communication equipment. In monetary terms, the value chains with the greatest potential to move their production to new geographies are petroleum, apparel, and pharmaceuticals.

Now, more than ever, the pharmaceutical industry plays a key role

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in society by contributing to people’s well-being. We are in an era where health is highly valued, more than it has been in many years, and we must take advantage of this opportunity to reduce risks and improve supply chain efficiency, which is a cornerstone for providing products and services in this market.

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from the

Q: How can Mexican companies optimize their operations through logistics without compromising cost and quality?

A: To optimize logistics, it is necessary to understand that the term is more complex than simply moving a product from point A to point B. There are several processes and activities to optimize if we frame the opportunity through a better understanding of the business and by selecting the desire Row to Market. Logistics is not an isolated activity or just part of the business; it directly impacts the entire operation and the bottom profit. To begin with the evolution of your Supply Chain, it is necessary to invest in your first key trigger: Digitalization.

Q: How do you promote the implementation of innovative technologies among clients in Latin America?

A: Technology should not be associated with a cost of millions of dollars, to a “nice-to-have” term, or to a “time-consuming project” typically outside of our yearly budget. Innovation, improvement, and optimization can come at zero cost. My first recommendation for users is to frame their current “modus operandi” in direct cooperation with their current and potential suppliers. I mean, a 360° ops-vision integrated by external and internal “knowhow”. Innovation and technology will be a result nourished by the relationships with our in-house collaborators and value-added suppliers once both parties understand what is vital in the short

Andrés Birlain

and long term.

Q: How have you promoted autonomous technologies among industries built around just-

CEO | Rivus Material Handling

in-time and just-in-sequence operations?

A: We are careful not to try to innovate just because the board of directors asks for it. We perform a conceptual analysis to identify the aspects that are most important to our customer’s operations

Material Handling Has Endless Possibilities: Rivus

and their existing opportunities. This requires strong collaboration between suppliers and customers on a product, application, and operational point of view. Logistics and Material Handling are extremely broad. We cannot just approach a company with a single solution. The approach depends on what the analysis tells us about what the company wants and needs.

Q: How has e-commerce revolutionized these concepts and how do you think it will impact future technology developments?

A: E-commerce has helped companies understand that the most important part of their strategy is the customer. This often takes companies years to understand. The retail world is very different from the e-commerce world. In retail, it is necessary to stack items into wooden pallets and wrap them for shipment and delivery. This allows companies to optimize immediate costs, but this method is resistant to innovation. On the other hand, e-commerce relies on innovation. E-commerce companies eschew pallets; they prefer reusable cages and one-touch technologies, which optimize distribution and make the whole process more efficient.

Flexibility has also become extremely important for e-commerce

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companies, and they need to look at logistics through a different lens. For example, workstations in warehouses should not be in a fixed point away from operations. Workstations should be able to move through the warehouse to allow workers to move to where the products and operations are.

Conference

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Highlights

Delivery, CX Determine Outcome of E-Commerce Battle Alvaro de Juan Iriarte CEO | iVoy Servicios de Entrega

Marinus van Gestel Head of Latin America | Uber

Alejandro Solís Director General México and Costa Rica | Rappi

Ignacio Caride SVP eCommerce, Payments and Financial Services Mexico & Central America | Walmart

David Geisen Country Manager & VP Marketplace México | Mercado Libre

E

-commerce experienced unbelievable growth during the past two years, boosted by an unusual mix of circumstances, and analysts expect the boom to continue. Mexico’s leading e-commerce players say that enhanced delivery times and spotless customer

experiences will determine which platforms users gravitate toward. “We are living in times of fierce competition and huge possibility to grow,” says Alvaro de Juan Iriarte, CEO, iVoy, a delivery service company.

“Everyone is innovating constantly,” says Ignacio Caride, Senior Vice President for E-Commerce, Payments and Financial Services Mexico and Central America, Walmart. Experts see that delivery times are an especially important skirmish within the wider battle. “We are obsessed with the idea of reducing delivery times. In our surveys, 70 percent of users really value that their products arrive within 48 hours,” David Geisen, Country Manager and Vice President Marketplace Mexico, Mercado Libre emphasizes.

For Alejandro Solís, Director General for Mexico and Costa Rica, Rappi, some verticals cannot be fully controlled because of their nature. Food deliveries, for example, rely on restaurants to prepare food and delivery drivers to move it to the customer.

Despite the obvious challenges, Rappi does what it can to take control of the process. “We predict cooking times and factor in issues that could complicate delivery, such as rain,” he said.

Indeed, not everything needs to move at the same pace. “There is a difference between delivering an urgent, missing ingredient and planned purchases so these issues have different costs attached to them,” explains Caride. “iVoy can be incredibly fast but faster deliveries cost more. We need to ask what clients want to pay in return, or who else will foot the bill.”

This shifts the focus to extremely quick commerce, or Q-commerce, which delivers within 15 minutes. “We are seeing this grow rapidly elsewhere in the world and companies are raising capital to make it a success. It is important for us to be a part of this development, though we need to be careful to not blindly follow trends,” says Solís. Van Gestel argues that for Cornershop, Q-commerce is not as important as offering a wide catalogue of products with reasonably fast deliveries.

“It is an interesting development but it is too early to say if it is

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really essential,” he says, underscoring a Goldman Sachs study that revealed that only 5 percent of China’s mature e-commerce market needs Q-commerce delivery speeds.

Professionalizing the Logistics Sector Carlos Canseco Founder and Director | PELT

Data Analytics: The Future of Logistics Rubén Imán CEO & Founder | Onest Logistics

The Paradox of Logistics Growth Ingo Babrikowski CEO | Estafeta

The Future of Last-Mile Deliveries Rodolfo Iñaqui de la Peña Country Manager | Borzo

The Pandemic Put All Eyes on Logtech Nur Malek Pascha CEO and Co-Founder | EnvíoPack

Beetrack Expands Logtech Across Latin America Pablo Yáñez Country Manager México | Beetrack

Largest Collaborative Network of Couriers Continues to Grow Juan Pablo Pineda COO | Mensajeros Urbanos

The Infinite Value Cycles Behind the ‘Rivus Method’ Andrés Birlain CEO | Rivus Material Handling

Logistics Challenges to Continue in 2022 Boris Franchomme Managing Director | SPARX Logistics Mexico

8

Oil & Gas In 2020, and into 2021, oil and gas companies faced two dilemmas: absorbing the shock of the pandemic and evolving into the post-pandemic era. The challenges have been complicated by the varying levels of technology available to the upstream sector to implement remote operations and automation amid pandemic-related crew reductions. Further muddying the waters are oil price volatility and an uncertain regulatory landscape.

Yet, despite the hurdles, the industry enjoyed exploration successes in the past year and finally pushed its technology adoption to greater heights.

The sector’s digital transformation, in particular, had been on the table for years but the pandemic forced its hand, accelerating the process. With that, the industry finally executed a transformation that it had desired and planned for the last decade.

Evolving into the post-pandemic landscape will come with its own challenges, and at the heart of that evolution is PEMEX and its future. The government is still pressing for the NOC to secure its position as the foremost company in the industry, despite its mounting debt. While the government’s efforts to support and prioritize the NOC through regulatory updates continue, global conditions, including oil prices, are looming over the company, putting pressure on PEMEX’s profitability and production volumes.

8

Oil & Gas

112

Analysis A New Era of Discoveries

113

View From the Top Alma América Porres | Commissioner | CNH

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View From the Top Héctor Moreira | Commissioner | CNH

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Expert Contributor Andrés Brügmann | Country Manager | Fieldwood Energy

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Expert Contributor Warren Levy | CEO | Jaguar Exploration & Production

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View From the Top Timothy Duncan | CEO | Talos Energy

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Conference Highlights Potential Surpasses Challenges in Deepwater

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View From the Top Stephan Drouaud | Trion Project Director | BHP

120

Analysis Expanded Infrastructure Needed for Field Development

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View From the Top Gilles D’Argouges | Mexico Country Manager | Perenco

122

View From the Top Robert Pérez | Region Leader and Vice President | Baker Hughes

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Expert Contributor Niels Versfeld | CEO | Simmons Edeco

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View From the Top Janeth Jaimes | Digital Manager | Schlumberger

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Conference Highlights Reading Between the Lines of Mexico’s New Energy Policies

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Roundtable The Impact of COVID-19: Associations, Regulators

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Content Links

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A New Era of Discoveries Despite the Mexican oil and gas industry’s rocky journey throughout 2020, exploration activities exhibited not only resilience and continuity but also historic success. PEMEX strengthened its reserves past investors’ expectations, while private companies proved their contribution to domestic oil and gas exploration and eventual production.

PEMEX’s Success 2020 and 2021 saw significant discovery announcements. Among the main ones was the entirely new field of Quesqui announced in 2020. In 2021, PEMEX and President López Obrador celebrated another discovery at the onshore well Dzimpana-1 that is expected to contribute between 500MMboe and 600MMboe to PEMEX’s reserves and production levels. The newly discovered field is located in the areas of Valeriana and Racemosa, Tabasco.

Its development could potentially result in the ground-up construction of infrastructure that would eventually amount to an entirely new oil production complex.

Whether these discoveries represent a positive addition to PEMEX’s portfolio or if the degree of investment that they need will end up turning them into burdens, more than assets, is still to be defined. The discoveries in Quesqui and Ixachi do have the advantage of being onshore discoveries located in close proximity to existing PEMEX infrastructure, so the degree to which drilling success can translate to productivity through a relatively fast and efficient transition timeline is ample.

Given its financial status, PEMEX’s priorities should be in finding fields and reservoirs with the potential of lowering the cost per barrel extracted to levels that are eventually comparable to those of Ku-Maloob-Zaap and Cantarell. This is especially true since fewer barrels will be entering the international market as more are fed into the national refining system and other downstream processing facilities for the purpose of national self-consumption.

Private Sector Contribution Private operators also generated value through exploration activities. One of the more emblematic came from a company already famous for being the first private offshore producer in Mexico in almost a century: Eni. CNH approved the company’s multimillion-dollar exploration plans to extend its search of the Saasken field at the end of 2020. The discovery the company announced in February could hold up to 300MMboe.

Exploration success came from steady private investments in Mexican projects throughout the pandemic. Even operators famous for being close to their production phase tallied up significant exploration achievements. Timothy Duncan, CEO of Talos Energy, said that although he remains focused on Zama, which is a generational asset that will ultimately provide decades of production and cash flow once it comes online, that project is only one of numerous potential catalysts for the company’s operation in Mexico. “We recently announced a major discovery in the US Gulf of Mexico with BP and Chevron.”

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According to Duncan, Talos Energy will aim to enter more projects like that in the coming months that could result in significant discoveries.

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from the

Q: What were the key success factors that defined the increase in discoveries during the pandemic?

A: It is important to note that exploration activities were an important part of the overall agenda in the years before the pandemic and this gave us a solid base to continue our successes throughout 2020 and 2021. If we go back to 2019, around 101 exploration plans were approved that year. Twelve appraisal programs were also approved that same year. In this case, an appraisal program is comprised of studies that appraise the reservoir and are focused on delimiting the well and its resources. In 2020, 66 exploration plans and 10 evaluation plans were approved. So far in 2021, 22 exploration plans have been approved, including modifications to previously approved plans, plus seven approved appraisal programs. This means that between 2019 and this year, we have approved a total of 189 exploration plans and 29 appraisal programs.

This is an industry that has simply not stopped working throughout this time. The discoveries that defined 2020 and 2021 cannot be understood outside of the context of all previously approved exploration plans, which speaks to the importance of our industry as an ongoing process.

Exploration plans included the drilling of 29 deepwater wells,

Alma América Porres

which focused mostly on private operators. A total of 81 shallow water wells are to be drilled as part of these plans, 56 of which came from PEMEX entitlement areas and 25 came from contractual areas with private operators. Additionally,

Commissioner | CNH

140 onshore wells are also to be drilled as part of these exploration plans, 72 of which came from PEMEX entitlement areas and 68 that came from contractual areas with private operators.

Exploration Activity Surpassing Limits, Boundaries

We need to consider the question of how many of these wells have actually been drilled. In 2019, 147 total wells were authorized to be drilled. 53 of those were drilled in 2019, 56 in 2020 and 38 in 2021 so far. This shows that despite operational delays, the industry has continued to work to fulfill its goals and has generated an immense amount of activity as a result. Fourteen deepwater wells have been drilled already, representing significant investments, all of them drilled by private operators.

PEMEX, despite its limitations, has drilled 40 shallow water wells and 40 onshore wells, while private operators have drilled 11 shallow water wells and 42 onshore wells.

Throughout this drilling, the rate of exploration success has been quite astonishing: our average is at 54 percent. This figure is incredibly high when you consider that the global average for deepwater activities, for example, is around 30 percent, which is already considered significantly high.

In Mexico, we are looking at an average drilling success rate for deepwater activities of 56 percent. If we distribute that average between PEMEX and private operators, PEMEX has

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an average drilling success rate in shallow water, its main area of expertise, of 62 percent, while private operators are maintaining an average of 44 percent. In onshore wells, PEMEX’s average is at 50 percent while private operators’ average is at 60 percent.

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from the

Q: What have been the most important developments regarding natural gas production?

A: I would like to say there have been many developments but, quite frankly, I have failed to see any substantial changes in the matter, especially in regard to incentivizing natural gas production. The question of whether or not the Texas winter snap resulted in a complete interruption of natural gas supply into Mexico is more complex than it seems; it is both true and not true. It is true because there was a degree of localized shutdowns but there was never a complete interruption of service as the media narrative seemed to suggest. What this tells us is that midstream infrastructure needs to be more appropriately distributed and diversified than we anticipated and that inputting national production into it might be more convenient than expected if a large enough effort is made to develop such production capabilities. However, there is definitely a new urgency to the subject of natural gas. I am hoping that this new urgency can lead us to a deeper debate about this commodity.

In general, I believe Mexico’s institutions have yet to grasp the importance of natural gas. There is an inkling of an understanding but not yet a complete one. For example, there is a lack of fiscal policies that directly incentivize natural gas production. There is a general rejection of fracking and I believe

Héctor Moreira

that will have to be reassessed. Fracking in Mexico could take place according to a new extraction model, which would have to be more efficient, profitable and environmentally friendly than that used in other parts of the world. Nevertheless, the openness

Commissioner | CNH

to finding that new methodology needs to be here first. A willingness to debate the matter and invest in research are the first steps needed toward a future where Mexico can be selfsufficient in its natural gas supply.

CNH Maintains Criteria, Technical Standards Despite Pandemic

Some of the underlying legal issues need to be resolved as well.

For example, the mining industry lobby in the state of Coahuila has paralyzed the efforts to tender areas for exploration. All of the unconventional richness of Texas has considerable geological continuity into Mexico’s northern states, so the resolution of legal controversies such as this one is essential, not just to tender areas for private operators but also to allow PEMEX to do its exploration and research work without external obstacles.

Q: What have been the most important developments in terms of discoveries?

A: I think there has been progress in this category. Private operators, in particular, have seen discoveries and exploration success increase significantly. As a result, reserve incorporation has become a much more important subject to tackle. We are seeing operators increase the scope and ambition of their exploration and development plans. 2021 has seen large investments as reflected by these plans. Many private operators are also reaching their production phases, which in turn can motivate the development of their exploration intentions. An

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example is Fieldwood Energy, whose proximity to production is also leading the company to increase its exploration investments. We are also seeing a great many reevaluations of areas that were previously thought to be depleted. These reappraisals are also producing positive results.

One of the particularities that has always made offshore development activities more challenging is the isolation and the distance of rigs and platforms to shore. Having an outbreak of COVID-19 would be harder to manage.

Offshore activities are the most vulnerable since personnel in vessels, drilling rigs and fixed platforms typically share closed spaces and crew shifts increase the exposure, due to gatherings at waiting or transportation areas and sharing accommodations. Additionally, the time workers stay on the platforms could be enough for the virus to incubate and develop, provoking total lockdowns that could imply health and economic impacts.

The crisis slowed everything down, and especially the oil industry. COVID also brought an increase in costs because of the implementation of quarantine periods, routinary PCR and antigen testing and thorough sanitation of facilities, among

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many others. Nevertheless, most companies have managed to

COVID-19 Challenges for the Oil and Gas Industry

keep working and have avoided total stoppages thanks to the cooperation between personnel and vendors. Unfortunately, new cases of COVID-19 around the world have arisen in the past months.

At Fieldwood Mexico, we have reinforced our preventive measures and protocols to protect our workforce and our service companies. On our side, we have benefited from

Andrés Brügmann

having vaccinations available and knowing how to minimize

Country Manager | Fieldwood Energy

vessels. This has been of the highest importance for us, and

exposure to the virus, which has helped us reduce project downtimes generated by medical leave and quarantine of we, as an industry, should not let our guard down.

We recommend getting fully vaccinated, staying home even if presenting minor symptoms and getting tested periodically to avoid spreading the virus. In addition, thorough hand-washing and the use of face masks while working onshore and offshore, even for people who are vaccinated, should be obligatory.

Social distancing, keeping rooms well ventilated, avoiding gatherings, suspending in-person meetings, events, and nonessential travel are also among the preventive measures we have taken.

Finally, as a reflection of those lessons learned, we want to remind our colleagues in the oil and gas industry that: + “Fully vaccinated” doesn’t mean “immune to COVID-19.” While the vaccines protect against developing severe disease, there is still a chance people will get infected and spread the disease. + Overall vaccination progress (with at least one dose) to August was 62.2 percent for the US and 55 percent for Mexico, both of which are still far from the 70 percent target estimated to reach herd immunity. + Reinfection has been happening; even with antibodies, it’s possible to get COVID-19 again. It’s not clear how long people are protected from getting sick again after recovering from COVID-19.

It is possible to beat this virus together but we must act responsibly and follow the recommendations of the authorities

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and the World Health Organization. The oil and gas industry has always been an example of resilience and innovation, and we will get out stronger from this pandemic. I am certain this great challenge will make our industry stronger and better equipped to face future endeavors.

T

he Mexican petroleum industry is the stuff of legends.

Let us consider two of our most famous ones.

Near a small town in northern Veracruz lies the Cerro Azul #4 Well. It produced the astonishing amount of 260,858b/d when it initially came online. Discovered in

1916, this prodigious well accumulated over 64MM barrels by 1922 and continues to produce small amounts of oil today. Now we go off to the giant oil fields beneath the Gulf of Mexico, off Campeche, Tabasco and Veracruz. The largest one by far — the Cantarell Field — is one of the five-largest oil fields ever found. At its peak, it supplied over 2MMb/d to Mexico. This level of production is larger than all but the world’s 10 principal oil-producing countries.

Mexico is also the ninth-largest consumer of natural gas. The country has abundant hydrocarbon resources. During the 1980s and 1990s, domestic natural gas production grew as consumption ramped up. From 2006 onward, the story changes: drilling

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activity suffered a dramatic drop as PEMEX turned its attention

Natural Gas and the Stuff of Legends Warren Levy CEO | Jaguar Exploration & Production

away from natural gas and toward drilling for offshore oil. The fall has resulted in domestic production first leveling off then entering into a steep decline, and imports soaring to meet the ever-increasing demand.

Mexico’s demand for natural gas continues to grow. Growth is a sign of an economy interested in moving toward cleaner forms of fuel to generate power and develop it. When thinking of a growing economy, increased demand for natural gas and the potential under the Mexican soil, it would seem logical to explore and develop more natural gas. The importation of almost 6Bcf/d of gas from the US represents around MX$90 billion (US$4.5 billion) in money that could be invested in Mexico and benefit the Mexican economy that is going to producers in the US. Experts everywhere agree that natural gas plays a vital role in the energy transition. Power generation with natural gas burns cleaner and more effectively than other options used in Mexico today. Beyond the immediate need to reduce emissions associated with power generation, and even as the world makes great strides to increase the use of renewable energy sources, natural gas is essential for manufacturing petrochemicals for an ever-cleaner global grid and is essentially in the transition to a cleaner and better world.

Mexico has made strides in indexes such as the Social Progress Index and the Environmental Progress Index. Nonetheless, its efforts have been insufficient. Governments alone cannot take the necessary steps to improve these indicators.It is my view that companies should take a more active role in driving social and environmental change. Companies have come to realize that doing things the right way — that is, engaging with communities, working with all stakeholders and finding better ways to do business — are the keys to achieving long-term sustainable and profitable businesses.

In Mexico, natural gas is an excellent place to start; it is a global necessity, especially in Mexico. We are blessed with an exceptional

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endowment of natural resources that remain underdeveloped.

Once responsibly developed, these resources will generate significant social benefits, employment, tax revenue and could guarantee a cleaner, more sustainable future. I am confident the stuff of the future Mexican legends will originate in natural gas.

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from the

Q: What is your position regarding the most recent announcements made by PEMEX and SENER regarding the distribution of resources within the Zama reservoir?

A: We have published a statement regarding the release where we addressed not only the third-party engineering firm’s viewpoint, but that of Netherland, Sewell & Associates (NSAI) as well. There are different data points out there and negotiations on many key commercial points in the unit agreement are ongoing, including the initial tract participation splits. That said, it is our expectation that the unit agreement will be finalized in accordance with international best practices and will carry standard redetermination provisions. In that case, the initial tract participation will be corrected over time as more data becomes available. So, in summary, the discussions on many points are ongoing and there will be a mechanism to ensure that the “true” tract participation prevails in due course.

Q: Although the original March 26 deadline has passed, what are your current plans and hopes for a unitization of Zama being agreed to in the short term?

A: It is in the best interest of all stakeholders to advance the unitization discussions diligently and commercially, including the Mexican people, the government, investors and job creators.

While we have not published any firm dates or deadlines, we

Timothy Duncan

trust that we are working as hard as we can to reach resolution and take this project to the next phase.

Q: How has the Zama negotiation impacted investor

CEO | Talos Energy

confidence in the oil and gas sector and what can be done to take this to a win-win resolution?

A: First and foremost, Zama is an incredible asset, not just for Talos, but for the Mexican state and the economy. Its discovery

Essential Conclusions for Operators in Mexico

is a great example of the power of private enterprise to unlock new resources and create value in society in numerous ways.

For Talos, we have delivered the discovery well with tremendous success, completed the appraisal on-time and under-budget, and are advancing the FEED as rapidly as possible. We are doing everything in our power to bring the project to fruition.

That said, the entire industry, investors, stakeholders, and other governments are watching the Zama unitization very closely.

They want to see that private enterprises are treated fairly, in accordance with law and best practice, and that Mexico is a good place to do business. It is hard to understate how important this perception is to the future of Mexico’s private energy industry.

Q: How are field development activities progressing in 2021 and adjusting to your significant reduction in investments during 2020?

A: At Talos, we responded to the COVID-19 and commodity price crisis by scaling back our capital investment budget and stabilizing our core business. That said, our activities around Zama and more broadly in Mexico were not impacted by this.

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We continued to do everything necessary to advance our assets in the country to the next phase. Capital spending on Zama is expected to be light this year as we wrap up the FEED and unitization discussions, but we are preparing for FID and, thereafter, the start of construction and field development.

Conference

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Highlights

Potential Surpasses Challenges in Deepwater Valeria Vazquez Energy and Resources Leader | Deloitte

Alma América Porres Commissioner | CNH

Carlos Ortiz Chairman IADC LATAM and Marketing Director | Transocean

Chris Brinzer Exploration Manager | Petronas

Luiz Feijo Director | ABS

Bud McGuire COO | Alpha Deepwater Services

T

he latest results from deepwater operators have generated a renewed interest in deepwater activities. In recent years, there have been a number of deepwater discoveries in the Perdido fold belt, as well as in the Salinas Basin. Alma América Porres, Commissioner at

CNH, explained the role the Commission has played as a regulator in incentivizing the recent exploration success that deepwater operators have enjoyed. “Since 2019, operators have explored 11 prospects and discovered resources in five wells in the southern Gulf of Mexico. This demonstrates a 45 percent success rate.”

In regard to deepwater activities, there have been major players that have contributed with their technological developments, such as Transocean, a company that has been involved in Mexico’s deepwater sector bringing its Invictus vessel to develop deepwater assets in Mexico. The company drilled a number of important wells in the Trion asset, among them the first ultra-deepwater well in the country’s history. “Transocean has been instrumental in the technological development of Mexico’s deepwater from the beginning,” said Carlos Ortiz, Director of Marketing for Latin America at Transocean.

Other comapnies have also played an important role in developing Mexico´s deepwater sector. Chris Brinzer, Exploration Manager for Petronas, said the company considers Mexico an important international investment. Mexico represents the largest exploration portfolio for Petronas’ international assets. Other important factors to consider for deepwater investments are asset evaluations, highlighted by Luiz Feijo, Director of Global Offshore Production at the American Bureau of Shipping for ABS. Feijo said the criteria used by operators to determine which asset to develop was extremely complex and that safety has always been at the top of those priorities. “Profitability is important but you cannot risk the safety of your people or the environment.”

Alpha Deepwater Services has spent 12 years working in Mexico and Bud McGuire, the company’s COO, is aware of Mexico’s deepwater richness and assets, especially after working together with PEMEX and witnessing those prospects mature up close.

“Mexico has world-class deepwater potential, most of it remains unexplored. This is a great opportunity to use new technology to improve drilling.” The richness of deepwater resources found on Mexico´s side of the GOM, are only matched by their unexplored nature. This is an area that must be studied. Valeria Vázquez,

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Energy and Resources Leader for Mexico and Central America at Deloitte, said there is a notable lack of knowledge and geological data when compared to the US side.

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from the

Q: How would you evaluate Trion’s adaptation to the conditions imposed by the events of 2020?

A: The pandemic has impacted and continues to impact us individually and as an organization and forced us to change our ways of working and engaging. Our first priority was the health and wellbeing of our team and contractors. The pandemic hit as we just commenced some key study work with selected contractors.

In March 2019, and for 14 months, we only work remotely from our home. Despite these new and unexpected challenges, we did perform well and met all our project milestones. We even successfully completed the first Deepwater Ocean Bottom Node (OBN) Survey in Mexico. Overall we adapted very well to the new environment by being productive and keeping our people safe.

The collapse in oil price also severely impacted our business partners, contractors and many communities. To support the communities in need and the supply chain, BHP took some actions in forms of donations as a response to COVID-19 relief and advanced payment to our suppliers. I would also like to recognize the actions taken by CNH and ASEA to extend some of the contractual deadlines and continue processing the reviews of documentation and application during this challenging time.

Q: Which geological characteristics of the Trion field best exemplify the technical challenges that the project presents?

Stephan Drouaud

A: The Trion field is a shallower and lower pressure reservoir with very good seismic imagery and data. The reservoir needs pressure support since day one. Confirmed by our SCAL and

Trion Project Director | BHP

core analysis, water and gas will be injected into the reservoir to maintain the pressure and enhance recovery. These secondary recovery mechanisms are driving the size of the Floating facility, which will be a large semisubmersible with a Topsides dry weight close to 20,000 metric tons. The seabed topography with many

A Unique Deepwater Project Moves Forward

cliffs and mountains is also increasing the complexity of the subsea architecture with multiple drill centers required to drill our wells. The slope stability of these cliffs will be tested through geotechnical surveys and results will inform the best anchoring design for our floating structures.

Q: How prepared is the Mexican industry to tackle deepwater projects and how has this shaped your collaboration with PEMEX? A: Deepwater developments are very specific in nature and bring a different set of complexity and require different skills as compared to shallow water field development. Following the Energy reform in 2013, interests in deepwater increased and expertise from IOC was sought to help the country and PEMEX to explore, appraise and then develop these fields. While the Mexican oil and gas industry is very capable of supporting the development of shallow water fields, there is definitively an opportunity for this industry to develop its engineering to supply chain capabilities to support the Mexican deepwater industry. We made a commitment to technology transfer by sharing our expertise in project development and operations and Trion could be the cornerstone for this journey. Three PEMEX employees work in our subsurface

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team as secondaries and we would welcome many more to join us as we are progressing the development study work. We are also assessing local supply chain capabilities and will work with key contractors to develop local suppliers for deepwater projects.

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There is a lot of work to do but many opportunities as well.

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Expanded Infrastructure Needed for Field Development The infrastructure and facilities utilized for upstream field development in Mexico were significantly impacted by the economic effects of the pandemic: ports were emptier and operated with fewer personnel, while ducts and pipelines administered less traffic having less access to maintenance and repair services. Even the offshore drilling market experienced a dip in day rates despite drilling activity barely being reduced.

However, as many new operators transition to field development and production phases, demand for new oil and gas infrastructure has increased. A number of industry trends have contributed to this scenario, while a group of industry players has also risen to the ensuing challenge. “The COVID-19 pandemic and the corresponding reduction in oil prices are challenges that few anticipated at the beginning of 2020. Nevertheless, our project execution efforts continue full steam ahead,” Andrés Brügmann, Mexico Country Manager of Fieldwood Energy, told MBN. As part of the operational continuity that private operators secured after oil and gas activities were declared essential amid the pandemic, more offshore infrastructure than ever before in Mexico was constructed and installed over the past 12 months. Brügmann, for example, said the company constructed two fixed production platforms to connect to PEMEX’s Tumut platform. Interconnection for the purpose of early production and commercialization is a necessary step for operators like Fieldwood Energy that had to do everything possible to maintain a project on schedule and complete the commissioning of facilities during 4Q20.

Brügmann acknowledges the numerous challenges that contractors are facing, including equipment and permitting delays, but he also highlighted another key milestone in the development of infrastructure. “Finalizing agreements with PEMEX to utilize the Tumut platform and the execution of purchase and sale agreements for oil and gas were necessary to start the early production phase of the project.” By connecting to PEMEX’s offshore infrastructure, Brügmann believes that Fieldwood will be able to accelerate production by two to three years, thus contributing to the production goals set by the Mexican government. New infrastructure has also been necessary to comply with new technological and sustainability standards.

“We adopted technologies and procedures ... to honor our commitments,” said Brügmann.

Fielwood’s adoption of standards issued by the International Finance Corporation (IFC) has demanded more detailed analysis to identify the full extent of environmental impacts caused by the company’s infrastructure and to implement strict mitigation measures. Fieldwood selected reel-lay technology for the installation of subsea pipelines, allowing welding, coating and testing activities to be conducted onshore so that once the pipeline is ready, it is spooled on board a lay vessel, hence minimizing environmental impacts offshore. “It is my understanding that we are the first company to use this technology in Mexico. In Read the complete article More about this topic

addition to technology selection, we also hired marine-biologists to supervise installation activities and ensure that habitats of protected species are not disrupted.”

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from the

Q: What role does Mexico play in Perenco’s international portfolio?

A: Mexico represents one of the group’s most recent additions to its portfolio, which contains 14 producing countries. We target our activities through two categories. One is mature fields and the other is marginal discoveries. Based on that, Mexico was an obvious choice for Perenco due to the country’s historically exploited fields, which are aging rapidly, and this means that we can bring much value to these assets. When we saw the opportunity to enter the country through the purchase of Petrofac’s assets, we considered it a critical choice that we had to make, since this group of fields were perfectly aligned with our abilities. When we enter a new country, we establish a preliminary strategy for possible routes to further expansion. We are still on that path but our commitment to Mexico is very much for the long term.

Q: How would you describe the process through which Perenco acquired its assets in Mexico?

A: Many decisions led Perenco to the 2018 purchase of 49 percent of Petrofac’s Mexico portfolio, followed by a complete purchase of those same assets in 2020. It was a rough process but it is also how we optimize our introduction to new countries. It is always difficult on some level but we never let that discourage us. It was important to consolidate our operational control over these fields, which is

Gilles D’Argouges

what led to this relatively fast transition from minority stakeholders to becoming a fully independent operator of these blocks.

Q: What have been the most important adjustments made so

Mexico Country Manager | Perenco

far to Petrofac’s investment, drilling and development plans?

A: One of the most important changes is that we have invested in our own evaluation of the fields and the opportunities they offered.

We aimed to find value that our predecessors missed, so we had

A Quick Transition to New Operational Leadership

to adjust the fields’ investment plans to account for our own data acquisition and analysis. We also conducted our own consultations with PEMEX, which is an enormous part of the history of these fields. The NOC is one of the primary stakeholders in the success of the fields due to many reasons, one of which is the structure of our contracts over these fields. We understood the importance of involving them in our plans.

Q: How would you describe the ongoing development of your relationship with PEMEX? A: Like all other operators in Mexico, we work to some extent with PEMEX and we are developing a very good relationship with them. Our communication with PEMEX has been very successful from the start.

In terms of legacy infrastructure, particularly in Santuario and Magallanes, which are onshore fields, we have not encountered a situation that we would consider catastrophic. We are working to make sure that existing infrastructure is optimized to properly handle the increase in production. Our collaborations with PEMEX in this sense have also been successful. We have

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also worked with PEMEX regarding the social aspect of our operations within these onshore fields. We were careful to introduce ourselves to all stakeholding communities in regard to social engagement protocols, so that a mutually stable and beneficial relationship could develop.

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from the

Q: How does Baker Hughes’ divide its operations in Mexico between shallow water, deepwater and onshore projects?

A: Deepwater has not been a focus of attention for the López Obrador administration but the private sector that is involved in deepwater is ramping up. However, most of our activity has been in shallow water. Of the millions of barrels that Mexico produces each day, over 90 percent of it today continues to be produced

by PEMEX. This percentage is reflected in our project portfolio, despite the success of private operators.

Q: How does Mexico’s exploration success rate influence your efforts to invest in new upstream technologies and services?

A: The current administration’s focus on shallow water and onshore activities has provided us with the opportunity to continue deploying our existing technologies and services and new exploration activity has been quite strong. From an operational perspective, Mexico’s exploration segment has been quite successful but there have been challenges on the financial side for contractors and service providers.

Q: How would you characterize your relationship with PEMEX? A: As a private foreign company with a strong presence in Mexico, Baker Hughes is aware that our views must never dictate

Robert Pérez

policy but they must understand the objectives of the policy that the government is attempting to deploy, so that we can work with them as successfully as possible and achieve those objectives. This has been an important part of our relationship

Region Leader and Vice President | Baker Hughes

with PEMEX. Understanding their objectives is easier on our business segment since we come into the picture once it has determined which goods and services we can provide to them.

Q: How have you helped PEMEX increase its productivity

Longtime Industry Ally Diversifies Portfolio

while keeping its costs per barrel down?

A: We align ourselves with PEMEX’s key performance indicators.

PEMEX does a good job of monitoring those: time it takes to complete wells, time it takes to bring production online once completed, factors driving the presence and fluctuation of NPT. Once that has been defined, we offer packages with technologies and best practices to improve lifting costs and completion speeds. We can offer these resources and the right personnel to maximize outputs and minimize detractions.

Q: What has been your contribution to the Dos Bocas refinery?

A: The incoming administration had a vision that many were skeptical of but if you now visit the Dos Bocas site you will see that it is no longer a vision but a reality. There are well over 20,000 people working at the site, four large EPC contractors and many vendors providing all the components that will ultimately result in an operating refinery. The government is focused on speed; they want production to begin as early as possible, which makes sense from a CAPEX efficiency perspective and considering the broader goal of energy self-

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sufficiency, in which all domestically produced oil is domestically refined. I am impressed by the conviction and dedication of the authorities in getting this project running. We are supplying around 30 different pieces of equipment for the project and the state-of-the-art nature of the project is really becoming a reality.

T

oday more than ever, business leaders and their teams face increasingly complicated decisions. Within drilling, operations are more complex physically and virtually.

To add to this, the number of stakeholders we engage with has increased dramatically. This trend toward

increasing complexity is impacting most industries. The current vogue has been to assume that mountains of data will provide solutions to our problems. However, the critical point is how we use this data and other sources of evidence to make good decisions.

Since the evidence itself is not the solution, leaders need to learn how to use the best available evidence to make unbiased decisions.

What is a complex decision? The Stacey Matrix defines a “complex” decision as one where there is very little agreement among stakeholders on what the goal is and very little certainty on how to achieve that goal. Sound familiar? Decisions such as these require structure, engagement, and communication to turn the

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evidence they gather into decisions and actions.

Making Complex Decisions: Structure, Engagement and Communication Niels Versfeld CEO | Simmons Edeco

Decision-making requires a structured process to reduce human biases. If the problem is well defined and understood, then routine processes and answers make sense. However, complex problems require consideration to define the problem before attempting to solve it.

One easy way to define the problem is to use the journalist’s five Ws: Who? What? Where? When? and Why? After you have defined these, try to change your perspective on the issue. Look at the issue from up close but also from afar. What is the larger picture that the problem is part of? Is the issue similar or different to other issues? What issues are critical to address? Once we have defined the problem, what approaches have been taken with these types of problems in the past? At this stage, companies need to engage stakeholders to ensure the problem is defined correctly, and that potential blind spots are identified.

Complex problems often exceed our individual ability to understand them and we tend to approach them with preconceived notions and assumptions. Therefore, engaging others, especially those outside your company, helps reduce blind spots when assessing issues and creating possible solutions.

Many of us increasingly reach out to colleagues and practitioners to help define a problem and company information is a rich source of evidence that can be mined. If the problem isn’t well known by you but well known by others, then consultants often are a good source of evidence. An often-overlooked aspect in business is to engage with the academic literature for the thoughts and problems being examined. What is this evidence logically telling you? What parts of the evidence are different than you assumed? Once you have a better appreciation for the problem and current approaches you will be better positioned to consider all the evidence and create the best answer.

A good decision is of no value if it cannot be communicated and followed through. We need to spend time beforehand thinking about who the decision will impact and how the decision will

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be communicated. Two-way communication is required to build a common understanding around the problem and solution.

Again, engagement with different stakeholders early in the definition process and while making these decisions will help ensure alignment.

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from the

Q: How did the pandemic change how you implement digital tools in the company’s operations?

A: The priority during any implementation of our solutions has been the preservation of our employees’ health. Now, the reality is that we had already built and had the experience implementing new work processes using digital technology before the pandemic, with our DELFI cognitive E&P environment. Before the pandemic, I am not sure we really understood the stakes of applying those technologies or fully appreciated the economic gains and growth that this digital environment could provide to industry. This led to a general shift in the mindset of the company, regarding the urgency to provide our clients the capabilities to use digital technology.

The degree to which some of these digital technologies have been implemented varies by country, so adaptations and customizations have been necessary. However, the favorable macroeconomic effects of digitalization and of the use of a digital ecosystem and tool technology, became apparent almost immediately.

Q: How have digitalization projects in Mexico accelerated as a result of the events in 2020?

A: Projects that were heavily focused on remote operations and decentralized decision-making processes had to be prioritized as our employees began working from home. We considered field and on-site operations to reduce on-site crew size while

Janeth Jaimes

still maintaining operational continuity, building new levels of instrumentation, automation, and autonomy directly into the existing drilling operations.

Digital Manager | Schlumberger

One example of this transition is the implementation of digital twins, which enable remote work. Another example, was the accelerated adoption of a virtual environment for a project, with more than 50 experts from different specialties and working remotely around the world, working through this pandemic with no

The Importance of Applying Digital Tools

interruptions and deep collaboration by identifying and de-risking exploration opportunities, adding ML algorithms for time reduction in specific workflows supported by DELFI environment. This exploration process increases effectiveness by at least 30%.

Q: What elements are needed in Mexico’s oil and gas industry to accelerate the use of digital platforms?

A: The situation in Mexico is interesting in this regard. One of the areas where we can accelerate the use of digital technologies are in data handling, security and processing. The way data moves throughout oil and gas assets in Mexico present us a few areas of opportunities concerning data management, infrastructure and security. This is normal considering the maturity of many Mexican oil and gas assets and facilities. Fortunately, more and more companies are co-developing new digital platforms to improve data handling processes.

To address these important elements, Schlumberger has expanded its partnership with strategic companies like Microsoft, to continue introducing and increasing the use of its industry-first, AIenhanced cloud-native solution “DELFI” through the OSDU™ Data

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Platform. This partnership will allow us to expand the use of cloudbased technologies in Mexico despite existing obstacles. The most important thing for our clients and for us, when it comes to using cloud-based technologies, is reliability and security. Data must always be accessible and secure in any situation.

Conference

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Highlights

Reading Between the Lines of Mexico’s New Energy Policies John Padilla Managing Director | IPD Latinamerica

Yolanda Villegas Founder & Partner | Oleum Servicios y Dictaminaciones

David Enriquez Founder & Partner | Goodrich, Riquelme y Asociados

Rafael Espino Independent Advisor | PEMEX

M

exico’s regulatory framework in the oil and gas industry remains unchanged, albeit not because of a lack of effort. Leading specialists discussed Mexico’s legal landscape, its context and what this means for the industry. “Constitutional reforms

have become less likely after the midterm election due to the difficulty of forming the necessary coalitions. However, we can expect that the attempt will be made nonetheless,” said Yolanda Villegas, Founding Partner, Oleum Servicios y Dictaminaciones.

According to John Padilla, Managing Director, IPD Latin America, eight factors stand out as the main drivers of change behind the oil and gas industry: the cancellation of the asymmetric regulation in natural gas, modifications to the permits of imported and exported energy products, changes to the Hydrocarbons Law, 700 protections in the energy sector, a decree from SAT regarding imports and exports of fuels, the announced creation of Gas Bienestar, the attempted Electricity Reform and SENER’s recent decision regarding the unitization of Zama.

From an international perspective, however, the first cases of COVID-19 reported in China were the spark that triggered the current industry landscape, as these had an immediate impact on oil demand at a global level, said Villegas. Beyond the López Obrador administration’s efforts to counter the lingering Energy Reform, the global context also had an impact on the industry’s legal circumstances throughout 2020. This included fluctuations in demand and prices spurred by the pandemic, coupled with the increasing urgency for an energy transition, explained David Enríquez, Senior Partner at Goodrich, Riquelme & Asociados.

The problem at the moment is the disconnect between Mexico’s international commitments and the changes proposed by the current administration. “All of this government’s energy sector policies have been regressive and inconsistent with Mexico’s international climate change agreements,” said Enríquez. For Rafael Espino de la Peña, Founding Partner, Fernandez, Espino & Asociados and Independent Adviser, PEMEX, however, the political handover that occurred in 2018 has to be analyzed considering the desire for institutional changes that strengthen PEMEX and provide Mexico with energy sovereignty. He highlighted the current increase in oil prices as an example of accomplishments achieved through current policies, especially given the positive impact that this will have on PEMEX’s

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operational flow. “Mexico has an energy deficit, which is what the new energy reform tries to fix. It wants PEMEX to watch over companies working in the country,” said Espino.

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The Impact of COVID-19: Associations, Regulators

Public sector authorities spent the majority of the pandemic coordinating a massive shift in direction for the entire industry.

Entire new organizational strategies and cultures needed to be adopted, with minimal disruption and downtime, after President López Obrador announced that oil and gas activities would not cease. In the wake of these changes, leading voices, from federal regulators to industry associations, provide their unique perspective on what was lost, what was gained, what will need to be rebuilt from the ground up and what will need to be rethought completely.

Offshore platforms and vessels present unique risks when managing personnel operations and activities, especially in regards to anti-contagion industrial safety. Many of these workplaces can be quite confined, with recirculated air that creates additional risks for accelerating the infection rates in certain cases. To implement safety protocols as effectively as possible, we have partnered with state governments and port APIs. SENER, CNH and SE have also played a significant role in doing the work necessary to make this possible. Thanks to their efforts we have had the flexibility to implement these protocols. Long-term uncertainty is another prevalent concern. 2020 has made us question what role we play

Merlin Cochran Director General | AMEXHI

in the work of health and medical institutions, which have been strained tremendously. We are studying how our members can contribute and invest in these institutions.

Industry personnel in all segments of the value chain, including myself, were vulnerable to COVID-19. Many experts had to be sent home as a result, and a great deal of real-time monitoring technologies and systems had to be implemented so specialized knowledge would not be wasted. This centralization meant that our regulatory services were equally in demand in all segments of the value chain and thus had to be equally applied; one segment could not become more important than the other. We could not execute inspections and issue authorizations faster for exploration and production projects than we did for fuel transport or retail.

José Luis González Head of the Supervision, Inspection and Industrial Surveillance Unit | ASEA

Slowing down on one segment created ripples down the road that halted production continuity. This all proved incredibly demanding.

Operators are planning to accelerate their activities but they are also aware that they have to cope with a whole new landscape.

We are institutionally mandated to follow SENER’s decisions and, in that sense, we have been successful. Evaluations and permitting have continued normally. While SENER continues to mediate PEMEX’s exploration and production plans, our responsibilities remain the same. Permitting needs have increased during the pandemic and there has been a tremendous amount of activity for all upstream operators throughout this difficult time. The drilling of wells and the execution of assorted exploration and development tasks has increased.

The authorization of new superficial exploration studies, in the geological, geophysical and geochemical categories, has

Alma América Porres Commissioner | CNH

increased in the past two years despite the global circumstances.

Special agreements had to be reached with all operators so that delivery dates could be delayed due to the pandemic.

Helping Industries Adapt to Imminent Transformation Tania Cerda Vice President of Marketing and Sales for Mexico and Central America at Schneider Electric

Managing Old Risks in New Circumstances Michael Günther Senior Vice President and Executive Director of Marsh JLT Industry Specialty Mexico

Growing in the O&G Sector During These Times of Uncertainty César Vera CCO of Naviera Integral

Is Sustainable Energy Really an Option for Everyone?

Warren Levy CEO of Jaguar E&P

Mexico’s Dilemmas in Facing the Energy Transition Fernando Cruz Galván Director of the Energy Segment at Kannbal Consulting

When Will the Opportunities in Hydrocarbons Emerge?

Alfredo García Mondragón Executive Managing Director of SIETE ENERGY

A Year of Changes Guido Van Der Zwet General Manager of iPS Powerful People

Origins of the Hydrocarbon Law, Part 1 Rajan Vig Founder of Indimex Marketing and Trading, LLC

Diversification, Future Outlook Key to Wood’s Strong Performance Antonio Villaluenga Manager of Wood

Industry Giant Blazes Downstream Path Alejandro García Fuels Marketing Manager of ExxonMobil

9

Energy Halfway through President Andrés Manuel López Obrador’s administration, the Mexican energy sector is still coming to terms with a new political vision that has pushed the industry into uncharted territory. For many companies involved in developing energy projects, the focus has moved from greenfield development to a more cautionary approach that includes measures aimed at protecting existing investments.

Despite a general sense that business is slowing down compared to the boom that occurred five years ago, industry insiders emphasize that there is still a great deal of opportunity to be found in Mexico’s markets, as the clean energy transition continues to resonate for many stakeholders.

Growing energy demand, a greater need for decarbonization and an increasing effort to cut costs within a post-lockdown economic reactivation continue to drive the energy sector’s considerable prospects.

In this chapter, industry experts provide an inside look at Mexico’s energy industry, how its regulation is developing and where opportunities can be found.

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Energy 130

Analysis Energy Battle to Determine Sector’s Course

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Conference Highlights Electricity Generation: Last Chance to Prevent a Climate Crisis

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Conference Highlights Much Left to Do for Mexico’s Sustainability Goals

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View From the Top Valeria Vázquez | Partner | Deloitte

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View From the Top Enrique Gonzálezno | Executive VP | Cox Energy America

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Conference Highlights Making Sense of Energy Management and Its Clear Benefits

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View From the Top Gerardo Pérez | Vice President and Country Manager Mexico | EDF Renewables México

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Analysis New Possibilities Pique Investor Interest in Financing Shift

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View From the Top Ramón Basanta | CEO | ATCO Energía

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Conference Highlights Natural Gas Access an Engine for Economic Development

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Expert Contributor Jeroen Visser | Global Director Hydrogen | Northland Power

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View From the Top Gianni Moreno | International Sales and Marketing Director | Hitachi ABB Power Grids

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View From the Top Tania Cerda | VP of Marketing and Sales for Mexico and Central America | Schneider Electric

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Conference Highlights Energy Compliance Better Than the Alternative

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Roundtable Which Developments Are Driving Sustainable Investments?

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Content Links

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Energy Battle to Determine Sector’s Course The Mexican energy industry continues to adapt to an uncertain landscape ushered in by a government vision that favors state institutions over the private sector. Yet, despite a slew of measures, the regulatory framework remains much the same, resulting in a stalemate whose end could determine which way the battle goes.

The government’s campaign to reformulate the energy sector began with President López Obrador canceling the fourth energy auction after having it postponed at the end of 2018. Some of the more notable recent decisions include a policy agreement from SENER, increased wheeling charges and changes to the electricity industry law (LIE), along with a proposed constitutional change.

Despite having the country’s energy sovereignty in mind, experts believe that the results have not been optimal. “Although the strategy to reestablish state control over the energy sector has been useful in strengthening Lopez Obrador’s relationship with the political bases that underpin his government, the actions taken within the framework of a new energy policy have not necessarily contributed to the proper functioning of this sector,” wrote Arturo Carranza, an Energy Adviser and Consultant, for MBN. President López Obrador often points to the “corrupting” influence of the international industry, arguing that the Energy Reform was steeped in dishonesty. For him, the fair way forward is through the public sector, all subject to the president’s anti-corruption program. “I understand that the government is protecting CFE but I think that by allowing CFE to compete, they could strengthen it even more,” Ramón Basanta, CEO of ATCO Energía, told MBN. Despite the government’s efforts to backtrack it, the status quo established after 2014’s Energy Reform has so far been protected by courts. By invoking injunctions, or amparos, companies have been able to challenge the constitutionality of decrees and proposed regulatory changes, resulting in a blanket protection for all investors. With the LIE reform suspended, the final decision regarding its future lies with Mexico’s Supreme Court.

If the Supreme Court rules that the changes to the LIE are to be upheld, further governmental efforts to change the law would not be necessary. But this scenario is not what is expected. “The government will likely prepare a constitutional change. Pushing this plan might take the rest of what is left of this administration’s term,” José Estandia, Energy Partner at Jones Day, said. For Carranza, the articles most likely to be altered are 25 and 28, which would allow the government to argue that the grid’s stability takes precedence over free competition. Juan Carlos Machorro, Partner at Santamarina y Steta, argues that there are more provisions in the Constitution that would harm the government’s chances to prioritize its own power production, at times more polluting than that of private companies. The size of the changes aside, the president remains unlikely to be able to push through with sweeping constitutional alterations after the elections. “Any future initiative intended to reform the Constitution will require Read the complete article More about this topic

the consensus of not only one party and its allies but most parties, plus the approval of the majority of the 32 state legislatures,” says Edmond Grieger, Partner at Von Wobeser y Sierra.

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limate change has pushed companies from all sectors to accelerate the green energy transition.

However, time is running out and the chances of stopping a climate crisis are dwindling. “We are all involved in this issue: civil society, the public sector

and private companies in the electricity sector. We take it as our own commitment in which we must not fail,” says Ramón Moreno, President of the Mexican Energy Association (AME).

Although the Mexican economy has not yet overcome the effects of the pandemic, according to estimates by the International Monetary Fund (IMF), economic growth this year is expected to reach 6.3 percent, particularly due to the rebound from a very low base in 2020. Globally, growth is expected to reach 6 percent in 2021 and 4.9 percent in 2022. “Mexico’s growth has been uneven compared to other countries, such as the US and China, where GDP is already higher than they were before the pandemic,” says Moreno. This uneven growth has not only been seen among countries but among industries. While sectors such as tourism, aerospace and entertainment are still struggling to recover, others such as technology have not fared as poorly.

In Mexico alone, exports of technology goods to the US fell by

Electricity Generation: Last Chance to Prevent a Climate Crisis Ramón Moreno President | Mexican Energy Association (AME)

only 2 percent in 2020, while all other exports fell by almost 11 percent.

The transition to renewable energy has been one of the pacesetting trends for organizations in recent years. Between 2000 and 2020, the installation of renewables worldwide went from 750GW to 2,800GW, while costs fell drastically, by almost 85 percent during that same period, says Moreno. Among renewable energies, he adds, solar has been crowned king and will be one of the most produced by 2025 compared to coal, according to the International Energy Agency (IEA).

The pandemic also demonstrated to suppliers that electricity systems could absorb more renewable energy production than originally thought, as lockdowns drove up energy demand among consumers. Thus, the pace of renewable power installation has continued unabated, with record-breaking installations in 2020. The pace is expected to continue and gradually increase.

However, Moreno warns, the clock is ticking and the rate needs to be accelerated to keep the global temperature rise at an acceptable level. “We are already seeing the effects of climate change through events that have happened around the world this year,” Moreno says. “The consumer is becoming more and more aware that they are looking for renewable and clean energy in the services and products they use.”

The Mexican Energy Association, present in 22 states in Mexico, seeks to coordinate power generation companies to strengthen their operations in the country and encourage investment and project development. “These are companies that invest for the long term and, therefore, want the country and the national electricity system to do well above all else,” Moreno says.

Members of the association, which include companies such as Naturgy, Fisterra Energy, Iberdrola Mexico, IEnova and Mitsui Power Americas, are all committed to global and local emissions reduction and climate change mitigation goals, says Moreno.

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Companies are not only dedicated to investing in renewable energy but are also trying to explore new options “focused on digitalization toward reducing emissions,” says Moreno.

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limate change has already forced many countries to act but to complete the clean energy transition, much work remains to be done. For developing economies like Mexico, the challenge is even greater. “We find ourselves in a decisive year, at the start of a decisive

decade, when it comes down to really kickstarting the energy transition,” says Arturo Carranza, Independent Advisor at CFE. Countries have signed up to reach net zero emissions by 2050 to prevent the world’s temperature from increasing too much. Higher temperatures have already worsened the frequency and effects of natural disasters, such as hurricanes, floods and droughts. A common, shared responsibility is crucial, says Carranza: “We are all responsible for reaching the same global sustainability goals in the end.” This transformation requires investment, infrastructure and technology, all working at optimal levels. “It requires talent and insight from decision-makers to build the instruments we need to make the green energy transition happen,” he says. Reducing emissions means that energy use should become more efficient too. “By changing consumption habits drastically, 55 percent of global emissions can be avoided.” People should not only think about how they produce energy but how they use it.

Much Left to Do for Mexico’s Sustainability Goals Arturo Carranza Independent Advisor | CFE

The transition is already well underway, says Carranza.

“Renewables were the only energy sources that did not suffer during the worst of the pandemic lockdowns.” But the same pandemic has caused many problems: “The economic recession has deepened in several countries and their ability to drive a sustainable recovery is limited,” he warns. The different speed at which countries embrace sustainability also deeply impacts the global energy transition. “Developing economies represent two-thirds of the global population but only one-fifth of the clean energy investment. These countries have access to 10 percent of the world’s financial capabilities,” says Carranza. If the energy transition does not accelerate in these countries, the goals that need to be achieved remain forever out of sight. Low costs of wind and solar energy can turn the tables for developing economies, Carranza believes. “Finding and establishing the right conditions for these grand investments and installing renewable energy rapidly is one of the biggest challenges of our time,” he says.

So, what is the status of Mexico’ developing economy within this transition? Carranza says that Mexico has committed to reducing greenhouse gas emissions by 22 percent and carbon emissions by 51 percent by 2030, against numbers from 2013. The country’s growing share of clean energy helps in this regard: the share of clean energy in the power production matrix has grown by 12.2 percent from 2020 to April 2021. This increase is driven mainly by wind and solar projects that were undergoing operational tests when the last PRODESEN concluded, giving clean energy a boost from 25,594MW to 28,714MW. Nevertheless, industry insiders warn that renewable energy development is not going as fast as it should in an uncertain environment. Carranza agrees that more renewable capacity is needed.

The role of the government is paramount: “The government has the opportunity to develop and implement credible plans to meet reasonable targets that foster investor, industry and citizen confidence,” stresses Carranza. Through concrete action, the

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integration of sustainable financing and the construction of the energy transition under a long-term vision can ensure Mexico becomes a sustainable economy.

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from the

Q: How do you assess the success of private companies achieving amparos against regulatory changes?

A: Several procedures have been started against the changes to the Electrical Industry Law (LIE). Recently, a court revoked a definitive suspension against the changes to the LIE. But this was just one resolution; several other amparos are still holding the general suspension in force. The path to a legal resolution is a long one. Until the Supreme Court, or a competent court in its place, t issues its final ruling or the final resolution nothing is written in stone. For companies involved, we recommend they have a legal case built on valid grounds so that they can challenge measures or regulatory changes.

The most important issue here, however, is what the sector was calling for: the opening of a real discussion about energy regulation in Mexico. The private industry is used to seeing regulation change when it comes to electricity, oil and gas.

Every government has the ability to change the rules of the game and if it does not affect current investment. In the end, we want to see strong private investment but we also want to have a strong state-owned company supporting Mexico’s transmission and distribution network, which is CFE’s exclusive responsibility.

These matters do not have a black and white answer. Not all

Valeria Vázquez

rulings will move the same way. The issues will be interpreted differently by various courts. However, I do not believe that the energy sector’s model will be changed through these decisions. The current electricity industry setup will persist

Partner | Deloitte

for a while. The government will try to amend the Constitution and the current energy model.

Q: How will the reorientation of the energy sector affect the efforts of C&I companies to

Helping Clients Navigate a New Political, Financial Landscape

decarbonize and meet net-zero goals?

A: How we will reach the energy transition’s goals within these conditions is a common question. Private investment has been halted because of the prevalent uncertainty and a critical slowdown in permitting. However, Mexico is not an isolated country. It is part of a bigger world. The global energy transition cannot be stopped; it is already a global reality. Many companies in Mexico understand this and even have international and internal energy transition commitments to adhere to. These companies want to achieve their goals, despite an unfavorable regulatory environment.

Mexico is rich in wind and solar resources. I do not believe companies will sit with their arms crossed, waiting for something to happen four years from now. The most important effort in terms of the transition will come from the private sector. One of the positive developments that occurred in the last month marked by regulatory changes is that the industry is finally providing a unified front, saying that it wants legal certainty, assured investment and the possibility to develop projects to help the energy transition

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move forward. Private companies will drive the transition and push the government to retain the status quo in the sector.

The next few years will be difficult but energy projects are long term. In the coming years, we will see the results of these efforts.

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from the

Q: Why did Cox Energy decide to venture into Latin America and why is Mexico the company’s ideal starting point?

A: Cox Energy was founded in Spain in 2014 to address the needs of the renewable energy boom that was taking place in Europe. Today, in Latin America, we are seeing the same phenomenon that occurred four or five years ago in Europe. The industry is on the right track. There are governments, like Chile’s, that are much more advanced than Mexico’s in terms of policies and regulatory processes related to renewable industry.

Given the boom in the industry in 2017 and 2018, many companies went public in Europe, especially in Spain. We went through that process with Cox Energy America in Mexico and last year, despite the pandemic, we were the only equity IPO on the BIVA stock exchange. We listed 15 percent of the company, which was a breakthrough for us and sets the stage for exponential growth. For us, going public, in addition to opening new capital financing alternatives, has been vital to accelerate our entire institutionalization process. The IPO was a wise decision for Cox Energy America.

We are paving the way for what we believe is going to be a great future. We know that there is no turning back and that renewable energies are here to stay. In addition to initiating the transition to renewable energy and improving environmental

Enrique González

conditions in Latin America, this change will be necessary because the current energy network will not be able to meet the demand expected in the coming years. Today, 50 percent of all renewable energy generation worldwide is photovoltaic

Executive VP | Cox Energy America

solar, which is the main reason why we decided to specialize in this field.

Q: What sets the company’s community development and environmental protection strategy apart?

Paving the Way for Latin America’s Renewables Boom

A: As a renewable energy company, we have met the main requirements in environmental, social and corporate governance matters. Our approach is to create an ESG philosophy and strategy through our Mexico 2021-2025 plan.

At Cox Energy, we have three clear commitments that we want to start fulfilling. The first is our commitment to the environment.

Through the pursuit of new technologies, we seek to reduce the environmental impact of our solar power plants. Although we are a green company per se, we seek new ways to contribute to improving the environment. Our second commitment is the social approach. We seek innovative solutions that allow us to improve the quality of life in the communities where we operate. When you have a photovoltaic solar park, you generate a positive social impact by creating jobs; we go beyond that.

Therefore, it is important that we define internal policies and regulations to consciously increase our impact.

Corporate governance is our third objective. If you have good corporate governance, in addition to ensuring long-term sustainability, good corporate governance helps to generate

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and maintain a disciplined approach to environmental and social issues. Two years ago, it was very rare to receive questions about ESG issues in meetings with investors. Today, in every meeting we have with national or international investors, 25 to 30 percent of the meeting time is focused on ESG issues.

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Highlights

Making Sense of Energy Management and Its Clear Benefits Guillermo Bilbao Director | Minsait

Carla Ortiz Country Manager Mexico | RER Energy Group

Sean McCoy-Cador Director of Energy Supply | Edison Energy

Santiago Villagomez

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or commercial and industrial players in Mexico, there are plenty of options available to gain cheaper electricity prices and boost sustainability rates. So many, in fact, that the possibility is almost dizzying. Industry experts shine a light on how companies can make the best

decisions with the options available. “We now live in a world of options,” said Carla Ortiz, Country Manager Mexico at solar energy developer RER Energy Group. “This has not always been a reality for Mexico, where the market was covered by a single entity, stateowned utility CFE, until the Energy Reform was instigated in 2014.

Today, there is an option to address your own energy supply,” pointed out Katya Somohano, Energy Director at globally leading steel and wire producer Deacero.

Cutting energy costs, often a Top 3 expense for companies, and addressing sustainability are among the main reasons why

CEO | Energía Real

companies would switch to the electricity market or build an

Katya Somohano

on-site energy project. “Being able to meet ESG goals and have

Energy Director | Deacero

visibility on energy costs while achieving savings is essential,” said Santiago Villagomez, CEO of solar developer Energía Real.

Villagomez said that his clients often used to be “frustrated,” not only with the lack of options available to them but because they did not understand their untransparent energy bills. This is a crucial issue for energy users, said Guillermo Bilbao, Director of Energy Business Mexico at Minsait. “Visibility and transparency give power to the energy user,” he said. Yet many companies are a little fearful of entering a new environment like the energy market.

Sean McCoy-Cador, Director of Energy Supply at Edison Energy, believes that it is better to make the switch sooner rather than later. “If you wait too long, your decision will never be the optimal decision. It is all about entering the market to unlock the benefits in the longer term even if it does not pay off right away,” he said.

The motivations to move to Mexico’s wholesale electricity market (WEM) are therefore clear. Even though it is still a young market, it already shows vibrant activity. One of the main options available is the ever-popular power purchase agreement (PPA). This is a contract signed between an offtaker, a qualified user in this case as they have a demand of more than 1MW and are signed up to the market, and a qualified supplier that facilitates the access of the user to the WEM. Somohano highlighted some of the benefits of these PPAs. “Energy users can directly decide which energy technology they want to use, so 100 percent renewable energy is a possibility, often at a low cost.” Through creative solutions, a

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tailor-made energy supply can even hedge risks. But the biggest advantage of singing a PPA is cost. “The long term gives you the big advantage of a low price,” said McCoy.

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from the

Q: How did EDF Renewables establish itself in the Mexican market?

A: The company started out with six non-renewable combined cycle projects before 2000. These projects are now in the hands of a Japanese energy company. Soon after, the company began to take note of the potential of the renewable energy market in Mexico. The company purchased a small Mexican project developer and continued to work with its partners. After 2004, the company began operating under the name EDF Renewables in Mexico, although every project exists under its own name, as is the case with our first project, Electrica del Valle de México (EVM), which began construction in 2007. In 2010 and 2011, EDF built two other major wind farms together with Siemens in Oaxaca totaling 400 MW. In 2014, I joined the company and we began developing the 300 MW Oaxaca wind farm at the Isthmus of Tehuantepec.

In an agreement with the previous administration, we migrated these projects to the new Electric Industry Law (LIE) from the previous self-supply scheme. In 2016 EDF Renewables México competed and won in the second long-term auction for energy and clean energy certificates supply and purchase contracts with the Federal Electricity Commission (CFE) with a 120 MWp solar project called Bluemex and a 252 MW Gunaa Sicarú wind project located in the Isthmus of Tehuantepec region in Oaxaca. Before the pandemic, SENER reinitiated the public consultation process in two

Gerardo Pérez

Oaxacan municipalities. Before launching the second phase, the pandemic forced a halt to this process and it has not yet restarted.

We hope to see the process restart in June 2021. In any case, EDF Renewables remains committed to the Mexican market.

Vice President and Country Manager Mexico | EDF Renewables México

Q: What other projects are featured in the company’s development pipeline?

A: We have close to 3,000 MW of projects, but in light of the

O&M, DG Complement Renowned Renewable Development

regulatory situation in Mexico’s energy sector, our development has gone into slow motion. We are doing the minimum amount of work necessary to ensure that we do not lose the progress that we have already achieved. We have solar projects with some progress in Coahuila, Yucatan and the center of the country totaling 1,000 MW. We have established agreements with landowners and developers, among other steps. However, doing more work than the minimum efforts we have accomplished is not viable. First, we need to see how the rules in the energy sector pan out. Our power generation is being curtailed. More than anything, this introduces uncertainty in regard to what might come. Nevertheless, our investors are not leaving the Mexican market or reducing operations.

Q: What is different about the company’s approach to power purchase agreements (PPAs) compared to its competitors?

A: There are two key points that distinguish our approach in this regard. First of all, EDF’s name is an international reference point when it comes to power generation in general, outside of the renewables area. This fosters confidence among investors and industrial players. Second, the company is one of the frontrunners in renewable development, both worldwide and in

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Mexico. Furthermore, for more than 20 years, EDF has operated successfully in socially difficult areas, such as Oaxaca. These factors, along with the certainty that a company of this stature provides, means that we still work with some of the world’s largest companies in the area of PPAs.

Energy | 137

New Possibilities Pique Investor Interest in Financing Shift Already rattled by the government’s push away from the Energy Reform, the continuously shifting Mexican energy sector has also been faced with a transformation in project financing. MBN experts see utility-scale project financing taking the backseat but highlight that Mexico’s massive potential, the global energy transition and emerging niches are drawing the attention of investors. “The counter-reform moves ahead. We will experience changes in trends and businesses but the sector will continue onward, regardless,” says Alan Sakar, Senior Associate at Clifford Chance.

An investment in an energy project is one for the long term. Even smaller installations often require millions in financing but the benefits are clear once a project is finalized. More importantly, investors continue to reap the rewards for periods of 15 years or more. Yet, to minimize risks over such long periods of time, absolute legal certainty is essential no matter Mexico’s potential.

In the country’s largest midterm election in history, President López Obrador’s party, MORENA, won several important governorships but saw its power in Congress reduced.

Consequently, the ruling coalition does not have the two-thirds supermajority it needs to push constitutional reforms, meaning it is not likely to amend the 2014 Energy Reform, the next step in López Obrador’s series of measures and congressional bills. Perhaps more importantly, the Supreme Court has not yet issued a final ruling on the government’s changes to the electrical industry law.

Constitutional change or not, many industry insiders argue that much of the damage has already been done. In an environment where permits for energy projects have come to a complete standstill, few appear willing to invest in long-term perspectives. Edmond Grieger, Partner at Von Wobeser y Sierra, believes that Mexico’s rule of law is a reliable cornerstone for concerned investors.

Mexico, however, does not exist in a vacuum. As part of a heavily globalized world, the country is strongly influenced by the wider green energy transition. For Grieger, this influence translates into new investment opportunities, too. “There is a steady, growing demand for clean and renewable energy in Mexico and worldwide.

Many important industrial and commercial offtakers in Mexico have engaged in admirable and ambitious environmental, social and governance (ESG) and net zero emission goals.”

The push toward stronger sustainable practices has gained ground in Mexico over the last few years as an ESG-ecosystem was constructed, says Mariuz Calvet, Director of Sustainability and Responsible Investment at Grupo Financiero Banorte. A growing awareness of the importance of sustainability, driven by investors and end users, is already transforming the market, he says. “More green and sustainable bonds are released every day, even from the Ministry of Finance. An emissions trading system is being piloted.

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Companies that emit 70 percent of the country’s CO2 are already a part of this program. It is a good time for sustainability efforts to become more robust.”

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from the

Q: How is the global corporate mission toward decarbonization affecting demand for solutions within the electricity market?

A: The issue is that without broad investments like those pushed by the long-term energy auctions, CFE’s prices will remain high compared to other options. Customers can see that there is a good possibility to save money. These potential savings, combined with the need for renewable energy and the social pressure to combat climate change, have created opportunities for qualified suppliers (QS) to help address these matters.

However, we are only seeing the tip of the iceberg here because of the issues the energy sector faces. Nevertheless, the market persists and so do opportunities within it.

Q: ATCO has stated it aims to develop green hydrogen elsewhere in the world. What role could hydrogen play for qualified suppliers?

A: In all honesty, I do not foresee much opportunity for green hydrogen in Mexico for the next few years. Looking at the numbers on a global basis, green hydrogen is still more expensive than other fuels. It will be the future, though: green hydrogen is a great solution. The overall process to produce it wins out on batteries, since these require lithium, which requires extensive mining operations. Battery storage is still somewhat expensive and does not yet have an adequate regulatory

Ramón Basanta

framework but I do see it becoming a part of the market sooner than hydrogen.

Because of its comparative advantage, hydrogen will certainly

CEO | ATCO Energía

be a part of the future energy mix but I do not see it taking off in Mexico yet, despite the many companies exploring the technology. The economics are not there and Mexico lacks the infrastructure.

Sophistication Determines Who Thrives in Electricity Market

Q: What will be the role of technology and automation in driving efficiency and reliability for ATCO’s operations in the WEM? A: Since ATCO’s early days in Mexico, one of the key pillars of how we view the market and its future has been technology.

The electricity market is highly rooted in digitalization. We had a big emphasis on technology, algorithms and big data analysis and incorporated this into our systems from the very beginning.

This was essential during the pandemic, allowing us to trust our systems in difficult times. Through technology, we created an entire network that we coded ourselves, spending a lot of time improving our systems, models and forecasting, as well as how we interact with CENACE. The framework helped us address all the problems we saw in the market. We even coded ahead for future stages in the electricity market that have not been done so far because of the government’s policy, such as Financial Transmission Rights (FTR) that would allow market participants to hedge risks between nodes.

Whether the market reaches these stages will depend on the political will of the government in power. I do believe the

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market forces will eventually drive the WEM forward. If it remains operational, it will eventually tell us where to move toward independently of the government’s vision because the government will not have enough resources to tend to the demand alone.

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Highlights

Natural Gas Access an Engine for Economic Development Malvin Delgado International Energy Business Director | Picarro

T

he efficiency of natural gas for both domestic and industrial use, as well as its environmental performance, have positioned this greenest of fossil fuels as a transition source toward decarbonization. However, the challenge of

increasing access to this fuel and the lack of awareness of its benefits continue to be stumbling blocks to realizing its full potential.

In Mexico, natural gas consumption has increased considerably in recent years. According to the Ministry of Energy (SENER), it is estimated that by 2031 the country’s

Gustavo Nunez

demand for natural gas will increase by 30 percent compared

Managing Director Sector Mexico & Central America | ROSEN

gas reserves in states like Tabasco, Tamaulipas, Veracruz and

Alvaro Corona COO of Gas Transportation and Distribution | ENGIE Mexico

Areli Covarrubias

to 2016. While it is true that Mexico has significant natural Nuevo Leon, and in its territorial waters, it is also a reality that the US, despite not having the largest reserves of natural gas, has positioned itself as the largest producer of this resource worldwide with a production close to 25 percent of what the world consumes.

Commercial Director | IEnova

Rafael Mercado Commercial Director | Naturgy Mexico

“This makes it clear that natural gas is the most abundant, reliable and secure energy source available to leverage Mexico’s development,” says Malvin Delgado, International Energy Business Director of Picarro.

Areli Covarrubias, Commercial Director of IEnova, says the key to seizing the advantages of natural gas is to keep in mind its role as a driver of economic development. “Where natural gas is available, industry, jobs and indirect economic spillover arise naturally,” she says. “The greater the presence of natural gas, the lower the levels of poverty.”

In Nuevo Leon, one of the country’s biggest natural gas consumers, GDP is expected to increase from 3.4 percent to 5.2 percent by the end of 2021, Nuevo Leon’s Chamber of the Transformation Industry (CAINTRA) said in April. By comparison, Mexico City, a low-volume consumer of natural gas, will need to show an average annual GDP growth of more than 4 percent over the next three years to reach prepandemic levels.

Targeting regions that do not yet have as much demand for natural gas as others is also an important step toward creating greater access and the subsequent economic benefits for more than just a few areas. “Unfortunately, there are still many places where families use wood or coal to generate

energy,” says Rafael Mercado, Commercial Director at Naturgy Mexico, a multinational pioneer in natural gas distribution founded in 1990.

Bringing this resource to every corner of the country and meeting the growing demand expected in the coming years poses major challenges, however.

While private sector investments will be necessary, the technical know-how to optimize infrastructure and make it safer and more accessible will be one of the main obstacles toward reaching natural gas’ full potential. “Coherent policies supportive of the development of the natural gas sector in the country must also be implemented,” Delgado says.

Licensing is another challenge in developing a pipeline transportation system or any other energy infrastructure project, explains Covarrubias, adding that while this has always been a huge hurdle, companies knew that if they met the requirements and established mitigation plans focused on taking care of the environment and communities, infrastructure could be built. Now, however, this is not enough.

According to Covarrubias, the rules of the game have changed and today it is necessary to demonstrate that construction brings value to the area where the project is being built. “This has to be demonstrated not only in front of government agencies but now, more than ever, in front of society.” She adds: “In Mexico, we need society to ask for this infrastructure.

Communities must know what the long-term benefits of these projects will be; they can then accept them and embrace them as their own,” she says.

Non-standardized requirements for each municipality and region pose a challenge for companies in the natural gas sector, nevertheless, says Alvaro Corona, COO of Gas Transportation and Distribution at ENGIE Mexico. A common front is required among companies to raise awareness of what natural gas projects mean for communities and their development, adds Corona. In addition, public policies that encourage the use and deployment of this infrastructure are crucial.

Despite the challenges, companies in the sector continue to promote technological innovation to generate accurate and reliable information for the safe operation of their projects, says Gustavo Nunez, Managing Director Sector for Mexico and Central America of ROSEN. “There are already solutions that can identify faults and threats as small as 3mm up to very critical threats such as fissures,” he explains.

AI, big data and machine learning are already bearing fruit in the industry through corrective and predictive maintenance of pipelines to avoid greater environmental impacts.

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N

ow is the time to act, the time to change. The decarbonization of human activity starts today.

Evidence suggests that the effects of climate change are already impacting Mexico. On Aug. 11, 2021, CONAGUA said in the Federal Official Gazette that

a severe drought was affecting almost 87 percent of the Mexican territory, with some states having seen their worst drought in 30 years. The effects of climate change are particularly important for Mexico, where the average temperature increase is one of the steepest around the globe. This will have consequences not only on the climate itself but on economic activities as well.

The decarbonization effort, as with all industrial revolutions, must be driven by the private sector. Governments and environmental policies are not enough to change the global economy at the pace needed to reach Net Zero by 2050. A combined effort is needed, as well as a mix of different technologies, to decarbonize all human activities as fast as possible, not only within the power generation

Energy | 141

sector. The only way to cope with decarbonization in hard-to-abate

Is Hydrogen the Backbone of the Decarbonization Revolution?

Jeroen Visser Global Director Hydrogen | Northland Power

sectors is a mix of green hydrogen, its derivatives and renewable electricity.

More and more companies are initiating and following new and stronger ESG trends that demand structural changes from industries. In the next few years, the use of green hydrogen will play a major role in effectively strengthening the sustainability and financial performance, as well as the profile of every public company and operation.

As mentioned, hydrogen is a complement to an energy mix that includes electricity based on wind and solar power, and, until the transition is complete, natural gas. A successful energy strategy and management of this mix is critical to achieving sustainability goals with confidence and maintaining competitiveness in the sector itself. Northland Power Inc. (NPI) recognizes this global reality, along with the specific constraints and challenges that companies face. In Mexico, one of the challenges is to guarantee that 100 percent renewable energy is used to power hydrogen production, due to the regulation that rules the electricity market, which has both capacity and energy as its main products. A greater challenge is guaranteeing compliance with the regulatory framework while guaranteeing a firm power supply and keeping power prices competitive. NPI has overcome the power supply challenge through the deployment of a comprehensive strategy that takes advantage of NPI’s company deployment in Mexico.

Having companies along the power production value chain, NPI is able to deliver an integral solution. Moreover, NPI’s experience in Mexico allows us to offer creative and innovative power supply solutions and share the savings that these strategies can create with our commercial partners while implementing solutions to meet their decarbonization objectives.

NPI is committed to Mexico. Through its strategic choice to incorporate green hydrogen in the renewable energy mix, and together with companies active across the Mexican industrial value chains, it is tackling the decarbonization challenge. NPI has launched an ambitious initiative to realize the local and on-site

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production of green hydrogen for the benefit of those companies that are already starting the journey toward decarbonization of their operations. NPI intends to establish an integrated green hydrogen value system in Mexico, from production and logistics to use applications.

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from the

Q: Analysts often point to the aging national grid as a stumbling block in Mexico’s clean energy transition.

How can the company add value in this area?

A: I am a firm believer in the energy industry’s ability to bring prosperity to a country and Mexico is no exception. From my perspective, for Mexico to take advantage of its position in the world, a robust, resilient, efficient and sustainable power grid is necessary. Even though hydropower has become a focal point recently, photovoltaic solar and wind will be major components in the country’s new energy matrix. For this to be a success, good planning is a must. This is where we come in, providing advisory services related to making hydropower more efficient and how to combine and integrate all of the country’s other assets to get the most out of them. If a competitive grid to make the country itself competitive is wanted, the company can help with advice and the integration of such technologies into the grid. Data will play a huge role; everyone has been talking about the buzzword “smart” in recent years, but what do we actually do with this data?

Understanding how we turn this into actual insights and use this toward innovation is what we are looking to do in Mexico.

Regarding technology, both new solutions, integration into the existing grid and parallel support are among the possibilities we can provide. An appropriate national strategy followed by an integrated resource planning stage are crucial in this regard.

Gianni Moreno

Some assets will likely be replaced with newer technology, but we help our customers to make well-informed decisions based on the strategy they follow. Execution is equally crucial because the right engineering and engineering resources ensure the

International Sales and Marketing Director | Hitachi ABB Power Grids

process goes smoothly.

Q: What energy storage efforts have you noted in the Mexican market and where have you identified untapped opportunity?

Social Innovation, Smart Tech More Than Just Buzzwords

A: In line with the government’s plans in the energy sector, hydroelectric dams offer a great option for energy storage. In talking about the growing trend of battery storage, however, we see it as a new tool for the industry. The more it is used, the better we understand it and can apply it to other situations. Increased renewable integration and dynamic demand can create instability, but storage can help remedy this. While this is a challenge, it also offers an opportunity in regard to energy efficiency. Hitachi ABB Power Grids has data-focused forecasting technology and can help operators manage the grid efficiently.

Q: What sets apart Hitachi ABB Power Grids’ approach to R&D? A: Innovation has always been and will always be a strong pillar for the company, only more enhanced by the JV. We continue to invest heavily in R&D. Hitachi brings the concept of “Social Innovation” to the table as well, which will take our innovation to a different level. Hitachi ABB Power Grids believes that true Social Innovation cannot be done alone. Companies need to partner up and co-create. That is what we are doing. For example, we signed a landmark agreement with General Electric recently in which the two companies will combine forces through a non-exclusive,

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cross-licensing agreement to further develop a new gas-insulation technology as an alternative to SF6. The alternative solution has a significantly reduced impact on the environment compared to SF6. Our approach to R&D is rooted in how to advance society in general and that is a key differentiator.

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from the

Q: How is Schneider Electric interpreting the current moment in the market?

A: We are interpreting this moment as one of constant transformation. As our CEO said to us 10 years ago, it is not just about change being a constant but about the rate and speed of change. The rhythm at which you adapt to change in the market must be appropriate. Our investments in technology, development and innovation remain considerable. Our spectrum of clients and markets also continues to be quite broad, running the gamut from residential to infrastructural applications. The value we offer to each one of these segments must be uniquely adapted to their needs. We must continue many of the practices that were in effect before 2020, while also continuing to migrate to digital mediums and modalities. This digital transformation began before the pandemic and its main objectives have always been to increase client and customer satisfaction, not just to adapt to the needs dictated by safety measures related to COVID-19. This transformation has also been implemented into our marketing strategies and the internal practices of our sales departments.

Q: How are you balancing your sales and marketing portfolio between emerging industries and those where you have an established presence?

A: We try to maintain a fair balance between all categories in our

Tania Cerda

portfolio. This is necessary to maintain a local infrastructure with which we can serve clients on a much more frequent basis. This also applies to our production and distribution networks. Despite our efforts to keep a symmetrically balanced portfolio, we do

VP of Marketing and Sales for Mexico and Central America | Schneider Electric

need to adapt to the nature of the market. In 2020, we had to adapt to the contraction of the office space development sector as it suffered the consequences of the pandemic and economic crisis, while data storage and management facilities became big targets of large investments. The adoption of digitalization

Helping Industries Adapt to Imminent Transformation

technologies was a constant driver for the market before 2020, but the pandemic greatly accelerated that trend. Companies that were previously hesitant to try our automation and digitalization technologies were suddenly motivated to sample them and adopt them. This is just one of the many trends that have greatly influenced the balance of our portfolio.

Q: What role has Mexico’s energy industry played in your portfolio?

A: It has played a considerable role because the needs of our clients in this sector have remained constant. Their No. 1 concern is security, both in the sense of the physical security of their assets, as well as the secure supply of energy and the reliability of their power generation capabilities. We want our solutions to satisfy these needs through a higher degree of technological sophistication. 2020 made it clear that supply continuity is an essential asset that major players in the energy and power generation sector need to worry about. Another important point is the efficiency of processes and also how consumption is impacted by how reliable and constant supply is. For instance, if we can reliably automate our solutions to our clients’ supply issues, then

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we can effectively address their efficiency and power potency issues. We want to guide our clients through the process of tracing and monitoring how these improvements and optimizations influence each other. An important part of this will be our cloud storage and management products, technologies and services.

Conference

Highlights Energy | 144

A

s global economies ramp up their energy transition efforts, grid code compliance will play a critical role in reducing energy costs through increased operational efficiency and longer asset life. “As the new grid code is implemented, benefits in cost

reduction and operational improvement will be accessible,” says Mónica Samudio, Country Managing Director Mexico and Central America at Circutor.

Energy and economic development have become closely related since the establishment of the Tokyo and Paris climate agreements, as well as the UN Sustainable Development Goals. Such initiatives have put pressure on different groups, industries and governments to embrace the energy transition and ESG strategies to make operations cleaner and more energy efficient, says Samudio.

In Mexico, however, the transition is still in its early stages, especially considering the targets set in the Paris Agreement.

Mexico’s renewable energy generation stands at 20 percent of total energy consumption, which is just above half of what is needed to reach the 35 percent set for 2024 and below half the goal of 43 percent for 2030. Although energy generation still depends mostly

Energy Compliance Better Than the Alternative Mónica Samudio Country Managing Director Mexico and Central America | Circutor

on natural gas, the energy sector and the regulatory environment surrounding it have changed drastically since Mexico joined the agreement, with new energy generation players that must comply with regulations established to ensure the stability of the grid.

The grid code established by CRE on April 6, 2016, as part of the Electricity Law (LIE), features all the administrative guidelines for the efficiency, quality, reliability, continuity, safety and sustainability of the National Electric System (SEN). All load centers wanting to connect or that are already connected to the SEN in medium and high-tension levels must comply with the grid code, regardless of their energy supply scheme, according to CRE. “Compliance is essential to the economy as a whole,” says Samudio. Although standards are strict, they were established to avoid energy disruptions like those observed in December 2020, when the national grid operator was forced to shut down at 2:27 p.m. — peak energy consumption hours — in 12 states, representing an unknown loss of economic productivity. According to the government, the San Carlos wind farm in Tamaulipas contributed to the disruption after its connection to the grid without the necessary testing to ensure the grid’s stability.

Beyond stability, the grid code brings many advantages to the sector as it includes all stakeholders involved in the sector, from energy generators to final users. “Regulations democratize the responsibility for generation and consumption of energy, which means that generators must follow all requisites to connect to the grid, while users must consider every step of the generation process and not focus only on paying for their consumption,” says Samudio.

In terms of benefits, grid code compliance means that generators can see both a reduction in energy costs and savings stemming from greater energy efficiency. “Penalizations are not as important as they could be worse,” says Samudio. Instead,

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companies should focus on the short ROI related to the needed investment in equipment to meet all standards, the increased operability of their equipment and the ability to plan production according to sales and demand forecasts, without worrying about potential grid failures.

Energy | 145

Which Developments Are Driving Sustainable Investments?

Sustainable finance includes all types of structured financial activities aimed at sustainable assets that consider environmental, social and governance factors as important as returns on investment. Industry experts have seen green financial instruments grow in popularity in the past year and predict even further growth toward 2021 and beyond. What are the factors driving this shift in investment strategies?

The pandemic has created a strong connection between people and what matters most to them. This led to higher awareness of social and environmental issues. People also understand that the pandemic has taken a heavy toll on the economy but that they need to generate a different mindset about how they consume or purchase products. Today, more ESG-friendly bonds are being issued than in all of 2020, which easily beat 2019. This demonstrates how priorities have changed globally. Consumers are also aware of what real sustainability means, making greenwashing an empty marketing strategy and a difficult

Mariuz Calvet

route to maintain. It is risky for companies not to consider sustainability initiatives.

Director of Sustainability and Responsible Investment | Grupo Financiero Banorte

Four external drivers are accelerating the shift to decarbonization, decentralization and digitalization. And there is no going back.

Driver one is the customer. Customers are focused on green and sustainable outcomes. Regulation and policymaking is driving take-up of solutions that incentivize and support green recovery.

In pursuit of compliance with global carbon emission-reduction policies, utilities are forced to retire legacy and polluting assets and transition to alternative business models. Investors take their cue from governments and consumers and are distancing themselves from carbon-intensive industries. As time runs out on current high

Gavin Rennie

carbon intensive utility business models, they are putting their money behind greener and renewable energy alternatives.

Global Energy Emerging Markets Leader | EY Mexico

Technological advances in renewable energy have made an energy transition that is profitable for investors and offtakers alike. One example is the current capacity of solar modules, where we have jumped from a 440W module in December 2020 to a 540W module in 1Q21. We have also witnessed technological innovations that augment the capacity factor of wind turbines and we have seen storage systems for utilities become operational, with great results. And let us not forget the current green hydrogen trends, which Japanese car manufacturers have invested heavily in for the past decade, bringing us closer to an achievable green mobility.

Juan Ávila CEO and Co-Founder | Top Energy

Consolidation as ‘Green Enabler’ Comes Into View Bruno Riga Country Manager Mexico & Central America of Enel Green Power

The ‘Ramírez de la O’ Factor Arturo Carranza Energy Adviser and Consultant

Energy as a Competitive Advantage Claudio Rodríguez Partner at Holland & Knight

CFE to Move on Hydroelectric Updates, Solar and Pipelines 07/16/2021

1GW Solar Plant Part of Sonora’s Grand Energy Transition Plans Rafael Cabanilla Energy Representative of the Transition Team of Sonora’s Newly Elected Government

Safeguarding Investor Rights Julio Valle Deputy Director at AMDEE

Investment, Dialog Lead New President’s Agenda José García President of AMGN

Riding Coattails of Our Strengths Into Larger Markets Jonah Greenberger CEO of Bright

Russian Experience and Skill Can Benefit CFE and Mexico Ivan Dybov President of Rosatom America Latina

IEA: A Pathway Toward Net-Zero 07/03/21

Sophistication Determines Who Thrives in Electricity Market Ramón Basanta CEO of ATCO Energía

10

Mining Mining is integral to the growth and economic reactivation of the country. According to data from CAMIMEX, the country is among the world’s Top 10 producers of 17 minerals. The sector contributes significantly to GDP and helps boost economic and social development, especially in the areas where the projects are located. However, the sector faces several challenges. In addition to the consequences of the pandemic, widespread uncertainty derived from the political landscape has tarnished the country’s attractiveness as an investment destination for mining. The tax burden that increases operating costs, the government’s position on concessions, insecurity and new policies such as the electricity bill initiative continue to be great tests for the industry.

Efforts have been initiated between stakeholders and even countries to ensure Mexico continues to be a strong mining country. However, greater public-private dialogue is needed to develop a legal framework that provides certainty and better support to jointly address the main problems of the sector. The Mexican mining sector is also embracing the incorporation of new technologies and ESG practices to promote sustainable development. In fact, the industry’s work to implement these practices has another potential benefit: changing the negative public perception of the industry by allowing miners to demonstrate and promote its value not only as an economic generator, but also as a generator of social welfare.

10

Mining 149

Analysis Mexico’s Exploration Outlook for 2021

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View From the Top Ana Maria Gonzalez | President | WIM Mexico

151

View From the Top Efraín Alva Niño | Director of the Extractive Industries Unit | Ministry of Economy

152

Expert Contributor Pablo Méndez Alvidrez | President | CLUMIN

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Conference Highlights How to Close the Gap in Mexico’s Mining Industry

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View From the Top Ramon Perez | President and Director | Candelaria Mining

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View From the Top Imaru Casanova | Deputy Portfolio Manager and Senior Gold Analyst | VanEck

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Analysis Mexico’s Path to Mining 4.0

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View From the Top Carlos Silva | CEO | Santacruz Silver

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View From the Top Federico Téllez | Director General of Commercia | CyPlus Idesa

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Expert Contributor Bradford Cooke | Founder & CEO | Endeavour Silver Corp

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Expert Contributor Isabelle Ramdoo | Deputy Director | Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF)

161

View From the Top Diego Torroella | Director | TAKRAF Mexico

162

Conference Highlights ESG Is Already in Mining’s DNA But Communication Can Improve

163

Roundtable Which Metals Will Lead the Decarbonization Trend?

164

Content Links

Mining | 150

Mexico’s Exploration Outlook for 2021 MINING PARTICIPATION IN STATE ECONOMIC ACTIVITY (percentage)

The number of mining projects globally is expected to grow as the market environment and commodity prices boost investor confidence. However, Mexico faces other challenges in addition to COVID-19 as political uncertainty has prevented the arrival of new investors and projects.

In 2020, the mining sector was affected by the COVID-19 pandemic amid lockdowns and a drop in metal prices in March. Despite these challenges, the industry ended the year better than expected.

According to S&P Global Market, the global exploration budget decreased 11 percent in 2020, representing a drop of US$8.7 billion compared to US$9.8 billion in 2019. S&P analysts said they had expected a greater decrease. Commodity prices and a better market environment mainly due to the distribution of the COVID-19 vaccine have improved the outlook for 2021, which is expected to see an exploration budget by 20 percent. The expectation for 2021 is that the mining industry will continue to see a greater focus on

33.3% Sonora 19.9% Chihuahua 15.9% Zacatecas 8% Durango 4.9% Guerrero 3.8% Coahuila

2.9% San Luis Potosi

1.9% Oaxaca 1.5% Baja

California Sur

1.3% Hidalgo 6.6% Others

advanced and mine-site assets than on early-stage exploration assets. This trend is mainly due to project financing, as junior mining companies favor assets that are not high risk, while majors prefer to maximize the value of their already profitable assets.

Despite its potential, Mexico’s investment environment has prevented the arrival of new projects. Political factors, taxes, legal frameworks and security concerns are key considerations for mining investors and, due to the current situation in Mexico, mining

Source: INEGI, SE

companies and investors are looking at other countries, CAMIMEX reported. “Countries like Peru and Chile have encouraged mining operations to grow with incentives that Mexico has forgotten or

STATUS OF MINING PROJECTS IN MEXICO

ignored. Mexico needs to understand mining as a whole, as well as mining companies, to attract more investment,” says Adolfo Calatayud, Tax Controversy and Dispute Resolution Lead Partner in Mexico and Latin America at PwC.

44.4% Postponed 42.7% Exploration 8.2% Production 4.2% Development 0.5% Closure

The Mexican mining sector has the important task of improving its investment situation. However, it cannot do it alone; it needs the support and help of the federal government. “We hope that the government will begin to promote mining activities, as all mining countries do. This alliance is necessary for the sector to develop,” Fernando Alanis, President of CAMIMEX, told MBN. Mexico needs certainty and long-term public policies that promote fiscal and regulatory competitiveness, social certainty and understanding of the mining sector. “Initiatives can be achieved through a mining board that allows good coordination between the legislative and executive powers,” said Alanis.

Source: CAMIMEX

Minister of Economy Tatiana Clouthier has announced that she also will seek to improve the mining situation in the country, in addition to reaching beneficial solutions to many mining conflicts.

The Ministry of Economy has invited small, medium and large companies, as well as their corresponding associations, to find common solutions within a legal framework to reactivate initiatives that will benefit Mexico’s mining sector. “We are working to provide Read the complete article More about this topic

a modern regulatory system that will reduce substantially the socalled bureaucracy. We need a better relationship with the private mining sector, where both sides trust each other,” says Clouthier.

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from the

Q: What is WIM looking to achieve in the mining industry?

A: Our contribution to the mining industry is to show what women can do in the sector, since women can do as much as anyone else. Therefore, we promote women’s roles, their contribution and all the benefits that are obtained when there is a more equitable work environment.

When I started working at the mining industry in 1992, it was not common to see women in the industry. Only 2 percent of workers in the sector were women. Thanks to our constant promotion, that number has increased to 16 percent and we now see women taking on many jobs, playing an active role as drivers, engineers and CEOs. Q: What are the main barriers that women face in Mexico’s mining sector?

A: The biggest challenge we face is our macho culture, where it is thought that only men can perform certain jobs or tasks.

This has made it difficult for women to imagine themselves in a hostile environment such as mining. We have to change this mentality, especially in men, so that they understand that women can also perform their tasks. This is a complicated challenge because it is difficult to help men adapt and help them see that this is not a competition between women and

Ana Maria Gonzalez

men but an alliance, where both genders can work together and complement each other.

Q: What progress has been made toward

President | WIM Mexico

the inclusion of women in mining?

A: Mexico has made progress. Today companies employ more women because they understand that women can contribute as much as men. There are also women who now hold high

Impact of Women in Mining Grows

managerial positions in Mexico and we are very happy to see that every year more women are incorporated into the sector.

However, one of the problems we see is that when women occupy higher positions, for instance, as a country manager, some men do not follow their orders because many doubt a woman’s ability to do the work.

To understand how the entire industry is improving conditions for women, we collect data and monitor the progress of our members. This allows us to identify problems and to help provide a solution. There are still some factors that could be improved but I think making women feel more accepted and welcomed in a male-dominated industry has been a great success.

Q: How do you think the Mexican mining industry will progress in the coming years regarding gender equality?

A: I believe the mining industry will continue to improve its policies as well as the working environment for women. We will continue to be a key partner for the industry and the government to achieve a more inclusive sector.

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For this year, we will work closely with mining companies and CAMIMEX to attract more women to the sector and improve their working conditions. There is a long way to go, but there is no doubt that we will achieve a more equitable industry.

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from the

Q: Why is mining a fundamental industry for the development of Mexico?

A: In Mexico, mining has always been a highly important industry. During the colonial period, one factor that set our country apart from other countries was the availability of precious metals, such as gold and silver, which have remained relevant to this day. The industry has maintained its economic relevance to this day, comparable to Mexico’s oil and gas industry. However, contrary to oil and gas, which are on decline, mining has remained at the forefront because of its importance to many other industries.

Q: How can Mexico improve its position as a mining investment destination?

A: The lack of legislative certainty has kept investors on edge.

The legislative situation in our country must be improved through the provision of more information. Data must be available to all people, from common citizens to the highest-level officials. We have seen a trend in social media where there is a great deal of misinformation concerning mining. I would like to urge mining companies to make a greater effort to communicate what the mining industry is and the many benefits it provides.

We need people to understand that the mining industry is a responsible and highly competitive sector; we have always

Efraín Alva Niño

aimed for sustainable mining. The mining industry in Mexico is world class and it is much more inclusive than it was a 20 years ago. The industry is changing for the better.

Director of the Extractive Industries Unit | Ministry of Economy

Q: What steps is the Mexican government planning to take to reduce investment risk and remove legal and regulatory hurdles?

A: We are working on facilitating the exploration of lithium,

Mining Needs Better Communication Strategies

considered “white gold.” Our job is to ensure that everybody gets the correct information. Ultimately, our goal concerning lithium is to keep pushing for thorough exploration campaigns.

There are already existing permits but we are looking for more potential areas and encouraging their exploration.

Another important aspect is the 2013 Tax Reform that disallowed tax deductions during the first year of exploration.

This is the reason behind the 40 percent drop in exploration investment. We are working on a proposal with Economy Minister Tatiana Clouthier and CAMIMEX. We are looking to improve the exploration phase for companies, as well as exploring the possibility of reducing the amount of taxes and implementing other incentives.

Q: What is the outlook for mining concessions and permits?

A: Unfortunately, there is a presidential order to stop mining permits. However, and this is where we come in, while we understand that there will be no new mining permits for the time being, we are asking the government to allow us to work on the ones we already have. We need to oversee current exploration

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programs, which are very complex. Mining exploration takes years and sometimes they do not represent any viable resources, meaning that the exploration investment could be lost. That is why we continue to make an effort to reduce the risks related to mining exploration investment.

A

lthough the mining industry has made significant progress in our country, it has also been involved in legal, community and environmental controversies.

Historically, there have been testimonials, mainly from ejidal and indigenous communities, who

have strongly opposed the mining industry’s activities. The main argument is that these activities tend to have an irreversible impact on the environment. This has strongly stigmatized the mining industry as a harmful sector for the community and due to the international recognition of human rights, today, there is strong criticism against these megaprojects based on the argument that they are disproportionate to the impact they generate; in particular, the development of open-pit mining projects.

Mining is distinguished by its development in three phases: exploration, exploitation and benefit. The exploration stage is the most important within any project, since the exploration viability of the project is defined based on the results provided

Mining | 153

by the geological studies, for which various drillings are usually

Mining Faces New Challenges, Environmental Authorization Delays Pablo Méndez Alvidrez President | CLUMIN

carried out to extract soil samples and measure ore availability.

Environmental studies are completed in this stage, approved by SEMARNAT, to calculate the adverse effects that the project may cause to the environment, as well as the preventive measures that the mining company must carry out to mitigate the negative effects that the activities will generate.

To gain SEMARNAT approval, the projects must comply with all the environmental requirements established by the environmental legislation; otherwise, SEMARNAT is entitled to deny the Environmental Impact Statement and suspend the project’s mining activities indefinitely.

In recent years, SEMARNAT has denied various requests for mining projects that involve open-pit extractive processes, consequently generating distrust among the authorities in these types of megaprojects. A notable example is the “Ixtaca” project of the Canadian company Almaden Minerals Ltd., which is located in the Sierra Norte in the state of Puebla. This project has been in the exploration stage since 2013. It has not been able to advance with its activities due to constant legal conflicts with the Tecoltemic ejido, who suspended the project through an amparo/ constitutional trial. It was not until last year that SEMARNAT definitively denied the project an Environmental Impact Statement due to the lack of essential requirements, which implies that as of today, the company is not allowed to carry out the project’s stages.

It is quite clear that the current recognition of human rights has prompted government agencies to listen to the voice of the ejidal and indigenous communities, and, therefore, to strictly enforce mining and environmental regulations. The greatest challenge that the mining industry faces is not related with the permissibility of the authorities when approving or denying the applications of their projects or with the recognition of the rights of the ejidal and indigenous communities, but with the current stigmatization that exists on mining activities in our country, which, unfortunately, is generally unfounded.

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Today, companies must not only comply with the mining regulations but must also protect these sectors to overcome the stigmatizations that have historically marked the mining industry.

Only in this way will the Mexican community recognize the true achievements the mining industry generates for our country.

Conference

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Highlights

How to Close the Gap in Mexico’s Mining Industry Fernando Alanís President | Mexican Mining Chamber

Tonatiuh Herrera Undersecretary of Promotion and Environmental Regulations | Ministry for the Environment and Natural Resources

José Jabalera Director of Mine Development | Ministry of Economy of Mexico

W

hile it is true that Mexico’s mining industry remains a major asset to the country, industry experts agree that it has lost some of its former sheen. By combating misinformation, establishing talks, protecting the environment

and sharing many benefits, Mexico can begin to close the gap and regain its gleam.

“Resources are the basis of the country’s development and, therefore, mining is fundamental. If we stop mining, other industries will collapse,” says José Jabalera, Director of Mine Development at the Ministry of Economy.

Today, Mexico is a Top 10 producer of 17 minerals. The country ranks first in silver production but it is similarly important in the production of gold, fluoride, copper, lead and other minerals. The mining industry is also the fifth-largest economic activity in the country as of 2020, says Fernando Alanis, President of Mexico’s mining chamber CAMIMEX. Since mining activity often occurs in remote areas, it can become an important lever for economic growth in these areas as well. “Mining can boost the economic reactivation of communities far away from cities. It is, therefore, an important part of Mexico’s development,” Jabalera says.

Last year, the Mexican mining industry did not perform as expected and experienced some low points as a result of the global pandemic, a lack of granted concessions and governmental regulatory uncertainty, which slowed down investments. This resulted in having 24.1 percent fewer investments than in 2019, for a total of US$3.532 billion. “Mexico dropped from the 20th most attractive mining country down to 42nd place in 2020. The pandemic has had its effect, but investments have dropped by more than half since 2012,” says Alanis. He also agrees with other experts who concur that certainty is the keyword for improvement.

Nevertheless, fostering certainty is much easier said than done.

Efraín Alva Niño, General Director of Technical Support and Head of the Extractive Activities Coordination Unit of the Ministry of Economy, believes that spreading accurate information about the industry and its activities is of the essence.

“Mining misinformation must be urgently addressed. Mexico has a world-class mining sector and our task is to convey that message to the public,” he says. Even though the country is competitive on

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a global scale, many remain unaware of the benefits the industry could bring and instead remain antagonistic toward any type of mining operations.

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from the

Q: What are the company’s investment plans for its assets in Mexico?

A: We are working on two projects: our flagship asset is the Caballo Blanco project in Veracruz and the other is the Pinos project located in Zacatecas. Caballo Blanco is a great asset and together with Agnico Eagle, we are planning to allocate a significant investment in 2021. It is likely that we will start a drilling program and an ESG program that will run parallel this year. Regarding the Pinos project, we have all the required permits and we are now evaluating financing opportunities to finish construction and start production. We expect to begin producing 15,000oz and eventually increase that to 20,000oz.

Q: How important has ESG criteria become in accessing funding in recent years?

A: ESG has definitely become an essential component for institutions and investors when investing in a mining company.

It is also an initiative to responsibly manage a project, from its exploration to its production phase. These criteria are required by all investors today, which is why more companies are pushing for broader and better ESG programs.

ESG criteria did not receive a great deal of attention in the past but now, it is at the core of many companies. Today, once mining

Ramon Perez

companies have identified good deposits, they launch their ESG programs right away. I think Mexico is beginning to grasp this idea and, as a result, it is becoming a stronger option for financing.

President and Director | Candelaria Mining

Q: How does Mexico compare to other mining countries in Latin America?

A: Mexico has a phenomenal mining history. Mining companies do not need to look for people outside the country because

ESG Criteria Opens the Door to More Funding

Mexicans have a great deal of experience with mining. In addition, the industry is very mature compared to other countries like Ecuador that are still developing the sector.However, Mexico has significant safety issues, which is definitely something that raises many questions from investors. I think that the perception of safety in Mexico is perhaps a bit exaggerated. However, it is true that sometimes companies cannot work under such conditions. As a result, the government should help companies feel more secure operating in the country. It is not an easy task but I believe that through alliances and working groups, initiatives can be proposed to improve the situation.

Q: How has the company reached out to nearby communities to involve them in projects?

A: Zacatecas is a mining-friendly state and, more specifically, Pinos is an area where mining has always existed, so community engagement has been faster and easier. Mining communities truly understand how the sector works and the benefits it brings to communities.

At Caballo Blanco we need to come up with a different approach

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for the communities. We have had some meetings with the locals to start cultivating a close relationship, as well as to allocate investments to involve them in the project. It is a challenge because Veracruz is not a mining state like Zacatecas. The key to success will be to provide them with reliable information.

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from the

Q: How are the major silver and gold trends shaping the investment sphere in 2021?

A: In 2020, Gold climbed to an all-time high after the impact of the pandemic and the ensuing global economic crisis. Investors considered gold a safe haven to hide from all the uncertainty. In late 2020 and early 2021, news of a vaccine, the world reopening and economies starting to return to normal, affected gold and silver’s appeal. However, after all the liquidity that has been and continues to be injected into the global economy, markets are now starting to worry about inflation. That is when assets like gold and silver shine, no pun intended. Exposure to these assets has historically been used as protection against inflation.

Q: How is the mining sector affected by these trends and what is your outlook for the rest of the year?

A: In the last bull cycle for gold, as the price of gold increased so did the cost of mining and producing gold. This meant that profit margins did not expand as much as expected. What we are seeing during this cycle is that the gold price has been rising while mining costs have been stable. Companies are focused on maintaining their production costs at a contained level. Margins have expanded significantly and the gold mining sector is generating a lot of cash. A cost measure that we refer to as All-in Sustaining Costs (AISC) in the gold mining industry is at present around US$1,000/

Imaru Casanova

oz, on average. With gold at around US$1,900/oz today, this translates into US$900/oz of profit and significant free cash flows for these companies. A lot of this free cash is being given back to shareholders in the form of dividends and share buybacks. As

Deputy Portfolio Manager and Senior Gold Analyst | VanEck

shareholders, we are happy to see that free cash is also being invested using very disciplined capital allocation strategies across the sector. Companies are not building massive projects just for the sake of growing production, but rather, they are making sure that the capital is going to projects with high rates of return. With these

Gold- a Safe Haven

types of companies and strategies, we believe that the future of the gold mining sector is bright, with the potential for even greater profit as the gold price increases.

Q: Which do you see as the winning metal in 2021?

A: The silver price is up around 5 percent year to date, while gold is flat, so, thus far, silver is winning in 2021. From an investment perspective, we think silver will follow gold’s lead, as both metals are used by investors as a safe haven and hedge against inflation.

In addition, silver has a strong industrial demand component, which should grow during periods of global economic growth. So, I would not be surprised to see silver continuing to outperform gold. With that said, the gold to silver ratio is around 68 at present, compared to over 100 in 2020, and in line with historical levels, so the opportunity for outperformance is lower compared to last year.

Q: What advice do you have for those wanting to invest in mining?

A: The reality is that there are so many things that could affect the price of gold, and it can be very difficult to understand. However, I recommend investigating the historic performance of gold,

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especially during crises and inflationary periods. Compare that data to other asset classes and it should give you a very good idea of the role gold plays as a portfolio diversifier. I recommend having gold as insurance. Just as with life and medical insurance, you hope you will never need to use it but having it is a no brainer.

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Mexico’s Path to Mining 4.0 GLOBAL MINING PRODUCTIVITY INDEX

The mining sector, characterized for years as highly traditional and slow to change, is undergoing a modernization process

Per annum -8.3%

100

-0.4%

called Mining 4.0 that is revolutionizing the industry. In Mexico,

-2.6%

the revolution is advancing, but gradually. “Mining 4.0 is about technology, efficiency and sustainability. It is about using your resources in the best possible way. Mexico has been progressing gradually. Mining 4.0 is the new trend, so we will see more and better implementation of it in the coming years,”

90

Jose Castro, Director of CLUMISIN, told MBN. In the last few decades, mining investments have focused 80

on growing technologically, with the most important advances having been made in the areas of safety, increasing productivity, caring for the environment and communities and using resources more efficiently. These advances are aligned

70

with the goal of becoming more sustainable while improving the public’s perception of the industry, according Gerencia de Riesgos y Seguros. Its modernization is also in line with mining’s critical role in the transition to a carbon neutral world.

2018

2017

2015

2016

2014

2012

2013

2011

2010

2009

2007

2008

2005

2006

2004

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According to the World Bank, clean energy will increase demand for minerals by nearly 500 percent by 2050.

Mexico has modern mining that employs high technology to

Source: MineLens

optimize processes and establish good management, social and environmental practices. In addition, it operates in accordance with the highest standards of social and labor responsibility. In 2019, the investment destined to research and technological development of the companies affiliated to CAMIMEX, which represents 90 percent of mining’s value, was US$35.2 million.

In 2020, it had almost doubled to US$62.9 million.

Through new investments, the industry has improved its safety conditions, with the sector’s accident rate falling 24 percent

CAMIMEX MEMBERS’ INVESTMENT IN TECHNOLOGICAL R&D

compared to 2018. The challenges posed by COVID-19 further highlighted the need for greater integration of technology into operations and led to the evolution of the entire sector as the

Year

Amount

2019

US$35.2 million

artificial intelligence and analytics.

2020

US$62.9 million

Although Mexico’s progress to Mining 4.0 has been slower

pandemic accelerated the adoption of digital technologies,

compared to other countries, experts believe the country is on the right path. “I believe that the progression had been

Source: CAMIMEX

very slow but in the last three years, the industry has picked up the pace by starting to do things differently. The industry is beginning to look at connectivity, productivity, precision, QA/QC and financial savings as crucial elements of their operations. I believe that this will continue to be explored for many years,” says Diana Catarino, Manager for Mexico and Central America at IMDEX. Catarino adds that around 35 percent of the industry is already in the smart mining wave, which is mainly due to the adoption of technologies from other countries because the Mexican market wants to see results and tends to look for solutions that have already been proven to work. “Mining companies cannot Read the complete article More about this topic

afford to install a piece of equipment that has not been proven to give good results,” Jorge Luis Cristerna Medina, Operations Manager at Multiled, told MBN.

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from the

Q: What is the significance of adding the Zimapan project to the company’s portfolio?

A: Zimapan has great potential. The mine is located in a 500-year-old historic mining district, so geologically it is an excellent opportunity. In addition, Zimapan’s production can reach 3,200tpd; we are producing 2,600tpd and we hope to increase that organically. The mine is very important because in addition to the opportunities, it is aligned with our plans to grow the company.

Q: How is the company progressing with its goal of recovering the mine’s historical production levels?

A: I worked at the mine as an independent for 10 years. We saw the potential of the mine during that time but we did not invest until it became a Santacruz asset. We are aiming to return to historical production levels, for which we are exploring and developing the project and preparing new plans. Its maximum production is expected to be 75,000 tons. We already have the financial resources to achieve this goal. We believe that by 2H21 we will be making great strides.

Q: How is the company considered a leading example of responsible mining?

Carlos Silva

A: We are working with the IRMA standard. We are considered the second company in the world to implement the standard and the first to publish the results. Our results were collected with total transparency and, in fact, IRMA left us tasks to improve and

CEO | Santacruz Silver

obtain a better rating. Likewise, we continue working with the communities through a scheme that is being adapted very well, especially in Zimapan.

Q: What are the company’s priorities regarding to safety,

Zimapan Acquisition Establishes a New Era for Santacruz Silver

especially after the recent accident at the Rosario mine?

A: Mining is a high-risk industry and as a result, we invest heavily in ventilation, mechanics, infrastructure and equipment to protect our people. We do not use the word safety. Instead, we say prevention because that is where we are focused the most. We have a prevention and health system, which we are constantly strengthening.

The recent accident happened in a fill phase when we changed the operating system to make it safer. However, water had weakened the rock. After the accident, I spoke with the boy’s father. We always want families to feel supported. Every year, a mass is held inside the mine on the day workers have died so that we do not forget them and to learn from these accidents. In addition, we grant scholarships to children who have lost a parent. We provide them with information if they want to dedicate themselves to mining and guide them throughout the process.

Q: What progress has Mexico made toward Mining 4.0 and what is needed for it be fully implemented?

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A: Mexico is ready for Mining 4.0 and is close to fully implementing it. However, it lacks support. The sector constantly faces new challenges, which prevent it from making progress in this regard.

The government needs to trust us. If the government believed in us, we could then achieve our goals more easily and rapidly.

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from the

Q: What made the company want to become a cyanide producer in Mexico?

A: Mining is a strategic activity for the development of the country; Mexico has been a mining country for more than five centuries and continues to grow. The technological advances during the 20th century allowed to explore and intensify the mapping and identification of mineral deposits; mining also plays and important role in the economy by contributing 2.4 percent to the Mexican GDP. This for sure increased interest among investors.

The geological potential is huge; 70 percent of the territory is susceptible to mining projects and as of today only 11 percent have been granted for concessions. Today, Mexico has 991 mining projects in which 665 are in the exploration phase, 45 in current development and 107 in production, not to mention the 33 world- class mineral deposits placing Mexico as the largest silver producer in the world and the 11th largest producer of gold.

Having said that, sodium cyanide is an important chemical reagent most used for the extraction process of gold and silver, which allows the cyanide market in Mexico to become one of the largest in the world. In the past, sodium cyanide was supplied mainly by imports coming from the US and Europe,

Federico Téllez

leaving the industry overexposed to any risk within the supply chain. This fact, and our expertise for cyanide production and technology development, led to the decision to invest in a production plant in Mexico. Having a local source of cyanide

Director General of Commercia | CyPlus Idesa

supports the mining industry by ensuring the supply and continuity of precious metal production.

Q: Why did the company choose to locate its plant in Veracruz?

Demand Spurs Local Cyanide Production

A: The availability of raw materials is a key decision when building a production site.

In Coatzacoalcos, our raw materials were available in a distance of 30 km from the facility, this for sure facilitates the task to transport our inputs and ensures availability as well.

The second reason was, an already established petrochemical industry, Coatzacoalcos hosts one of the biggest Petrochemical Industries in Mexico and qualified personnel to operate.

Q: How do you expect demand for cyanide to develop in the short term?

A: The mining industry suffered from the effects of COVID-19 pandemic and the shutdown of operations last year diminished the growth potential. After more than five years of highest growth, the market is now consolidating to more moderate growth rates. For the upcoming years, we are expecting that mines will recover their production rates. I can say that

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based on the good expectations for gold and silver price development together with the geological potential of our territory, the Mexican market will continue to grow, additionally supported by the declining quality of gold and silver ores with corresponding increased demand of leaching reagents.

T

he mining industry often gets a bad rap. Certain politicians, environmentalists and media tend to portray mining as an uncaring or “dirty” industry. But this perception is not only outdated, it is misleading.

The mining sector actually leads the way for other

industries to follow in embracing corporate social integrity.

Since inception in 2003, we at Endeavour Silver have strived to create social, environmental and economic benefits for all our stakeholders. Our company has released its 2020 sustainability report, Endeavour’s eighth consecutive year of sustainability reporting under the Global Reporting Initiative. This year, we also linked our ESG disclosures to the Sustainability Accounting Standards Board.

We all know that when you feel good about yourself, your colleagues and company, you feel less stress and perform better.

Last year, Endeavour launched our “ICARE” values program, so

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that all employees can identify personally with our corporate

Mining Leads the Way in Corporate Social Integrity Bradford Cooke Founder & CEO | Endeavour Silver Corp

values. ICARE stands for Integrity, Care, Attitude, Reliability and Excellence. The feedback from our people to this program was very positive.

Mining is a risky business. The safety and well-being of our employees and contractors are our top priority at Endeavour.

In 2020, we delivered a 25 percent reduction in our Reportable Injury Rate, thanks largely to the buy-in of our employees to our new “Te Cuido” safety culture program. Te Cuido is naturally related to ICARE so we plan to merge these two programs in the future.

Mining is truly Mexican. Even though we are a company based in Canada, Endeavour’s workforce remained 99 percent Mexican in 2020 but we became more diversified: 1,954 employees and contractors worked for the company last year, 13 percent of whom were women, up from 11 percent in 2019. Our employee absentee rate was 1.8 percent, down from 2.6 percent the previous year.

Mining is a good citizen. Not including our employees’ time, last year we invested over US$200,000 in community initiatives.

Mothers, in particular, were very appreciative of our donation of 534 smart tablets to local students to support online learning.

Mining respects the environment. Last year, we invested US$1.5 million in environmental protection, including the planting of 44,000 trees through our reforestation initiative and we reduced our greenhouse gas emissions by 34 percent.

Last but not least, the mining industry creates high quality jobs, trains people with career skills, and generates economic activity that has a 7x multiplier effect in society due to the supply chain.

We also pay some of the highest taxes (52 percent total tax burden) of any industry worldwide.

The mining industry is under appreciated by the general public and it is our responsibility to tell people about all the good

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things that we do. Mining is a core activity that supports modern civilization. We do what we have to do to build our business in a sustainable way for all our stakeholders. That is why the mining sector leads the way for other industries to follow. If you can’t grow it, you have to mine it.

N

ew technologies are introducing sweeping changes to the mining landscape as they redesign the work environments and organization of the workplace, altogether. Although these changes will impact both men and women in different

ways, it is tempting to assume that new ways of working will automatically improve the gender balance in the large-scale mining sector. But will that really be the case?

To better understand this issue, it is necessary to look at how new technologies will affect women’s participation in the mining workforce. New working conditions will reshuffle the established gender pattern in the workplace, removing certain physical and technical barriers for women. And new technologies will improve occupational health and safety conditions. Furthermore, new technologies are moving workers away from the rock face. This improves access to jobs for women who are banned from working underground in some

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countries.

New Tech and Mining’s Future: Will Prospects Improve for Women?

Isabelle Ramdoo Deputy Director | Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF)

Despite the positives, there are, potential drawbacks, which may in fact further entrench inequality. First, there is a major issue stemming from the digital gender divide. New mining jobs will require new skills that mostly rely on digital literacy and internet access. But according to a worldwide study from Equals Global Partnerships, 200 million fewer women than men own a mobile phone, 250 million fewer women than men use the internet, and only 6 percent of women develop apps.

This divide is even greater in developing and less-developed countries. Research by Women’s Rights Online shows that across urban poor areas in 10 cities, women are 50 percent less likely than men to be online, and 30-50 percent less likely than men in the same communities to use the internet for economic and political empowerment. This raises an important question: Are women sufficiently equipped to capitalize on opportunities arising from new technologies?

If we want the mining sector to evolve and provide more opportunities for women, it is important for policymakers to prepare for these changing workplace dynamics. However, prior to taking bold policy steps, there is a critical factor to be addressed: getting the numbers right about women in mining.

There is a glaring lack of granular and gender-disaggregated employment data for the mining sector. Without first knowing where we stand, we can’t anticipate the future and prepare women to manage job transitions and seize new opportunities.

As such, the Intergovernmental Forum on Mining (IGF) is launching a new project to close this data gap, in partnership with International Labor Organization (ILO), International Women in Mining (IWiM) and Environmental Governance Program of UNDP and SEPA. This project will unfold in three phases, starting now, with developing a baseline of detailed data about the level of employment, occupation types, skill levels, and educational attainment in large-scale mining, segregated for men and women. The second phase will investigate future job profiles and skill requirements. Finally,

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we will look at gendered impacts of new technologies on mining supply chains. The objective is to provide evidence to allow better policy design to address systemic and contextual challenges women are likely to face, with the fourth industrial revolution in the large-scale mining sector.

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from the

Q: How have TAKRAF’s technologies helped mining companies adopt new standards?

A: We have seen over the years that as foreign companies invest in Mexico, they also introduce global standards. They introduce what they have learned in different countries in regard to environmental regulations and reforms, which tend to be much stricter than what we have in Mexico. It has been interesting to see how the Mexican industry has evolved over the years with the arrival of each new global standard. We have seen the mining industry adopt automation technologies with the goal of providing safer and more reliable solutions. Our products have already adopted many of these technological solutions, such as improved water management and techniques to improve efficiencies. Our equipment has evolved toward those goals and we are in the process of implementing them in Mexico.

Q: What does TAKRAF’s Zero Harm approach represent and how can mining companies be a part of that initiative?

A: Zero Harm is linked to the recovery of water and having the ability to use it in the rest of the process, aiming to minimize the environmental impact. In addition, it includes and emphasizes safety. A reliable operation is always safer, meaning that the less physical interaction between a human and a machine, the better.

That is what TAKRAF’s technologies wants to achieve. With all the

Diego Torroella

data gathering that we do, we are able to determine what might fail in the future. From there, we structure a plan to tackle those challenges and prevent any setbacks or any accidents that could potentially harm equipment and operators.

Director | TAKRAF Mexico

Q: How do TAKRAF’s DST and DELKOR solutions help to reduce their water consumption and improve its management?

A: TAKRAF has been around for many years and in 2014 we

Conceptual Planning Leads to Success

integrated DELKOR, a company that has a lot of experience in liquid/solid separation and mining processes. By combining our efforts, we are able to view Dry Stack Tailings (DST) as a complete system, rather than separate pieces of equipment. This has allowed us to work with our clients, starting with the planning phase where we determine the most reasonable and effective plans. In addition, we join forces with geotechnical companies to identify the best location to place the tailings.

Our solutions have a range of thickeners, such as high rate, high density, paste and conventional thickeners. In addition, we offer specific filtration capabilities in the form of horizontal belt filters and filter presses. We also provide the complete material handling solution from conveyor belts to mobile trippers, mobile stacking bridges, as well as spreaders, meaning that we have all the equipment needed for all tailing processes.

Q: What will be the global standards of Mining 4.0 that will disrupt the industry?

A: Easier and more affordable maintenance will be a global standard. As a result, mining companies will be able to speed up

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production while reducing downtime and improving operator safety. Our equipment may seem robust and big when you look at it but it is filled with a variety of sensors and instruments. With these, you can monitor the equipment and if there is an issue, you can analyze and fix it before it becomes a bigger problem.

Conference

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Highlights

ESG Is Already in Mining’s DNA But Communication Can Improve Kenneth McLeod CEO | Sonoro Gold Corp

Euridice González Country Manager | Coeur Mexicana

Jim Norine Director Minerals, Americas | Ausenco

Barry Quiroz President | Sapuchi Minera

E

SG criteria are a cornerstone for doing business in 2021.

These practices play a fundamental role in regulation compliance and the handing out of crucial permits, as well as guiding investors and serving as a major benchmark for funding decisions. Yet, ESG goes beyond

these considerations, says Jim Norine, Director Minerals of the Americas at Ausenco. “The ESG initiative is about doing the right thing; doing what you are supposed to do. There should not be a cost associated when it comes down to ESG.” Mining undoubtedly has an impact on the environment and on communities. For Euridice González, Country Manager of Coeur Mexicana, this means that mining companies must leave a net positive impact behind as the industry is crucial to the global economy. “Without mining, we would not have most of these products that we rely on so much,” she says.

Whether framed in the sense of ESG criteria or not, environmental and social standards are at the core of many companies like Coeur Mining. “We pursue a higher standard in integrity and ethics in all our operations,” says González. ESG has also been at the top of the mind for Barry Quiror, President of Sapuchi Minera. The Sapuchi project hopes to get crucial permits approved soon. “We expect our environmental permit to be approved in late October 2021 and a second permit needed to go toward our construction and production to be approved by the end of 2021 or 1Q22,” he says.

ESG criteria will only continue to grow in importance, in particular with the advance of climate change challenges, highlights Kenneth McLeod, CEO of Sonoro Gold. “A new set of laws will soon be presented to us as a result of the 2015 Paris Agreements on climate change,” he says. No matter how much work is involved, McLeod believes that mines must become more sustainable. For instance, in Mexico mining companies face some problems when looking to tackle emissions. “Mexico is not rich in renewable energy when you look at it,” says McLeod. Mines use a lot of energy in their operations, after all. Having to buy carbon credits with “arbitrary, even predatory” prices is not a feasible approach but mines can take measures to become more energy efficient by turning to state-of-the-art equipment.

Industry leaders agree that even though a good mining company does what it can to keep an optimal ESG track record, miners could do more to report on their efforts, both to communities and

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to the rest of the world. “We need to use modern communication technologies to spread the word about what mining really does and can mean for the world,” says González.

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Which Metals Will Lead the Decarbonization Trend?

Experts expect demand for several key minerals and metals to grow exponentially in the coming years as these are essential to creating cleaner and greener technologies. Mexico ranks among the Top 10 countries in the production of 17 minerals, and as a result, it is expected to benefit from this transition.

What are the main factors to watch out for regarding the decarbonization trend?

Copper is essential to achieving a low-carbon world, with the goal of replacing diesel and other petroleum products with greener alternatives. I believe that the future of the industry, society and our lives will depend heavily on copper, as there is no other replacement for it. Perhaps silver could be an option, but it is more expensive. As a result, copper will be the metal that leads the world’s green transition. I believe that Mexico has a very important role to play since it is one of the main producers of many metals. Its contribution will not only be in the supply of copper, but also in silver, gold and many of these metals that are essential for our transition to a

Steve Robertson

decarbonized world.

CEO | Infinitum Copper

Silver is essential to a green economy. You cannot have electric vehicles (EVs) without silver coating every electronic circuit, nor can you have solar power without silver coating each photovoltaic cell (PCs). Silver is the best natural conductor of electricity on planet Earth. Mexico is the largest silver mining country in the world, producing 5,541 tons (178 million oz) of silver or 23 percent of total mine production in 2020. Even though silver mining in Mexico goes back thousands of years to the Mayans and the country has dominated modern silver production for hundreds of years, Mexico continues to have

Bradford Cooke Founder and Executive Chairman | Endeavour Silver

some of the best exploration potential worldwide for the discovery of new silver orebodies and the development of new mines.

While gold is not specifically classified as a strategic ‘climate-smart’ mineral by the World Bank and has not been identified as a critical raw material by main producers of green technologies, the range of its scientific and technological applications suggest that it plays an important role in advancements to mitigate climate change. More precisely, gold is a transition metal as it has the unique characteristic of being able to bond with other elements, augmenting their capabilities. Furthermore, gold is an excellent conductor of electricity and is particularly non-reactive with air, water and

Isabelle Ramdoo Deputy Director | IGF on Mining, Minerals, Metals and Sustainable Development

most other substances, which implies that it has very little risk of corrosion. In addition, gold nanoparticles can be used to improve PV in solar panels, hence creating more and cleaner energy sources.

Mexico’s Mining Tradition, Today Karina Rodríguez Matus Partner at Rodríguez, Matus & Feregrino

Senate Mining Commission Readies New Agenda Miguel Ángel Lucero Senator and President of the Senate’s Ordinary Commission of Mining and Regional Development

The Mining Industry in Light of the New Political Landscape Pablo Méndez President of Chihuahua Mining Cluster-CLUMIN

Dedication, Passion Drive Success for Women Miners Ana Laura Muñoz Director General of Rama Mantenimiento Industrial Total

Legal Certainty Needed to Retain Foreign Investment Andrés Pérez-Howlet Managing Partner at Molina, Hanff & Pérez-Howlet

Understanding the Importance of the Modern Mining Industry Juan E. Pizarro-Suárez Managing Partner at Pizarro-Suárez & Bandala

Women Leaders, Intercultural Cooperation Key to USMCA Success Jennifer Burge CEO of WorldWise Coaching & Training

Americas Gold and Silver’s Mine Is Still Blocked 08/12/2021

Blockade Lifted at Equinox Gold’s Los Filos Mine 08/02/2021

Mining One of the Most Attractive Sectors for Investment 07/27/2021

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Health After almost two revolutionary years for the sector, providers continue to demonstrate their strength. The stage has been set, with the health system moving toward a patient-centric approach, supported by technology, a preventive healthcare culture and patient empowerment.

As healthcare becomes a national priority, universal access is key to offer comprehensive health services to all people and communities regardless of their financial capabilities. To achieve this, the sector has established close collaboration between different providers, which has boosted the impact of measures to face the ongoing COVID-19 pandemic, opening the door for collaboration to address the sector’s longstanding burdens, such as financial barriers and lack of infrastructure and personnel.

The government’s vaccination program and public health coverage through INSABI continue to move forward. While there are still gaps to be addressed, efforts from both the public and private sectors point to a solution.

Mexico’s health industry is and will continue to be an economic pillar for the country. To achieve the industry’s full potential, providers agree on the importance of digitalization throughout the entire supply chain, from manufacturing and development processes to direct contact with patients. Key stakeholders say this has and will reshape the way health is developed and delivered.

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Health

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Analysis Preventive Practices Are aNecessity in the New Normal

168

View From the Top Patrick Devlyn | President of the Health Commission | CCE

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View From the Top Constanza Losada | President and Country Manager | Pfizer

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View From the Top Enrique Liñero | Country Manager | Sandoz

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Conference Highlights Pharmaceutical Innovation’s Ultimate Goal: Patients

172

View From the Top Nicole von Mohr | General Manager Breathing Circuits | Atramat

173

View From the Top Michel Barriga | General Manager and COO | Omron Healthcare

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Analysis Digital Health Regulation: Hits and Opportunities

175

Conference Highlights Telemedicine, Mental Health: How the Pandemic Changed Health

176

View From the Top Miguel Khoury | General Director and Chairman of the Board | Hospitales MAC

177

View From the Top Leticia Zermeño | Commercial Director | Grupo CPQ

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View From the Top Everardo Barojas | Director General | Prescrypto

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Expert Contributor Juana Ramirez | CEO and Foundere | Grupo Sohin

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View From the Top Jesús Arenas | Corporate Communication Director | Maypo

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Roundtable How Are Companies Innovating Chronic-Disease Offerings to Increase Access?

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Content Links

Health | 168

Preventive Practices Are aNecessity in the New Normal When COVID-19 arrived, Mexico was already a sick country, with

The main preventable causes of death, which cost 53 percent of years of life lost in Mexico, were:

obesity, diabetes and cardiovascular disease rife among the population. This, among other factors, led to worse outcomes and higher mortality. It could also have a profound impact on Mexico’s economy.

Mexico’s care practices have been characterized as being

• Diabetes • Perinatal deaths • Ischemic heart disease

primarily reactive in their approach. The country’s health reality is also different depending on the region. For example, there is a substantial difference between what ails the southeast and what ails the north of the country. This polarization is also fueled

THE ROLE OF PREVENTION

by geographical, societal and individual differences, such as

+ Heart disease: A reduction in deaths from cardiovascular diseases has been achieved through greater prevention (reduction in incidence), earlier detection and more effective treatments (higher survival rates). + Diabetes mellitus: Type 1 diabetes is not preventable but appropriate treatments can reduce mortality.

Type 2 diabetes is largely preventable and appropriate treatments can also reduce mortality. + Influenza and pneumonia: Influenza can be prevented through vaccination. Pneumonia fatality rates can be reduced through early detection and appropriate antibiotic treatment. + Liver disease: Can be prevented by improving habits, reducing alcohol consumption, early diagnosis and treatment. + Cerebrovascular diseases: Reduction in deaths has been evenly achieved through greater prevention (reduction in incidence), earlier detection and more effective treatment (higher survival rates). + Chronic obstructive pulmonary diseases: Case-fatality rates can be reduced through appropriate treatment.

purchasing power, gender and ethnicity. Only recently has Mexico started doing preventive work. “It is time to reevaluate the role of private health ‘investors’ beyond each country’s ‘Healing Systems’ (incorrectly named ‘Health Systems),” writes Javier Picó, partner at LifeSciences Consultants, in an MBN contribution.

The current academic literature identifies four types of prevention.

The first scenario corresponds to complete inaction, which equates to not having any access to health services throughout life. The second scenario corresponds to what is known as tertiary prevention, which aims to soften the impact of an ongoing illness or injury that has lasting effects. The third scenario corresponds to secondary prevention, which involves actions directed at detecting diseases earlier and trying to halt their progression. The fourth scenario reflects primary prevention, involving all actions aimed at reducing the likelihood of disease arising in the first place and, as INNSZ’s Director Dr. Kershenobich says, “Considering that we have different levels of prevention, we require an approach that includes actors beyond medical professionals.” This is one of the most compelling scenarios for improving outcomes and optimizing healthcare spending. Savings come from fewer people needing treatment and fewer still developing complications.

99,733

Malignanttumors tumors Malignant

60,421

Influenza and Influenza and pneumonia pneumonia

29,573

Liverdiseases diseases Liver

27,842

Cerebrovascular Cerebrovascular diseases diseases

24,928

Chronic obstructive Chronic obstructive pulmonary diseases pulmonary diseases

15,847

0

0

Diabetesmellitus mellitus Diabetes

Sources: INEGI, OECD

150,000 150,000

108,658

120,000 120,000

COVID-19 COVID-19

90,000 90,000

141,873

60,000 60,000

Heartdiseases diseases Heart

30,000 30,000

LEADING CAUSES OF DEATH IN MEXICO IN 2020

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from the

Q: What are the CCE’s priorities to support timely access to medicine and health services?

A: We have a very clear agenda, which we shared from the beginning with the current administration. This cross-cutting agenda that addresses the interests of 12 private sector organizations and is endorsed by FunSalud (the No. 1 health think tank in Latin America), the UNAM Faculty of Medicine and by Red de Acceso (a group that coordinates several patients’ associations), among other entities.

Our transversal agenda includes six main priorities. First, to implement a comprehensive prevention strategy to reduce chronic diseases. Second, to strengthen primary medical care by ensuring the quality of care. Third, to ensure that the public budget is allocated as efficiently and transparently as possible by integrating the private sector to cover investment gaps. Fourth, to measure the impact of public policy through key performance indicators to enable better decision-making. Fifth, given that the health system is highly fragmented, we want to promote the transition to a single system with significant private sector participation. We are facilitating and accelerating the adoption of technologies that allow an easier and more effective user experience through the system, such as the electronic health record. Sixth, we unanimously support universal health coverage, while being cautious with how it is implemented due to low public sector health spend and national

Patrick Devlyn

finances that need to be kept in check, with a complementing participation of the private sector to fill this gap.

Q: How is CCE prioritizing investment in favor of the public sector?

President of the Health Commission | CCE

A: From the beginning of this administration, we identified issues that could be improved to help the country build infrastructure and health capacities to serve the population, especially those living in poverty or who are marginalized. However, this past year

Fostering Public-Private Collaboration in Health

was marked by the pandemic and the priority has been on how to respond to that need. We already had a health system that faced lags and areas that needed strengthening and renovation. The pandemic emphasized these areas.

The country invests little in health as a percentage of its GDP compared to other countries. We believe that investment in health is good business because it yields results in the short, medium and long term, not only in terms of people’s well-being but also in terms of productivity, innovation and employment. We also feel it is important to work as a team with the private sector because there are important capabilities in infrastructure, facilities, equipment, technology and trained health personnel. Just as an agreement was made so the government could use beds from private hospitals, there is other infrastructure that the government can use collaboratively. Examples of this are pharmacies and their clinics, the diagnostic capacity of labs and medicines provided by pharmaceutical companies. But collaboration is needed with clearer and more transparent processes and criteria for all participants. This becomes particularly important with the urgency arising from the pandemic.

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In a post-COVID-19 era, there will be many opportunities: we can attract more vaccines, both for COVID-19 and other diseases; leverage technologies to provide greater access to healthcare without the need to build more hospitals and clinics; and encourage healthy lifestyles as part of a prevention strategy.

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from the

Q: Innovation is one of Pfizer’s core values and those efforts stand out with the production of a COVID-19 vaccine. What sets this vaccine apart from others?

A: From the beginning of the pandemic, we were clear this was not a race between pharmaceutical companies but a race against the virus. Although for Pfizer to create a vaccine against COVID-19 represented a great challenge, having at hand scientific innovation of this caliber was not fortuitous but the result of our over 170 years of innovative vocation.

Alongside BioNTech, Pfizer worked at unprecedented speed to develop, test and manufacture vaccines based on messenger RNA technology. These vaccines teach our cells to produce a specific protein that triggers an immune response capable of generating antibodies to prevent COVID-19 infection. From the beginning, our scientists worked in parallel, not sequentially, which was decisive in the timely development of the vaccine.

The actions we implemented at the clinical, manufacturing and logistics levels are a sample of the quality of our processes and the talent of our people.

Going from the creation of a safe and effective vaccine to the first inoculation in only eight months is undoubtedly historic and an example of what can be achieved through innovation and Pfizer’s four fundamental values: Courage, Excellence, Equity and Joy.

Constanza Losada

Q: How is Pfizer ensuring vaccine production and distribution inline with the contracts that countries have signedwith the company?

President and Country Manager | Pfizer

A: We are committed to making the Pfizer-BioNTech COVID-19 vaccine available to all people around the world to help end the pandemic. To do so, we increased production of this vaccine in Kalamazoo, Michigan, from where we are exporting it.

Benchmark of Innovation Delivers First COVID-19 Vaccine

We use our global supply chain to ship vaccines to governments (including Mexico’s), fulfil our commitments and ensure reliable, equitable and continuous deployment. Production capacity has grown steadily due to continued improvements in the vaccine supply chain, including the expansion of existing facilities and the addition of more suppliers, Pfizer-BioNTech sites and contract manufacturers.

We are committed to implementing sustainable solutions by supporting the creation of manufacturing networks on several continents. The goal is to leverage our patented mRNA technology to help improve the health of people around the world.

Q: How has Pfizer ensured its regular medicine production remains continuous as it manages the high demand for COVID-19 vaccines?

A: Our plant located in Toluca, State of Mexico, continues to be a benchmark for the region and is responsible for producing 53 million medicines that are exported to other Latin American countries. More than a year after the start of the pandemic, all

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administrative staff is teleworking. But our production facility never stopped operations because it is an essential industry. It has been operating under the strictest security measures. Fortunately, our technological approach allowed us to be prepared to work this way and to accelerate projects in our therapeutic portfolios.

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from the

Q: How has Sandoz contributed to maintaining economic stability throughout the pandemic?

A: The pandemic was rough for all companies. At Sandoz, we are honored to be working with over 3,00 employees, who all maintained their jobs, salaries and working conditions despite the economic situation. Our employees are our priority; therefore, for a year, none went into the field to promote products. Sandoz is trying to shift the company’s employee culture. We were recognized as a Top Employer due to our innovation on work modalities. We are trying to change the 8-to-5 model to something we call the “unboss” approach, in which employees can manage their time by owning their results.

Sandoz has a large supply of all its products, which allows us to support access to medicine. We have a single united supply line for the entire company that allows us to plan our production and distribution accordingly. While this could appear to be a disadvantage, for Sandoz it has meant quality and excellence, which is essential to the generics industry.

Q: How can generics manufacturing contribute to pharma’s role in reactivating the Mexican economy?

A: We continue to invest in this industry and recognize it as a

Enrique Liñero

pillar. Sandoz previously invested US$0.5 million a year in new launches for Mexico, but starting last year, we decided to invest five times more. In 2021, we will be investing almost US$2.5 million and developing more than eight products annually.

Country Manager | Sandoz

Q: How is Sandoz expanding its biosimilar line and promoting its benefits in terms of cost and effectiveness in Mexico?

A: Sandoz’s main objective is to become the leading biosimilar

Generics, Biosimilar Leader to Expand Access, Reduce Costs

brand in Mexico, mirroring our position in the global market.

We now have eight available biosimilars, of which three are available in Mexico: somatropine (Omnitrope), filgrastim (Zarzio) and rituximab (Arasamila). In the next 18 months, Sandoz is planning to introduce four more, with two of those coming in the next 12 months.

Biosimilars are complex molecules and their cost might make their acquisition harder for some institutions. For that reason, offering biosimilars at accessible prices would be a milestone.

Introducing biosimilars into Mexico has not been an easy task.

Sandoz introduced the first biosimilar to the US and Japan (somatropine) but this remains an innovative area for most countries. Physicians need to understand the exact benefits of these new molecules. To introduce biosimilars into the Mexican market, we are approaching physicians to explain the safety and quality of these therapeutic options, as well as the savings they can bring to healthcare institutions.

Before they enter the market, these molecules must be approved by COFEPRIS’ Committee of New Molecules. At

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this point, COFEPRIS, like every other regulatory agency in the world, has its hands full with COVID-19 approvals but we are confident we will get our approvals. COFEPRIS has also optimized its processes, which are now simplified, digitalized and accepted in English.

Conference

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Highlights

Pharmaceutical Innovation’s Ultimate Goal: Patients Cynthia Ramírez Communications Director | AMIIF

Cristobal Thompson Executive Director | AMIIF

Florencia Davel VP, General Manager, Latin America at Bristol Myers Squibb & President | FIFARMA

Angeles Martínez Senior Principal and Head of Consulting, North Latam | IQVIA

Antonio Loaeza Country Medical Director | Sanofi Genzyme

P

harmaceutical innovation takes time, effort and investment. However, the main goal of innovation is only achieved when it reaches the patient, a path that is still fraught with challenges in Mexico. In the last few years, access to basic sanitation, clean

water, immunization and access to pharmaceuticals have been critical drivers of health improvement, says Cristobal Thompson, Executive Director of the Mexican Association of Pharmaceutical Research Industries (AMIIF). The speed at which innovations arrive to the market and the industry pipeline play an active role in patients’ quality of life. “We are moving from mitigating the impact of diseases through symptom management to novel treatments that create real transformative change for patients, their families and their environment,” says Cynthia Ramírez, Communications Director of AMIIF. The value of innovation, however, only becomes meaningful when it reaches the patients who need it. Achieving this is no easy task as everyone in the healthcare ecosystem needs to accelerate access pathways to pharmaceutical innovation so that patients have access to new treatments. Access must also be provided on time, which has not yet been achieved in Mexico as regulatory processes are slow. A solution to process delays, while vital for innovation, is just one of many barriers that are holding the industry back, says Angeles Martínez, Senior Principal and Head of Consulting for North Latin America at IQVIA. Mexico, unlike other countries like Brazil, the US or Japan, still has many areas of improvement to make innovation accessible. While in Mexico it takes over four years to make a treatment available, in other regions of the world it can take less than two.

Working in partnership rather than individually in the healthcare ecosystem is another step toward bringing innovation to patients.

Florencia Davel, Vice President and General Manager for Latin America of Bristol Myers Squibb, says that scientific advances over the last century have addressed the diseases challenging the sector, such as HIV, which has seen a 60 percent decrease in deaths compared to 2004. More recently, she noted, the COVID-19 vaccine that has lowered the risk of hospitalization is a sign of “early accessible innovation.” The pandemic is an unprecedented event where collaboration between different stakeholders of the healthcare ecosystem has taken place at a global scale, adds Country Medical Director of Sanofi Genzyme Antonio Loaeza. “This has given us the opportunity to bring new

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technologies and biological platforms like those using messenger RNA (mRNA), which are gaining strength in areas such as oncology and immunology.”

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from the

Q: How did you adapt to the reduction in surgeries brought

by COVID-19 in both the public and private sector?

A: COVID-19 caused a decrease of around 80 percent in all scheduled surgeries for the public sector in Mexico and a significant decrease as well in the private sector. Of course, there were some emergency surgeries performed and that is why we still had sales in the public and private sectors throughout the peak of the pandemic.

The government’s new tender policy has been a challenge but everyday we are learning and adapting to its new ways of working. Atramat was able to compensate for this loss by focusing its efforts on opening new markets in other countries and increasing its sales in those countries where we were already present but that did not limit their operations due to COVID-19.

Our focus throughout these uncertain times was also placed on our new facility in Mexico that manufactures ventilation and anaesthesia circuits under the Altech brand. We had this project since before the pandemic but after the crisis, all our efforts were on completing the technological transfer and obtaining the GMP certificate to deliver high-quality ventilation machine consumables to care for COVID-19 patients.

Nicole von Mohr

Q: How did you adapt to the logistics challenges brought by the blockage in the Suez Canal?

General Manager Breathing Circuits | Atramat

A: Atramat has a big advantage because most of the raw materials it purchases are of small volume, so they can be shipped by air. With our seaborne imports, we increased our purchase volumes to guarantee full containers and mitigate the cost of the products placed in Mexico.

Atramat: Challenges and the Path Forward

Q: How did you leverage your international presence to prevent disruption?

A: Our main focus throughout the pandemic has been to keep our people safe by making sure all preventive measures were in place. We also conducted constant testing with all our personnel. The other thing we did was to always be up to date on borders closing and all local and international regulations.

That way, we created strategies to make sure all our products could be delivered. All our distributors did the same thing to prevent disruption.

Q: How is the acquisition of Santec and its cardiovascular line helping Atramat move forward in cardiovascular care?

A: Santec is a German manufacturer specialized in cardiovascular surgery, particularly in loops for mitral valve repair or replacement. Physicians in Germany design Santec’s products so it is similar to providing customized products focused in the specific surgeon’s needs.

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This acquisition has strengthened our portfolio of cardiovascular products, allowing us to offer a complete solution for cardiovascular surgeries of all kind and is one of the stepping-stones to position our company as leader in the area of specialized heart surgeries.

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from the

Q: How do your products related to cardiovascular disease support patients dealing with these issues?

A: The priority for Omron’s cardiovascular line is the construction of better communication channels between patients and doctors.

Our monitors have evolved from traditional high-blood pressure monitors with no memory card to equipment that is able to record the patient’s at-home behavior and measure the impact of their treatment. We offer interconnectivity among devices through Bluetooth, transmitting the monitor’s data to the patient’s phone.

The information allows the patient to have an understanding of their health. Patients can also share this information with their doctor or a family member. During the pandemic, this feature was especially useful as it allowed both doctors and family to follow-up on chronic or in-treatment processes.

Mexico’s high prevalence of chronic disease and diabetes make it a good target for our monitors. We also understand that Mexico’s socio-economic status may make our solutions unavailable to some patients, so Omron has developed a wide range of blood-pressure monitors that ensure inclusive access to our solutions. We offer a range of monitors from a compact high-tech monitor to a simple, high-quality monitor for at-home care.

We want to make blood-pressure care a routine step for diagnosed and non-diagnosed patients. Omron promotes a preventive

Michel Barriga

healthcare culture where patients create healthier lifestyles for themselves through the use of innovative, technological trends that improve their healthcare and allow them to control their habits.

General Manager and COO | Omron Healthcare

Q: Omron has a globally important respiratory division. How did this business behave during the COVID-19 pandemic?

A: Omron’s nebulizers were originally targeted to treat chronic respiratory diseases but their use expanded as people began

Remote PatientMonitoring Devices Offer Precise Treatment

paying more attention to their respiratory system. During the pandemic, the penetration of these products grew significantly due to the concerns people had but also as a result of our steady communication with doctors and commercial partners.

Q: What led to Omron’s distinction as one of the Top 100 Global Innovators Award for the fifth consecutive year?

A: This award reflects Omron’s efforts to improve its technologies.

We won it because of the improvements we made to one of our nebulizers, involving technical and in-depth innovations that began with our providers, who comply with Omron’s special quality requirements. The device has a better particle scattering, saves energy, is quieter and comes with interchangeable masks, among other components that provide patients a better experience and a more precise delivery of medication. Our goal is to ensure this innovation is available to both doctors and patients.

Q: Remote patient care is a growing trend in the industry.

How is Omron leading the way in this area?

A: With our remote care products, our goal is to transform the

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common care approach that only holds the doctor responsible for an outcome. Our products help divide the responsibility between doctors and patients by providing the latter with the right monitoring tools. This empowers the patient and creates a virtuous chain that encourages equal healthcare from both sides.

Health | 175

Digital Health Regulation: Hits and Opportunities Embracing technology development can be challenging. It can be made even worse if regulation fails to respond rapidly and ensure a fair and safe environment for innovation. In healthcare, this is particularly relevant as tech systems deal with personal information that can compromise a patient’s well-being. While digitalization has been advancing slowly but steadily across the sector, the COVID-19 pandemic spurred an unprecedented boom in digital health solutions. While this comes with many benefits, concerns are also growing because not all regulatory entities are responding with the same agility as developments unfold.

Emerging trends and solutions call for regulatory issues to be addressed, says ICLG, including data privacy and compliance with the Health Insurance Portability and Accountability Act (HIPAA), which many players use as a model in countries where regulation is lacking, such as Mexico, Jesus Diaz, CIO of CHRISTUS MUGUERZA, and Camilo Garay, Country Manager of 1DOC3, told MBN. While this framework can be a good base to look at, Deloitte also broke down the steps to form independent regulatory ecosystems for digital health solutions: First, companies need to consider the key players of the ecosystem, then brainstorm the design principles for a new regulatory paradigm and finally determine the regulatory rigor and data required to clear that product. After these steps, Deloitte recommends building a clear regulatory process that is easier to navigate but that still foments innovation. The goal is to create risk-based processes that harness data to expedite the pre-market approval of digital health and ensure device safety, effectiveness and performance throughout the solutions’ life cycle.

Mexico’s Requirements The General Health Law promotes the development of health services through the integration of TIs to widen access and quality attention. It also controls tech transfers among dependencies and supports clinical practices with ECR. The law also considers the ability to use biometric data for electronic identification and grants the Ministry of Health the ability to guarantee the interoperability, processing, interpretation and security of the information contained in electronic medical records, as well as the establishment of telemedicine resources and electronic prescriptions. Related laws and regulations include the Federal Law of Personal Data Protection, NOM-004, NOM-024 and NOM-035.

Regulation Gaps Despite these laws and norms, regulation is the first hurdle when it comes to the introduction of new technologies in healthcare, according to Mario Muniz, Regional General Manager for North Latin America at IQVIA. “We are completely lagging behind in establishing regulation that is transparent but at the same time contemplates all the necessary aspects involved,” says Muniz.

He explains that there is little technology promotion in the country for the health sector and even though there are already telemedicine companies operating in the country, there is a need Read the complete article More about this topic

for standardization to allow the general market to benefit during this crisis. According to Muniz, “we are losing a lot of time because we do not have the appropriate regulation.

Conference

Health | 176

Highlights

Telemedicine, Mental Health: How the Pandemic Changed Health Américo García VP and Director General | Apotex Latam

Rafael Maciel

C

OVID-19 exposed healthcare system failures but it also opened new avenues for providing services due to the acceleration of the digital revolution.

The pandemic is still going strong and continuously changing the health industry, which will eventually

provide the population with greater access to healthcare services.

“Nowadays, people inform themselves through social media, look for medical solutions on the internet and turn to telemedicine.

Some patients even take for granted that doctors should use digital platforms,” says Enrique Culebro, Director at Central Media.

Even when the pandemic ends, videoconferences will remain and change the way health services are provided. COVID-19 also shifted

President | Asociación Mexicana de Genéricos (AMEGI)

dramatically the mental health industry. “One of the positive

Enrique Culebro

around mental health. Psychiatrists became more important

Director | Central Media

Edilberto Peña de León Director General | CISNE México

Iván Encalada Vice President | Consejo Mexicano de Ortopedia y Traumatología AC

Leopoldo Cavazos Consultant | MYC Asociados en Regulación Sanitaria en México

aspects of the pandemic is that there is no return to the stigma than ever after the lockdowns,” says Edilberto Peña de León, Director General at CISNE México. About 70 percent of the global population changed their sleeping patterns during the pandemic and depressive disorders increased by 20 percent, he adds.

The use of videoconferencing grew 25 times in 2020, according to Culebro, opening opportunities not only for telemedicine but for doctors’ continuous medical training and communication. That said, technology has not replaced in-person visits. While surgical operations still need to be done on-site, telemedicine could help in post-operatory monitoring and communication with patients, according to Iván Encalada, Vice President at Consejo Mexicano de Ortopedia y Traumatología AC. Benefits almost invariably carry responsibilities and challenges, among them regulations and the creation of a clear legal framework that protects patient data and helps public institutions, according to Leopoldo Cavazos, Consultant at MYC Asociados en Regulación Sanitaria en México. “The ideal scenario is that every industry actor operates under the same, clear legal framework,” says Cavazos.

Prevention campaigns and several adjustments are needed for the Mexican healthcare system to improve, according to Rafael Maciel, President at Asociación Mexicana de Genéricos. Mexico has to be “more proactive than reactive,” invest more money in its healthcare system, strengthen COFEPRIS and boost biocompatible medicines.

“A strong COFEPRIS creates a strong industry and guarantees

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people’s access to quality, affordable medicines. That is what we need in Mexico: to produce quality generics to fight against the most common illnesses,” says Maciel.

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from the

Q: Hospitales MAC has undergone a rapid infrastructure expansion. What allowed Hospitales MAC to achieve such progress?

A: Hospitales MAC, founded 13 years ago in Celaya, has sustainably expanded throughout the country, achieving, two years early, our “15/15” goal of opening 15 hospitals within our first 15 years two year early. We have four hospitals under construction in Los Mochis, Queretaro, Leon and Mexico City and we have acquired land in Cancun. We are analyzing expanding to other cities through hospital acquisitions to reach 25 hospitals in the country. We are also planning a new strategic expansion of our infrastructure and equipment.

Our success has been driven by our business model, which combines three core features: highly advanced medical equipment, well-trained medical staff and fair prices. While other hospital chains offer one or two of these features, we provide all three.

Q: What is Hospitales MAC’s differentiator versus other hospital chains in the country?

A: As a business, our main differentiator is our expansion capacity. While a large hospital chain might grow 5 percent annually, we grow about 30-40 percent. We recently raised

Miguel Khoury

MX$1.5 billion (US$75.46 million) on a five-year term with an Interbank Equilibrium Interest Rate (TIIE) of +2.1 percent. We are using that to pay down our higher-rate debt and to guarantee we reach our 15-hospital goal relatively easily.

General Director and Chairman of the Board | Hospitales MAC

We are operating on the Institutional Stock Exchange (BIVA) and plan to raise more capital by 1Q23. Moreover, we are a large employer in Mexico with about 3,000 people working in our hospitals and 1,000 at our construction sites.

Equipment, Talent, Affordability Accelerate Expansion

Q: Why should doctors and medical professionals choose Hospitales MAC? A: We offer doctors a high-tech environment, a vast supply of medicines to meet prescription needs and a safe, modern infrastructure. These features allow doctors to provide quality care to their patients. Our hospitals also provide doctors the ability to reach more people as our costs are competitive, which gives doctors the opportunity to provide an even better service that a patient might receive at a public hospital.

Q: Fully digital hospitals are the emerging trend in the sector.

How is Hospitales MAC integrating technology at its facilities?

A: The pandemic accelerated telemedicine by at least 10 years but prior to this acceleration, Hospitales MAC had already implemented tools like the electronic clinical record or digital imagine interpretation centers for tomography. Moreover, during the COVID-19 pandemic, we strengthened our remote consultation services by creating “MAC at home,” a service to deliver a set of tools like oximeters to facilitate remote

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consultations with doctors.

We are looking forward to integrating digital tools into our work and with the support of our Strategic Planning and Innovation Department we will make the most of hospital technology.

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from the

Q: How did Grupo CPQ deal with global supply chain disruptions during the pandemic, given it has a portfolio of 900 products?

A: The unprecedent challenge demanded an extraordinary response from our team. The expertise of our people together with close communication with our commercial partners including suppliers and customers helped to minimize the impact of the disruptions. One cornerstone was the stock storage in our distribution center located in Jalisco, which helped us kept an acceptable filing rate to our customer’s demands.

Q: How did the pandemic affect demand the company’s pharma, R&D and care areas?

A: Demand depended on the therapeutic area. Some of our products saw a 200 percent increase in demand while others were on standby. Pediatric drugs or treatments for common ailments, for example, faced weak demand because children were staying home most of the time. On the other hand, our antibiotics, corticoids, vitamins and antidepressants ingredients were our bestsellers. Other items indirectly related to COVID-19 also increased in demand, such as those to treat metabolic issues because the lockdowns generated sedentary habits Q: Grupo CPQ works closely with generics manufacturers. How have the changes to the

Leticia Zermeño

centralized purchasing scheme impacted supply?

A: Facing a new acquisition system forced us to improve and innovate. The industry is open to embrace the challenge and

Commercial Director | Grupo CPQ

prove that Mexico can compete against other pharma clusters in the world. A fair ground for all players will be fundamental to guarantee quality medicines to the population and clear timelines and rules will help us focus our efforts on remaining competitive in cost, deliveries and quality of our products.

Innovative Supply Offer Responds to an Innovative Pharma Industry

Q: How is Grupo CPQ integrating technology into its internal performance?

A: Grupo CPQ integrates technology into our warehouse processes and inventory to deliver the best distribution results and avoid disruptions. The continuity of our business would not have been possible without a technological shift. In terms of the pandemic, we have implemented virtual office and communications with our clients. Our communication with clients is essential to anticipate and prepare orders and we have achieved that just as well in the digital era. Webinars have been an effective communication source for our clients. They have also been of great use for the development of our staff. We also participate in virtual forums and we have noted their impressive reach in terms of audience.

Q: What are your views about the functionality of nearshoring for the pharma and chemical sectors in Mexico?

A: Health is a priority for all countries. I think the government should create a program to encourage and support a strong national pharma industry to face health challenges. Mexico

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should be prepared and not rely completely on foreign suppliers. It should encourage the local production of active pharmaceutical ingredients aside of the already well-developed manufacturing of medicines. The safety of our population should not be compromised.

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from the

Q: What are the main drivers or your market growth in the last year?

A: Mexico’s healthcare sector lagged in the adoption of digitalization while other industries embraced it. The isolation brought by the pandemic changed this situation, leading care providers to integrate digitalization to communicate and provide remote consultations using common communication platforms. These were not professional services and required further modifications to provide appropriate medical consultations. As a result, doctors began using electronic clinical records, specialized telemedicine services and digital prescriptions.

Living the digital experience made both the doctor and the patient recognized the need for an electronic remote prescription service, which also requires deliveries to complete the experience. These services are a basic need, not a commodity.

Q: How did Prescrypto adapt to the challenges caused by the COVID-19 pandemic?

A: COVID-19 allowed Prescrypto to improve its distribution capabilities. After the isolation measures implemented during the COVID-19 pandemic, many e-commerce pharmacies saw

Everardo Barojas

us as a strategic growth channel, which helped us expand our services as we began to partner with e-commerce pharmacies.

Retail pharmacies were different. They hesitated to adopt

Director General | Prescrypto

these technologies because the pharmacopoeia had no reference for digital prescriptions. But in December 2020, the pharmacopeia changed to include the use of an e-signature on digital prescriptions, which led retail pharmacies to start using Prescrypto.

Digital Prescriptions Complemented with Medicine Delivery

Q: What regulatory processes and requirements is Prescrypto following to guarantee prescription safety?

A: Digital prescriptions follow The Model Law on Electronic Signatures published by the UN Commission on International Trade Law. This law, which explains how a document and a set of electronic signatures should look, is the basis for Mexico’s electronic signature law.

Prescrypto does not use advanced electronic signatures because we think that limiting the doctor’s practice by using only a signature issued by SAT is not ethically correct. Also, the pharmacopeia changes of 2020 only mentioned that companies must comply with the data retention standards of NOM-151. We follow the same cryptographic and electronic firm standards and we are the first digital prescription company to comply with NOM-151.

Electronic signatures are used for many services, including credit cards, documents and contracts. Thus, NOM-151 is a response to fintech needs that required electronic signatures to

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protect and validate data and documents.

Healthtech regulation should respond to innovation and fair competition to provide a fair ecosystem that allows entrepreneurs to thrive using their own technologies.

T

he COVID-19 pandemic is posing considerable challenges to healthcare systems and societies.

From its first mention in December 2019, COVID-19 quickly progressed into a major public health concern for Mexico’s private and public

healthcare system.

Complications beyond the initial period of acute infection and illness became a target for multidisciplinary clinics worldwide.

The list of persistent and new symptoms reported by patients is extensive. Within the past year, a large population of survivors with prolonged post-infection symptoms have been reported. However, pandemic-related inpatient service demands, disrupted ambulatory practices, social distancing and physical space limitations require creative adaptation.

Our model combines telehealth visits, followed shortly thereafter by an in-home, comprehensive medical evaluation.

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Our core belief is that rehabilitation programs should be

Post-COVID Care, Follow-Up Key for Long-Term Health Juana Ramirez CEO and Foundere | Grupo Sohin

individualized and adapted to accommodate the needs of the patient.

The post-COVID-19 clinic at SOHIN was created to provide ongoing care and assessment of adult patients who are recovering from COVID-19. The clinic is designed to treat patients who are still experiencing symptoms as well as to monitor for any late effects of COVID-19 infection.

Several reports identify and address non-pulmonary sequelae, including extrapulmonary organ dysfunction, physical rehabilitation needs, cognitive impairments and psychosocial vulnerabilities. Acute cardiac, neurological, neuromuscular and hematological complications had significant implications for our post-COVID-19 clinical program design. Patients will have access to specialists in primary care, cardiology, pulmonary medicine, hematology, nutritional specialists and neurology as well as to mental health providers.

Each patient will receive a care plan customized to their specific needs and our outpatient care managers will facilitate all assessments and visits that may be needed. Because the long-term effects of COVID-19 infections are not yet known, comprehensive follow-up and evaluation of patients who are recovering is important for optimizing long-term health.

At discharge, patients with COVID-19 are given pulse oximeters and enrolled in a four- to 12-week monitoring program supervised by an internal medicine specialist care coordinator. Finally, we have optimized patient and provider use of the electronic health record with Salesforce Health Cloud. This facilitates pre-visit completion of patientreported symptom measures across multiple domains, improving the clinic’s efficiency and increasing patient engagement.

The follow-up program at the post-COVID-19 clinic at SOHIN is an outpatient benefit offered to individuals previously

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hospitalized with COVID-19, including those who required critical care support, and non-hospitalized individuals with persistent respiratory symptoms following COVID-19. We consider our impact crucial to minimize long-term morbidity and mortality associated with COVID-19.

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Q: How can the pharmaceutical value chain help increase access to healthcare while running a successful business model?

A: To succeed in the current healthcare environment, all companies must reinvent themselves. Article 4 of the Mexican Constitution ensures the right to healthcare. For that to be possible, all public healthcare entities must receive the proper medicines. INSABI was created to achieve this constitutional mandate but the medicine distribution process implemented to meet its needs has faced significant challenges that has led to shortages.

To deliver the extraordinary medical supplies required by the government, which is around 2 billion units per year, suppliers must be able to distribute to the four public health institutes in the 32 states of the country. This is highly complex and technology plays a large supporting role for providers, distributors and public institutions.

Q: How is Maypo using technology to support its logistics and distribution processes?

A: Distribution companies need to plan their logistics after analyzing the yearly consumption of every type of medicine or healing material they manage. To do so, they need constant

Jesús Arenas

communication with clients to determine the average monthly consumption, while considering the ongoing situations that each state or institution is facing. For example, the State of Mexico has at least 500 delivery destinations and all these

Corporate Communication Director | Maypo

sites have the same consumption trends. This average allows suppliers to determine if a weekly, biweekly or monthly delivery suits their needs. When companies manage large numbers of orders, with around 20,000 delivery points and 50,000-60,000 invoices and document processes,

Commercial Fair Play: The Foundation of Multinational Success

technology becomes essential and allows us to optimize the cost-benefit ratio. Not giving this process the necessary attention can compromise the supply to the population. We have to keep in mind that we are dealing with medicines and healing materials, which are some of the most complex products to distribute.

Maypo has carried out these processes for years, which means we understand their complexity and why we adopted technology to meet demand. Technology has allowed us to keep track of inventories, consumption trends and placed orders, among other critical aspects of a successful medicine distribution. Maypo’s communication and data analysis facilitates our processes by providing us an even more precise panorama of our distribution network. We are also able to link with our clients’ data through an RP (Revolutionary Preservation) system that allows warehouse and inventory control. Real-time stop-by-stop tracking of medical shipments; monitoring, tracking, and documentation of environmental conditions during transport.

Maypo has five major warehouses fully equipped with a picking

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and packing system with temperature-sensitive medication.

We also have a collection system for our operators that allows us to minimize errors. Another warehouse has a picking system to pack the orders. These automated solutions have reduced errors and packaging times.

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How Are Companies Innovating ChronicDisease Offerings to Increase Access?

Chronic diseases represent a global health burden. In Mexico, diabetes, cardio vascular disease and chronic kidney failure are among the most common ailments, representing not only a significant impact on patient health but also one of the common causes of poverty. With such a large population suffering from a chronic disease and limited access to appropriate follow up, it makes sense for the industry to react with innovative products.

Companies should focus on supporting patients with chronic diseases in a way that allows them to have a better lifestyle, beyond just paying for their treatments. This means creating products that work as bridges for the user to have a healthier lifestyle and a better quality of life. These patients obviously need their health recovery treatments but these have to be complemented with psychological support and nutritional attention. Such integral avenues of attention would have a true impact on the user.

Salvador Arceo Director General | Plan Seguro

RGA introduced in Latin America a new digital product for patients with a chronic disease which has been performing extraordinarily. This model, created by RGA, builds an ecosystem for the user through ally companies. Strategic partners include insurance and tech companies, laboratories, doctors and medical associations, such as the Mexican Society of Nutrition and Endocrinology. Beyond being an insurance product, this is an integral solution for patients with Type 2 diabetes to offer advice, nutritional plans, medical guidance, medical appointments and support from different actors

Eduardo Lara Vice President, Head | Health Latin America at RGA

interacting on the same platform. If the patient were to present a severe complication, the product also offers insurance coverage.

However, the target of this product is to nurture better habits and a culture of prevention.

The insurance sector does not cover people with a pre-existing condition or with a chronic disease but we try to look for feasible options to cover them in the same way a major medical expenses insurance policy would. People with diabetes who are aware of their condition and keep their disease under control take better care of their health than most healthy people.

However, Mexico has a large group of diabetics who are unaware of their condition and only seek medical care when faced with something serious. This is a challenge for insurers because we have a harder time looking for healthy individuals and that has

Hector Sobrino Director | Health Services and Transformation at AXA

stopped us from efficiently reaching this market niche.

Navigating Uncertain Scenarios Javier Picó Partner of Lifesciences Consultants

Transversal Initiatives Propel Specialized Health Talent Georgina García President of Cluster Médico Jalisco

Will Mexico Become a VC Hub for the Legal Cannabis Industry?

Erick Ponce President of the Promoting Association for the Mexican Cannabis Industry (GPIC)

Learning to Play with UNOPS and a New Framework Lisandro Herrera Counsel of Galicia Abogados Luis Marin Senior Associate of Galicia Abogados

Mexico’s Healthcare System: Challenges and Solutions Mario Muniz General Manager North Latam of IQVIA

Mexico’s Right to Health 02/25/2021

Socializing Health María Jesús Salido Rojo CEO of Social Diabetes

Decolonizing Global Health Practice 06/15/2021

Environmental Issues Impact Human Health 06/22/2021

COFEPRIS’s New Molecules Registry Updated 06/29/2021

12

Automotive Last year brought unprecedented challenges to the automotive sector at the global, regional and national level. Suppliers were forced to embrace a digital world, while sales, production and customer relationships were changed permanently following a global manufacturing shutdown.

Industry leaders have called 2020 “a turning point” for the industry. The light-vehicle sector experienced an annual drop in production, exports and sales against 2019 — falling 20.2, 21 and 28 percent, respectively. The heavy-vehicle segment also posted negative numbers, with drops of 32.3 percent in production, 31.4 percent in exports and 38 percent in sales. Despite all this, the sector remains at the cornerstone of the Mexican economy, representing 3.8 percent of GDP, 20.5 percent of the manufacturing GDP and approximately 1.9 million direct jobs.

The pandemic accelerated industry trends. CASE vehicles are influencing suppliers’ operations across the country. Connected vehicles are enabling new monitoring and safety features.

Autonomous vehicles continue to challenge existing infrastructure. Shared mobility is forcing OEMs to innovate to maintain sales levels. Electric vehicles are also becoming a central element in OEMs’ strategies thus influencing the entire supply chain. In Mexico, automotive clusters in each region are focusing on their individual strengths to become specialized hubs to better attend OEM requirements.

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Automotive

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Analysis Challenges Herald a Transformational Period

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View From the Top José Zozaya | President | AMIA

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View From the Top Miguel Elizalde | President | ANPACT

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View From the Top Manuel Montoya | President | Automotive Cluster Network

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View From the Top José Román | President and Director General | Nissan Mexicana and NIBU

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View From the Top Luis Lozano | President | Toyota Motor de México

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Conference Highlights In the Short Term, Supply Will Drive Demand

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Analysis The Race Toward Lightweighting

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View From the Top Juan José Zaragoza | President Mexico and Latin America | DuPont

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View From the Top Adriana Macouzet | President and Director General | PPG Industries

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View From the Top Felipe Villareal | CEO | Alian Plastics

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View From the Top Martin Toscano | President and General Manager | Evonik Industries de México

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View From the Top Abraham Sosa | Director of Global Accounts Latin America | Universal Robots

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Roundtable How Is the Industry Transforming on the Path Toward Recovery?

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Conference Highlights Vehicle Connectivity Increasingly Closer Thanks to 5G

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Challenges Herald a Transformational Period The automotive industry in Mexico continues to adapt to urgent circumstances. In the aftermath of the pandemic, a shortage of supplies and logistics constraints are slowing the pace of manufacturing lines. Meanwhile, the ongoing transformation toward a connected, autonomous, shared and electric mobility is more evident than ever.

“We face a common challenge as a sector, which is the shortage of some components needed to manufacture our vehicles at the volumes necessary to meet the needs of the market. We have not met the demand given that we are not producing at 100 percent capacity,” says Edgar Estrada, General Manager Mexico of Volkswagen.

Despite not operating at full capacity, leaders among Mexico’s Top 5 sellers and producers remain optimistic about the road to recovery. “The automotive market operates in cycles. The sales cycle had reached its peak and was in a lower phase when the pandemic arrived. We have already hit the lowest point in the curve and now we are again moving upward.

Mexico has the potential to sell 2 million units per year. In a regular year, we sell about 1.3 million units but it is possible to sell more. In 2020, the industry sold just below 1 million. For 2021, we forecast that sales will surpass 1 million. In a couple of years, we will reach 1.3 million again,” says José Román, President of Nissan Mexicana and NIBU. At the same time, the industry is undergoing one of its largest transformation periods in history. OEMs are working alongside suppliers to ramp up a successful connected, autonomous, shared and electric mobility strategy. “Manufacturing a vehicle is complex, given all the components that are needed. We work closely with our customers because we consider them to be key business partners. In many cases, we have our suppliers within our manufacturing plants and we work together on the transformation processes the industry is living, whether related to electrification or USMCA’s regional integration processes.

Close communication is the secret,” says Luis Lozano, President of Toyota Motor de México.

“The automotive industry is going through significant challenges but we have to put 2020 behind us. Despite the circumstances, we continue to meet our customers’ expectations and provide them safety, efficiency and state-ofthe-art mobility, fueled by innovation,” adds Estrada.

Sector leaders are clear about the role auto parts manufacturers play in the country and the sector’s development, as well as the importance of adapting to new circumstances. “We are the fifth-largest auto parts producer in the world with US$94 billion in play. This drives the country to build regulations that assure its competitiveness. The automotive sector in Mexico is larger than the oil and gas Read the complete article More about this topic

and remittances sectors, even larger than tourism. Millions of families rely on the automotive sector,” says Alberto Bustamante, Deputy Director of INA.

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Q: What are the main challenges Mexico’s automotive industry faces?

A: Mexico’s economic recovery faces significant challenges.

Specialists surveyed by the Central Bank of Mexico (Banxico) in July 2021 forecast 6.06 percent GDP growth in 2021 and 2.83 percent in 2022, while inflation is expected to reach 5.94 percent in 2021 and 3.70 percent in 2022. Hand-in hand with the limited expectations, other analysts point out that during the next six months, economic growth will be hindered by public insecurity and domestic political uncertainty and market weakness.

One of the most relevant difficulties we faced in recent months is the shortage of semiconductors caused by increased demand for the manufacturing of electronic devices, such as video game consoles, cellphones and computers. However, semiconductors are also a key part for the production of cars because they are used in vehicle control systems, speedometers, proximity sensors, tire sensors, alarm detectors, seat belts, cameras, fuel injection and infotainment systems, among others.

Q: How are OEMs in the country performing on the road to recovery?

A: OEMs have done as well as possible under present circumstances. Despite the issues, OEMs have worked hard to

José Zozaya

stay up to date with market expectations and challenges. At the beginning of the year, we expected an increase in production and exports of 12 percent compared to 2020. But the results of July and August have forced us to reexamine our forecasts. We expect

President | AMIA

figures similar to last year due to the scarcity of semiconductors.

Q: How are OEMs coping with constrained production figures?

A: Each corporation has a different global strategy but none will be

Mexico’s Advantages Spur Foreign Investment Allure

a short-term easy solution. We expect that the sector will recover by mid-2022. But investments to increase the production capacity of semiconductors will take at least two to three years to bear fruit.

Q: What are the challenges and opportunities to consolidate CASE mobility in the country?

A: Mexico has great potential to produce electric vehicles, as can be seen in our report on the sale of hybrid and electric vehicles.

In June 2021, brands sold 4,344 hybrid and electric vehicles, 157.7 percent more than the sales registered in June 2020 (1,686 units).

During 1H21, brands sold 23,143 electric and hybrid vehicles, which represented 4.4 percent of total light-vehicle sales. We still have a long way to go in the transition to electromobility but AMIA has taken the first steps to promote and strengthen the use of hybrid and electric vehicles in Mexico. These vehicles are now manufactured in Mexico and OEMs continuously announce new investments in the production of these vehicles.

We are communicating with the authorities and members of the industry to tackle the accelerated changes caused by global trends, such as the use of technology in sustainable transport

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alternatives to face the greatest environmental challenges.

However, to achieve this, the sector needs a comprehensive vision to respond to the challenges derived from electromobility, such as the need to update the legal framework and new mobility and charging infrastructure, among other features.

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Q: How is ANPACT collaborating toward the creation of the New General Law of Mobility and Road Safety?

A: We have participated directly and indirectly in the elaboration of this new law. The new law will provide a scheme to address all mobility and road safety concerns in the country. The draft of the new law defines the responsibilities and stakeholders involved.

While a large part of the responsibility will lay on the Mexican Ministry of Urban and Territorial Development (SEDATU), it is a transversal topic that involves the ministries of transportation, economy, public security, finance and environment.

Q: The deadline for NOM-044 to be enforced is coming. How is ANPACT preparing to meet the new requirements?

A: The entire transportation value chain is looking for common ground to find a solution that reduces emissions, which might be vehicle park renewal with new technologies and fuels, such as ultra-low sulfur diesel. ANPACT’s members have invested strongly in this technology but the authorities need to ensure ultra-low sulfur diesel is 100 percent available nationwide. Older vehicles pollute the most but working with SEMARNAT and energy agencies it will be possible to find solutions. ANPACT proposes to have Euro V / EPA 07 (vehicles that use regular diesel) coexisting with Euro VI / EPA 10. We can find a solution, since ultra-low-sulfur diesel is not yet available nationwide.

Miguel Elizalde

Q: One year after USMCA entered into force, how are ANPACT’s members complying with new rules of origin and new labor standards?

President | ANPACT

A: USMCA entered into force on July 1st, 2020, it was a major challenge for the whole automotive industry, however for the heavy vehicle industry, there were certain things that made possible to comply immediately, for example we did not have any

The Heavy Vehicle Is Ready for Sustainable Mobility

immediate increase on our VCR, until 2024 we will need to comply with 64 percent of VCR and by 2027 with 70 percent of VCR. However, there were new requirements like steel and aluminum and labor value content that represent challenges during the implementation to the industry, since there was no precedent in the past. Today, all companies comply with all the requirements and disciplines without exception. We are ready to continue our exports worldwide leadership through the USMCA integration.

Q: How will new heavy-vehicle power technologies transform the sector?

A: It is important to maintain our competitive advantages to continue as leaders in both the light- and heavy-vehicle sectors. New technologies are arriving in the country, including electromobility, as many light-vehicle manufacturers are committing to only produce EVs. The sector will increasingly demand vehicles powered by alternative sources of energy, including natural gas, hybrid, electric and hydrogen. Mexico has already exported natural gas, diesel, electric and even hybrid heavy vehicles. The coming years will see stricter environmental

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standards across the supply chain. Sustainable vehicles represent about 1 percent of total production and exports and 98 percent of our exports head to the US. Should that market implement new rules, such as carbon taxes or similar measures, Mexico would have to adapt.

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Q: How has USMCA influenced the Mexican automotive industry’s supply chain and operations?

A: USMCA is impacting the Mexican automotive industry mainly through the rules of origin, which now demand greater regional content. The original 62.5 percent of regional content is gradually shifting to 75 percent. Last year, it was 66 percent but this year it must reach 69 percent. By 2023, regional content will have to reach 75 percent. This means that the 12.5 percent of vehicle components that were previously imported from Asia or the EU now have to be produced in North America, leading companies in the region to look for local suppliers. Mainly Tier 1s are looking for Tier 2s to substitute imports. When supply does not cover demand, Tier 1s invite suppliers from Asia and the EU to establish in Mexico or the US. We have seen this trend intensify since last year. Rules of origin are changing the way Tier 1s operate.

Q: Regardless of where OEMs are located, what characteristics make regions attractive for FDI? A: Investment will be very precise. Usually, Tier 2s focus on a very specific process so they invest in places that provide them with a skilled, specialized workforce rather than general labor.

For example, an aluminum die-casting company would look for specialized technicians and engineers but they are not common, which could prevent regions from receiving FDI from those

Manuel Montoya

companies. Regions that have a large number of engineers, engineering centers and good universities are usually attractive for FDI. Regions must be prepared because they cannot develop these abilities from one day to another. In the coming months, we will see

President | Automotive Cluster Network

interesting investments in the best-prepared regions.

Q: What is the Automotive Cluster Network doing to integrate the supply chain and favor Tier 2 investment?

Complying with USMCA Requires Supply Chain Integration

A: Within the Automotive Cluster Network, we collaborate to learn from one another. With NAFTA, the most important Tier 1s of the world landed in Mexico but they did not develop local suppliers because it was not a requirement. This has changed. Tier 1s are now looking for Tier 2s and have found that there are not enough.

Mexico should have five to six times the Tier 2s it has. To integrate the automotive cluster, we have to know where the suppliers are.

Sometimes we look for suppliers in Nuevo Leon and find them in the Laguna region or in Chihuahua. We are connecting suppliers through the clusters and our network, which creates opportunities for local entrepreneurs to invest in Tier 2s, which do not require US$100 million investments as Tier 1s do. More Tier 2s will translate into wealth for the regions and economic growth for Mexico.

Q: What role should Mexico play in the supply chain of semiconductors?

A: The semiconductor crisis is a structural, global problem. Mexico does not have the technology and economic capacity to make the required US$15 billion investment to build up a semiconductor plant that will only start operations 24 months later. The entire industry relies on the big semiconductor manufacturers in Asia.

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The majority of manufacturers specialized in the auto sector are located in Taiwan, where they have been attracting investment and building an ecosystem for years. It is a very complex technology.

Mexico should align to the investments taking place in the US and take advantage of its industrial connections.

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Q: How did recent challenges to the automotive sector make Nissan’s manufacturing and sales operations more resilient?

A: This is a very interesting moment for the automotive industry.

As I say to my teams: Never let go of the opportunity a crisis brings. The pandemic taught us many things, including resilience.

We decided first and foremost to focus on our objectives and strengths. We know how to manufacture and sell cars. Thus, we designed a strategic plan to address the pandemic alongside employees, dealerships and suppliers. In this crisis, we continue to learn.

Q: How did Nissan support its dealership network and supplier base in Mexico amid the pandemic?

A: More than support, it is about strategy. We provided them certainty, clarity and a clear direction. The first thing we did was to protect our work teams. Once we ensured the safety of our teams at our facilities and corporate offices, we decided to resume production. With more than 15,000 people employed, we had a great responsibility to protect them. We also created crisis committees with distributors, employees and suppliers. Together we are stronger, as our motto says. We did the right thing for our employees and our customers too through Credi Nissan. This moment taught us that we owe ourselves to the Mexican market and we want to be here for 60 more years and beyond. The market

José Román

is halfway to recovery and it still has a great deal of potential.

Q: From a general perspective, how have chip shortages influenced the automotive industry in Mexico?

President and Director General | Nissan Mexicana and NIBU

A: The automotive industry in Mexico has always been closely related to the US from a long-term perspective. The pandemic is showing us that we also need to focus on the short term. The secret is to balance short- and long-term strategies. Chip shortages

Nissan Eyes Another 60 Years in Mexico

will eventually pass and the next step will be to develop more suppliers at different locations to avoid concentrating production in a single region. Over the last few years, supplier consolidation has proven to be successful but chip shortages have made us rebalance our priorities.

Q: What are Nissan sales and manufacturing priorities for the Mexican market?

A: Mexico is our fourth-most important market worldwide, after China, US and Japan. Being the best seller in the country entails commitment with our customers to bring them state-of-the-art manufacturing quality. In manufacturing, we do not compete domestically; our factories compete against others across the world. Within Nissan North America, the facilities in Mexico produce the largest number of models. The lineups have proven successful. Sentra, Versa and Kicks have been really successful both in the US and Mexico, despite the pandemic. 2021 will be a year for stabilization and improvement and the sector will eventually put chip shortages behind it.

We have a strong dealership network with outstanding after-sales

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service and excellent sales teams. By combining these factors with our customer care the natural consequence is to hold first place and increase our market share. The right path is to really focus on what our customers want, whether it is safety, intelligent mobility or electrification.

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Q: How is Toyota moving toward a mobility-oriented mindset?

A: The global automotive industry is undergoing the kind of transformation that takes place once in a hundred years. Toyota has decided to become a mobility company, although automotive will continue to be at the core of our business. We understand that if a person can move, they can be happy and achieve the impossible. You will see more of our vision for achieving the impossible at the Olympic games.

Our evolution toward becoming a mobility company is based on the four pillars of CASE: Connected, Autonomous, Shared, and Electric. The electric element does not always imply a fully battery-electric vehicle. We believe we should offer different electric options for our customers. Toyota now has four electrified vehicles. First, there is the hybrid-electric vehicle (HEV). It is now in its third generation and serves markets that may lack charging infrastructure, such as Mexico. We also have a plug-in hybrid (P-HEV) similar to the regular hybrid and can be more efficient in reducing emissions. We have a battery-electric vehicle (BEV), which is the most popular in the media but will not necessarily dominate global markets. Finally, our Mirai model introduces a fuelcell electric vehicle to the market, a hydrogen-based electric.

Q: What role do EVs play in Toyota’s move to carbon neutrality?

Luis Lozano

A: Different automotive players are introducing their own environmental goals. We introduced our environmental challenge in 2015 and we have been innovating technologies for over 40 years. The Toyota Global Challenge aims to reduce CO2 emissions

President | Toyota Motor de México

by 90 percent by 2050 throughout the vehicle’s entire life cycle, from its manufacturing to its disposal. Our life-assessment cycle measures the entire carbon footprint of the vehicle. By 2025, we will have an electric twin of every one of our models in the world.

By 2030, we will sell more electrified vehicles than ICE vehicles.

Toyota México: Evolution Toward CASE Mobility

We are happy about our results. Prius for instance has been the ultimate example of the role we play in the hybrid market.

Q: Chip shortages are a great challenge for the automotive sector in 2021. How has the shortage affected Toyota’s production?

A: Toyota is a company that learns from its mistakes and that makes us stronger. There was a serious earthquake in Japan that hindered many of the critical suppliers of our manufacturing operations a few years ago. At that moment, we were forced to innovate in our supply chain and we have learned from that experience. We also maintain close relationships with our suppliers and we continue to work with them and the purchasing areas to address the current chip shortages. We have only experienced minor affectations because of the situation.

Q: What potential does the North American region have to develop semiconductor suppliers?

A: It would be beneficial for the region to have a cohesive strategy to establish semiconductor plants in North America. The US is really interested in achieving that goal and investors will assess

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which countries would be more competitive for this. Having said that, semiconductor production is really complex; it is not about just building a new plant. Developments take years to achieve profitability, which is one reason why there are not many semiconductor plants in the world.

Conference

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T

he automotive industry was hit hard by the COVID-19 pandemic and its negative effects are expected to continue into 2022. “We expect a great reset for the industry, which will be paralyzed depending on how many units can be manufactured, not on what

consumers want. There are no inventories; it will be a great reset. Supply will drive demand, not the other way around,” says Guido Vildozo, Senior Manager Americas of Light Vehicle Sales Forecasting at IHS Markit.

The expected global light-vehicle sales forecast for 2021 is 80.5 million, says Vildozo, thanks to the positive effects of vaccination programs and an increase in demand to pre-pandemic levels in key markets, such as China and the US. However, pandemic-related disruptions and supply chain bottlenecks will continue impacting the sector for the next 12 to 18 months. The industry is moving forward and automotive innovations today come from electronics rather than mechanics. As automakers drive toward CASE mobility, semiconductor chips have become essential. A single alteration in the supply chain could result in a massive impact for the entire sector. With 3Q21 close to its end, the projected impact from the semiconductor shortage for 2021 is over 10.5 million units globally

In the Short Term, Supply Will Drive Demand Guido Vildozo Senior Manager Americas of Light Vehicle Sales Forecasting | IHS Markit

and 2 million units for North America, according to Vildozo.

“When the delta variant spread across Southeast Asia, which are Tier 2, Tier 3 and semiconductor chips suppliers, the problem got worse because they just entered the stage of lockdowns and the economy shutdown and the reopening cycle usually takes between six and eight months. Considering that the shutdowns began in July, the situation will be normalized by the end of 1Q22, limiting 2022’s production,” says Vildozo.

Regularizing the value chain is a complex challenge considering the pandemic’s varying progress globally, macroeconomic factors and governmental decisions. IHS Markit’s global light-vehicle sales outlook for 2022 has an 82.62-million-unit base, with 80.62 million units with a pessimistic view and 86.46 as an optimistic forecast.

For North America, the outlook ranges from 14.9 million to 16 million light-vehicle sales for 2022. Regularization of the value chain will not arrive until 2H22, according to the analysis.

A respite might arrive earlier with more semiconductor plants.

Technology giant Bosch’s new €1 billion (US$1.2 billion) semiconductor chip plant began operating in August. As vehicles get smarter, more semiconductors are needed. “The fact that we actually started to build this plant a couple of years ago shows that we expected the demand to go up dramatically,” Herald Kroeger, Member of the Bosch Management Board, told CNBC. The situation becomes even more acute as electrification becomes the key trend driving the automotive industry. While OEMs cannot approach it in the same way in developed and emerging markets, there is an aggressive tendency toward EVs. Between 2018 and 2028, there will be 241 light-vehicle launches, according to IHS Markit.

Manufacturing of EVs will be completely different from traditional combustion engine vehicles and processes will also differ between BEVs, HEVs and PHEVs. “By 2030, we will have a very different industry, with fewer platforms and less complexity. It will be highly

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electrified but with a reduced range of products. In North America, from 2022 the tendency toward the combustion engine will be negative,” says Vildozo.

Automotive | 193

The Race Toward Lightweighting The US Environmental Protection Agency reported that in 2018 the average car weighed 1.85 tons, of which 55 percent was cast iron and steel, 11 percent was plastic, 9 percent aluminum alloys, 7 percent rubber, 3 percent glass, 1 percent non-ferrous alloys and 14 percent other materials. While this has not changed that much since 1975, the focus on weight reduction has long been prevalent in the industry. “The key to improving fuel economy is weight reduction: the smaller a vehicle is, the less power it requires to accelerate and the less energy to maintain a fixed speed,” wrote Frank Field and Joel Clark for MIT Technology Review in 1997.

For decades, steel and metal alloys were materials of choice for the body of the vehicle. To replace steel, materials must deliver high strength, energy intensity or the ability to absorb impact, manufacturability, minimum weight, corrosion resistance and maintainability, according to the paper, “Modern materials for automotive industry,” published by Havorun et al in the Journal of Engineering Sciences. MIT researchers point out that the vehicle’s body only accounts for approximately one-third of the vehicle’s weight. However, “for every 10 pounds saved by reducing the weight of the body, another 10 pounds can be saved by downsizing other parts of the car.”

There have been key developments in alternative materials that meet the necessary conditions to replace steel. Aluminum car bodies have already reached mass production, although only for expensive models. “Thanks to aluminum, the car gets lighter, which increases speed and reduces CO2 and fuel consumption” said Havorun et al. Aluminum can weigh up to 30 percent less than cast iron. Some aluminum alloys include materials like titanium and vanadium (TiAl3 and VAl6), further enhancing its characteristics and reducing weight.

Another relevant material pushing lightweighting forward is carbon fiber. This material is particularly important for electric vehicles.

Given the high cost of carbon fiber, however, it is currently used only in light sports vehicles, including Mexico’s VUHL. “ETXE Diseño, which is our engineering consulting firm founded in 2007, and Adman Leku, an advanced manufacturing company founded in 2013 and focused on carbon fiber components and complex sub-assemblies, work for VUHL and represent between 25 and 30 percent of our portfolio, respectively,” says Guillermo Echeverría, Co-Founder of VUHL. Vehicles are becoming increasingly complex and leightweighting involves vehicle components, adhesives and coatings. OEMs have set ambitious sustainability goals, which involve more efficient and electrified vehicles. Consequently, the supply chain is also adapting. Chemical giants like DuPont have continuously supported OEMs and Tier 1s’ lightweighting goals. “Lightweighting, sustainability and comfort remain macro trends for combustion, hybrid and electric cars. We have a special program called AHEAD™ (Accelerating Hybrid-Electric Autonomous Driving) to address these challenges. Today, 30 percent of our global profit comes from AHEAD technology developments. This rate is similar Read the complete article More about this topic

in Mexico, since every vehicle in the US carries at least one auto part produced in Mexico,” says Juan José Zaragoza, President Mexico and Latin America of DuPont.

VIEW TOP Automotive | 194

from the

Q: What role does sustainability play in DuPont’s strategies?

A: Dupont’s Mobility and Materials Division, Dupont’s largest in Latin America, has significant influence in the automotive sector, which represents 75 percent of our sales. We collaborate with Tier 1s, Tier 2s and OEMs to find sustainable solutions and work toward the future of mobility, such as autonomous and electric vehicles.

Q: How has DuPont advanced in its AHEAD technology?

A: Accelerating Hybrid, Electric and Autonomous Driving (AHEAD) continues to be an important strategy for us. About 40-45 percent of our sales in the mobility and materials segment come from advanced mobility products, namely electric and autonomous vehicles, and we have been working on technologies that will help us meet our sustainability goals. But our goals for traditional ICE vehicles and advanced mobility vehicles remain the same.

Latin America’s automotive sector is quite different from more developed markets. We do see a transition toward advanced mobility but it has been slower. In Mexico, several OEMs are embracing global manufacturing practices and some are already producing electric vehicles in the country.

Q: OEMs have introduced aggressive electrification plans.

How does DuPont support OEM efforts in this regard?

Juan José Zaragoza

A: DuPont’s different business lines allow us to be a Tier 1, Tier 2 or Tier 3, depending on the component. New technologies in the automotive sector require more resistant materials to weather

President Mexico and Latin America | DuPont

different conditions. Temperature resistance in traditional and advanced mobility is a critical component.

We also work alongside OEMs and Tier 1s to design auto parts and systems that meet specific requirements. For example, an ICE

Sustainable Materials, Technology: Keys to Future Mobility

vehicle requires between 50 and 100 sensors but an autonomous vehicle requires over 1,000 sensors. We support efforts to develop technologies that can detect certain elements in the environment.

We have helped OEMs and Tier 1s develop applications that foster lightweighting and vehicle downsizing.

Q: How has the USMCA treaty influenced your strategies?

A: DuPont’s strategy did not shift dramatically because of the USMCA thanks to our strong global footprint. Our presence in the Americas remains strong and our goal is to consolidate our footprint as part of the North American region. That being said, the market has changed. The trend today is toward regionalization.

OEMs and Tier 1s want their suppliers to be closer to consumer markets. Delivery times are being shortened and, given Mexico’s location, USMCA becomes a unique opportunity for the country to regain its position as the major trade partner for the US. Q: The sector transformed more in the past 12 months than in almost 100 years. What is your perspective on this?

A: The industry has adapted rapidly, according to the circumstances

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we are living in. Long-term planning did change: it now involves thinking one month ahead. Change is the only constant. Planning has been really short-term oriented as the industry must adapt rapidly, not only because of supply shortages but also because of ongoing transnational logistics.

VIEW TOP Automotive | 195

from the

Q: What role does the automotive sector play for PPG in Mexico and how has the pandemic influenced your local operations?

A: The automotive sector is a key area for PPG. We ramped up operations in Mexico to support the growth of the OEM’s in the country. The sector is our backbone and I am glad to say that PPG also plays a fundamental role in boosting the automotive sector in the country through technology transfer that ensures the vehicles manufactured in the country are equal or superior in quality to those produced in other North American plants.

One figure that highlights the importance of the coatings in vehicle manufacturing is for instance when an OEM decides to set up a new plant in a new location, approximately 40 percent of the capital investment goes to the paint shop. These areas have paint booths that are not only automated but also isolated, which demands special temperature, humidity and ventilation conditions.

Given the size of the investment, OEMs are very selective regarding their paint and coating supplier.

Q: How is PPG innovating and adapting to the electric vehicle revolution?

A: The key element in EVs is the battery and the industry is working to make batteries more efficient, lighter and cheaper. At PPG, we think about what a battery is and what is happening inside. The

Adriana Macouzet

battery requires different layers of protection and that is where coatings come into play. Batteries require dielectric insulation and thermic coatings given heat risks, and corrosion protection, among others. Coatings play an important role in this regard because the

President and Director General | PPG Industries

EV battery is a combination of various cells and each of these parts require their own coating. We help make batteries safer for the vehicle at a reduced cost and lower weight.

Q: What is the role of sustainability for PPG and how do you

Innovative Coatings Support Sustainability, CostEfficiency Goals

support your customers in reducing their carbon footprint?

A: Our product innovation has also led us to create paints that can be baked at lower temperatures, reducing the amount of fuel needed to heat the ovens. Paint applications have also been innovated. Traditionally, the painting process is done in four stages; we developed compact coatings technologies that reduce the environmental impact, while also significantly reducing the investment required to install and operate the paint shop.

Q: How are PPG’s innovation centers supporting automotive trends? How is Mexico contributing to PPG’s innovation goals?

A: Coating plays an important role in the development of autonomous vehicles. We have studied which colors are better recognized by vehicle sensors. We also study how coatings better enable communication through the vehicle’s sensors and other aspects relevant to boosting vehicle automation and electrification without compromising the aesthetics of the vehicle.

Q: What are the most recent products introduced

by PPG to the Mexican market?

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A: We are introducing our compact process technologies that reduce the number of layers in the paint system by eliminating one layer. This allows companies to simplify the application process and eliminate one production oven.

VIEW TOP Automotive | 196

from the

Q: How did Alian Plastics weather the pandemic in 2020?

A: Last year, the world stopped between March and May amid the pandemic. Thanks to our diversification strategy started two years ago, we saw our HVAC and toys segments carry on while automotive was slowing down. After July, the automotive sector came back even stronger. In fact, we gained two new projects during the pandemic, with BMW and Tesla.

Q: What new technologies in the plastic injection sector are helping your business?

A: We recently invested in new machinery related to the recent projects we won. Plastic injection companies use the same brands and technologies; the difference is in the peripheral equipment. A plastic injection machine with an additional robot or robot end-arm can boost productivity levels considerably.

Those end-arms are custom-made for specific processes.

Another promising technology is automated storage and supply for the machines, where tubes and automated infrastructure deliver resins to the machines automatically. Today, the process is done manually. That is a technology worth exploring.

More technologies and robots will continue to be incorporated into manufacturing lines. However, those robots and

Felipe Villareal

technologies will not displace human capital. We are all looking forward to increasing profitability but not at the expense of the human element. In plastic injection, the expertise that employees acquire is impressive, from molds to maintenance. If we focus on

CEO | Alian Plastics

people, it will eventually lead to profitability. Our motto is that, “We take care of our people, so they take care of their people.”

Q: How has the company used data analytics and new technologies to streamline its processes?

Boosting Production Through Industry 4.0

A: We have an Industry 4.0 platform that sends alerts every time a machine stops and provides the reason why, whether it is a matter of quality, production, maintenance or another factor.

Those automatic alerts help us to react faster and take actions toward our common goal to continue improving as a company.

Every month we analyze all machines and areas that were affected by stoppages to determine the five most problematic and address them. We have seen major improvement through this process.

We also have a variety of dashboards that were developed internally to process all of our information. Through these dashboards, we can merge all major KPIs into a single scorecard within our quality system, IATF:16949, and visualize the information on a mobile or desktop app.

Q: What are your near-term priorities?

A: Last year was excellent for us in terms of deliveries and quality from an operational perspective. Our goal for this year

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is to surpass those results, taking into account both the initial productive capacity reduction and its later growth. We are going to demonstrate the capabilities of our different teams since production volume this year has increased significantly from 2020.

VIEW TOP Automotive | 197

from the

Q: What innovations in material science help Evonik’s customers reach greater levels of sustainability?

A: Sustainability is a central element of our “Leading Beyond Chemistry” strategy. Evonik provides innovative solutions that help make lives more sustainable, healthier and more comfortable. As a specialty chemicals company present across the world, Evonik sees sustainability and long-term business success as two sides of the same coin. Our customers are increasingly demanding products and services that demonstrate a good balance of economic, ecological and social factors.

Through our innovative capabilities and state-of-the-art technology, we empower our customers to offer a broad range of resource-efficient solutions, such as additives for hydraulic fluids.

About 50 percent of the sales made by our chemicals unit are for products that make a measurable contribution to improving resource efficiency. To reduce Evonik’s carbon footprint further, we are continuously optimizing our processes along the entire value chain by using alternative raw materials and biotechnological methods. Through the initiative “Together for Sustainability,” we are promoting transparency and sustainability along the supply chain. Because we achieved our target and reduced greenhouse gas emissions ahead of schedule, our executive board introduced new environmental targets in February 2019. The new target is to reduce absolute scope 1 and 2 emissions by 50 percent by 2025

Martin Toscano

compared with 2008. This affirms our commitment to the Paris Agreement on Climate Change. We are reducing climate-relevant emissions by an estimated 3 percent per year.

President and General Manager | Evonik Industries de México

Q: What is the role chemical companies play in driving the innovation of material science?

A: Evonik’s Smart Materials division uses innovative materials that enable resource-saving solutions. These products are

Driving Material Science Innovation and Sustainability

continuously adapted to the needs of customers and they are the smart answer to the major challenges of our time: environment, urbanization, energy efficiency, mobility and health. The Smart Materials division’s strong technology platforms pave the way for better resource efficiency and sustainability. It produces inorganic materials with superior properties, such as silica, silanes, peroxides and specialty catalysts, and high-tech polymers, such as polyamide 12, polyimide, special polybutadienes and polyesters. It also manufactures composites and membranes using those materials.

Our specialties shape fast-growing markets, including coatings, mobility, environmental, infrastructure and consumer goods.

Moreover, materials that are more durable, energy-saving or sustainable have a direct effect on the end product.

Q: How are you addressing raw material availability?

A: A solid agenda and clear rules can support the generation of a sustainable Mexican chemical manufacturing sector that benefits from existing production capacities. This sector could be a reliable and competitive partner for the whole Mexican market. Mexico’s chemical industry could play a pivotal role in

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exports and support demand. There can be no development of manufacturing and production platforms in Mexico without a sustainable and solid Mexican chemical industry. ANIQ plays an important role in leading this strategy and presenting our concerns to the Mexican authorities.

VIEW TOP Automotive | 198

from the

Q: How has Universal Robots supported growing automation efforts before and after the pandemic?

A: The inherent flexibility of Universal Robots’ collaborative robots (cobots) helped support the rapid development and deployment of automation globally. The key is that being a smaller type of robot – compared to those regularly used in plants – they can physically interact with humans in a collaborative work environment. As many companies and production plants implemented social distancing, the use of Universal Robots’ cobots allowed companies to optimize operations without affecting business production.

Q: What were some of the lessons learned from the pandemic?

A: 2020 was a year of change. Our market analysis gave us four important lessons. First, agility became key to make informed decisions and turn them into action plans to help industries find their way through difficult periods and seize new opportunities.

Second, many business owners evaluated exiting their business, which is common in periods of economic uncertainty. COVID-19 was no different. To get the most out of what companies have built, owners must create a succession plan. Three, downtime provides opportunities to update and invest. With manufacturing plants forced to shut down, some organizations took advantage of the offline time to upgrade IT systems and update processes. Finally, automation and collaboration were put into practice. To reduce

Abraham Sosa

employee interactions, manufacturing organizations turned to automation to keep team members safe. Automation adoption will be one of the legacies of the pandemic. Organizations should continue to explore automation opportunities to start maximizing

Director of Global Accounts Latin America | Universal Robots

its impact.

Q: What are the key drivers of companies adopting these alternatives?

Universal Robots Aims to Make Impossible Automation a Reality

A: Today’s manufacturing environment is under increasing pressure to be more flexible due to uncertain production volumes and product lifetimes. A safe and flexible cooperation between robot and operator improves productivity in a flexible production system.

Manufacturing companies are experiencing an increase in humanrobot interactions and in the use of cobots.

Empirical results gathered by Universal Robots reveal that companies are concerned about “operational efficiency” and “ergonomics and human factors.” Drivers are aligned with productivity, flexibility and quality improvements. Understanding these drivers can help motivate manufacturing companies to adopt cobots and reap the benefits of this technology.

Q: What is the main added value that cobots could bring to the automotive industry and what are the obstacles to achieve this?

A: Parts of the automotive manufacturing process have been highly automated for decades but some tasks remain highly dependent on manual labor. For tasks like screwdriving and assembly, the flexibility and small footprint of UR’s cobots benefit automakers.

A large part of auto production occurs in urban areas that lack an

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extra 100,000m2 to expand into. In highly regulated sectors like automotive manufacturing, where traceability is key, cobots also help manufacturers control and track key production processes, such as the precise torque applied to screws when they are mounted to the car body.

Automotive | 199

How Is the Industry Transforming on the Path Toward Recovery?

The automotive sector is reinventing itself as a comprehensive mobility solutions partner. The leaders of Mexico’s top brands and manufacturers explain their own vision to transform themselves as the industry recovers.

Together we are stronger, as our motto says. This moment taught us that we owe ourselves to the Mexican market and we want to be here for 60 more years and beyond. The market is halfway to recovery and it still has a great deal of potential. The automotive industry in Mexico has always been closely related to the US’s long-term perspective. The pandemic is showing us that we also need to focus on the short term. The secret is to balance short and long-term strategies. Chip shortages will eventually pass and the next step will be to develop more suppliers at different locations to avoid concentrating production in a

José Román President and Director General | Nissan Mexicana and NIBU

single region. Over the last few years, supplier consolidation has proven to be successful, but chip shortages have made us rebalance our priorities.

We face a common challenge as a sector, which is the shortage of some components needed to manufacture our vehicles at the volumes necessary to meet the needs of the market. We have not met the demand, given that we are not producing at 100 percent capacity. Semiconductor shortages are a global crisis.

In August, they hit Volkswagen’s stock price and market share but we are confident we will recover in the coming months.

However, the pace of the automotive sector’s recovery is faster than we expected, which shows the strength of the market.

The automotive market is seeing a solid recovery and will likely experience growth in 2021 but will surely grow in 2022.

Edgar Estrada Director General | Volkswagen Brand Mexico

The global automotive industry is undergoing the kind of transformation that takes place once in a hundred years.

Toyota has decided to become a mobility company, although automotive will continue to be at the core of our business. We understand that if a person can move, they can be happy and achieve the impossible. We will continue our efforts toward electrification in the Mexican market. We are undergoing a transformation process in the automotive industry and Mexico has the unique opportunity to jump into that transformation.

Toyota is interested in working with all stakeholders and the Mexican government is interested in grabbing those

Luis Lozano Presiden | Toyota Motor de México

opportunities.

Conference

Highlights Automotive | 200

C

ars have undergone a significant transformation toward the digital as manufacturers have increasingly fitted them with screens and sensors.

However, the industry has been waiting for years to offer a truly interconnected service ecosystem. The

tool it needs to accomplish that is almost here: 5G technology.

5G will enable US$13.1 trillion in global sales activity by 2035, according to Qualcomm. “All industries are going to capitalize on this technology,” says Ricardo Anaya, Staff Product Manager of Qualcomm Mexico. “The automotive industry has been waiting for a network like 5G to be able to offer new services like autonomy and cloud access.”

The emergence of 5G networks is essential for the digital transformation as it allows automakers to deliver new services, including up to 8k resolution. “5G is going to transform the way we distribute video like 4G did with audio,” says Anaya.

With the speed capabilities that 5G will bring (over 100Mbps), “working in the cloud will be like working in the internal memory of a computer,” says Anaya. Network latency, which refers to the time it takes for data to travel from one place to another, is essential for the automotive industry as it will enable “remote

Vehicle Connectivity Increasingly Closer Thanks to 5G Ricardo Anaya Staff Product Manager | Qualcomm Mexico

decision-making” in autonomous processes. 5G offers an extremely low latency rate, adds Anaya. “This migration will enable millions of devices to be connected.”

“The cornerstones of 5G are more bandwidth, better latency and more user capacity. When implementing 5G, these three pillars and the new frequencies on which this technology works, allow for network deployments that are very different from what we are used to,” Anaya told Mexico Business in an interview in July.

As the network grows, powerful processing centers located close to the connections will enable new forms of collaborative work. “You can make simpler devices with more battery life,” says Anaya. “This happens when you have good processing between the end device and the edge AI.” 5G must be based on global standards and be interoperable and easy to replicate. “The 5G that is being applied in Germany is similar to what we expect to be implemented in Mexico,” says Anaya. According to GSA data, as of the end of July 2021, there were over 175 operators with 5G commercially deployed in over 70 countries and over 285 additional operators investing to deploy 5G technology globally. “These numbers indicate that half the world has officially set its sights on 5G.” This impact will be reflected beyond the improvements in the services offered by companies. According to analysts from the firm IDC, during the first year 5G networks are deployed in Mexico, they will trigger a value of almost MX$90 billion (US$4.4 billion).

The transformation that 5G will bring to the automotive sector includes manufacturing processes with collaborative robots, sales and maintenance processes, service automation, in-car experiences and interconnected transportation services, such as traffic signals, bridges and infrastructure. “The priority is for a person to get in their car and arrive at their destination as safely and efficiently as possible,” says Anaya.

Through the cloud and 5G, vehicles will also have the ability to

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connect in real-time to their surroundings. This, Anaya explains, will open the way for a driver to be warned if another vehicle is approaching from three blocks away, preventing accidents.

Omnichannel Approach Key to Improving Sales: Hyundai Juan Carlos Ortega | Marketing Director México of Hyundai

Mitsubishi Consolidating Growth Strategies Jorge Vallejo | Director General, Mitsubishi Motors de México

Despite Pandemic, Aftermarket Likely to See Long-Term Benefit Jean-François Champagne | President, AIA

Haskell: Supporting Manufacturing Investments in Mexico Luis Jiménez | President, Haskell

Inflection Point in the Mexican Automotive Market Guillermo Prieto | President, AMDA

Volvo Buses Ready for Long‑Term Effects of Pandemic Moshe Winer | Commercial Director, Volvo Buses

AMAVE: Only One in Five Mexican Companies Uses Leasing Liliana Anaya | Director General, AMAVE

Grand Chelem: Mexico’s Exotic Vehicle Dealer Martin Josephi | CEO, Grand Chelem

Kavak: Story of a US$4 Billion Company 04/13/2021

Mobility, Automotive Companies in Time100 Most Influential List 05/13/2021

Index Adecco 82, 83 Alian Plastics AME

DuPont

92, 196

19, 21, 23, 32, 89

52, 58

Endeavor Endeavour

187

ESG

AOLM 99

Evonik 197

Arista Technologies 47

FEMIA

ATCO Energía

130, 138, 146

Fintonic

76, 77

Baker Hughes

41 114, 115, 120

24, 27, 50, 59, 63

189

122

Grupo CPQ 178 Grupo Sohin 180

Banxico 5, 6, 9, 21, 22, 187 119

Heartbest Foods 46 Hitachi ABB

31, 50, 52, 58

Candelaria Mining

142

Hogan Lovells

28

Briq Fund

37, 48

Google Cloud

Automotive Cluster Network

Bitso

Homie 155

Honeywell 5, 16 Hospitales MAC

CCE 169

Huawei

5, 7, 12, 13, 18, 128, 130, 132, 133, 135, 136, 138, 146

Circutor Clara

32, 50, 52, 56

CLUMIN CNH

144

153, 165

112, 113, 114, 118, 119, 126 25, 59, 63, 94

Humanólogo Consulting IACSA & Asociados IGF

Intel

33, 40, 49

Isla Urbana

74

Cyplus 110

Jaguar

116, 127

Kueski

30

Dostavista

101

73

Inclusion in the Workplace

Cox Energy 134

98, 118, 133, 175

85

161, 164

86

Deloitte

177

38

IOS Offices

Conekta

81

70

Casai 54, 85

CFE

135

94, 137, 144, 147, 134, 135, 155, 141, 160, 163, 145

Fieldwood

173

Autodesk

18, 160, 164

Energy Management

ANPACT 188

BHP

5, 15

Embassy of Israel in Mexico

AMEXCAP 53

Atramat

136

EDF Renewables

131

American Express

AMIA

193, 194

Lalamove 102

89

Index Maypo

181

Medix

106

Rising Farms

8, 10, 36, 150, 152, 154

61

Morada Uno

66, 71

Mureni 62 139

New Set of Skills

Santacruz Silver

90

Northland Power

Schlumberger 124

141

Nuvocargo 57, 100 174

127, 143

SIMCA Desarrollos

67

10

Talos 112, 117

26, 30

186, 191, 199

Toyota

91, 94

Transplace 8, 103

Perenco 121

Traxión 104

170

Uber

Pharmaceutical Innovation 172 195

Prescrypto

Schneider Electric

SRE

Parks Desarrolladora 68

PPG

45, 58, 80, 108

Universal Robots 198 VanEck

179

Residential Real Estate

158

80, 85, 87

Scania

Nissan 11, 186, 190, 199

Pfizer

43, 180

171

Sandoz

Nearshoring 5, 17

Pearson

Rockwell Automation 39 Salesforce

Natural Gas Access

PayPal

Rizoma 75 Robots, Automation 92

MountX Real Estate Capital

Omron

95, 107, 109

Rivus

Ministry of Economy

60

156 66, 72, 77

WeWork 69

WIM

151

Advertising Index Mexico Business Events Mexico Business News MexicoView 96

1 34

Picarro

140

Mexico Business Publishing

148

Photo Credits Cover

Envato

48

MBF Echo 2021

88

Pharmadvice

4

Presidencia de la Republica

49

Intel

89

MTF 2021

9

BANXICO

50

Fintonic

90

MTF 2021

53

AMEXCAP

91

Pearson

10

SRE

11

MBF Echo 2021

54

Casai

92

MTF 2021

12

CFE

55

MBF Echo 2021

93

MTF 2021

13

Santamarina +Steta

56

Clara

94

Roche

14

AmCham

57

Nuvocargo

95

Rivus

15

Israel Embassy

58

Endeavor

99

AOLM

16

Honeywell Latin America

59

Fintonic

100

17

MBF Echo 2021

60

Rising Farms

101

Dostavista

18

Presidencia de la Republica

61

Morada Uno

102

Lalamove

19

American Express

62

Mureni

103

Transplace

22

BANXICO

63

Fintonic

104

Traxión

23

American Express

64

Grupo LAR

105

Intelimetrica

24

Fintonic

67

Simca Desarrollos

106

Medix

25

Conekta

68

Parks

107

Rivus

26

PayPal

69

MBF Echo 2021

108

MBF Echo 2021

27

MBF Echo 2021

70

Homie

109

SEMAR

28

Briq Fund

71

MountX Real Estate Capital

110

Cyplus Idesa

29

Bnext

72

WeWork

113

CNH

30

Kueski

73

IACSA

114

CNH

Nuvocargo

31

Bitso

74

Isla Urbana

115

Fieldwood

32

American Express

75

Rizoma

116

Jaguar E&P

33

Intel

76

Autodesk Mexico

117

Talos Energy

38

Huawei

77

Grupo LAR

118

MOGR 2021

39

Rockwell Automation

78

Meta

119

BHP

40

Intel Mexico

81

Hogan Lovells

121

Perenco

41

FEMIA

82

Adecco México

122

Baker Hughes

43

Salesforce

83

MTF 2021

123

Simmons Edeco

44

Docusign

84

Humanologo Consulting

124

Schlumberger

45

Uber

85

MTF 2021

125

MOGR 2021

46

Heartbest Foods

86

IOS Offices

126

AMEXHI

47

Arista Technologies

87

Scania Mexico

126

ASEA

Photo Credits 126

CNH

155

Candelaria Mining

181

Maypo

127

Transportes Aéreos Pegaso

156

VanEck

182

Plan Seguro

128

CFE

158

Santacruz Silver Mining

182

RGA

131

Mitsui

159

CyPlus Idesa

182

AXA

132

Arturo Carranza

160

Endeavour Silver

183

Novartis

133

Deloitte

161

IGF

184

Chevrolet

134

Cox Energy

162

Takraf

187

AMIA

135

MER

163

MMR 2021

188

ANPACT

136

EDF Renewables

164

Infinitum Copper

189

CLAUT

138

ATCO Energia

164

Endeavour Silver

190

Nissan

139

MER

164

IGF

191

Toyota Motor de México

141

Northland Power

165

Halyard Inc.

192

IHS

142

Hitachi ABB

166

Ergotron

194

Dupont

143

Schneider Electric

169

CCE

195

PPG Industries

144

Circutor

170

Pfizer

196

Alian Plastics

145

Banorte

171

Sandoz

197

Evonik

145

EY

172

MHR

198

Universal Robots

145

Top Energy

173

ATRAMAT

199

Nissan

146

Enel Green Power

174

Omron

199

Volkswagen

147

Orla Mining

176

MHR

199

Toyota

151

WIM Mexico

177

Mac Hospitales

200

152

Secretaría de Economía

178

Grupo CPQ

201

153

CLUMIN

179

Prescrypto

154

MMR 2021

180

Sohin

Qualcomm Kia

Acronyms 3PLs

Third Party Logistics

NOC

National Oil Company

AI

Artificial Intelligence

SME

Small and Medium Enterprises

CNBV

National Banking and Securities Commission

USMCA

United States-MexicoCanada Agreement

EV

Electric Vehicle

WHO

World Health Organization

FDI

Foreign Direct Investment

WTO

World Trade Organization

IoT

Internet of Things

Credits Journalist & Industry Analyst: Cinthya Alaniz Junior Journalist & Industry Analyst: Sofía Hanna Editor: Alicia Arizpe Senior Editor: Mario Di Simine Managing Editor: Alejandro Salas Commercial Manager: Sebastián Vázquez Content Partnership Coordinator: Alexa Villarruel Content Partnership Coordinator: Miguel García Content Partnership Coordinator: Mariana Rodríguez Content Marketing Coordinator: Christopher Reyes Junior Graphic Designer: Valeria Villanueva Junior Graphic Designer: Paulina Quiroz Graphic Designer: Marcela Muñoz Senior Graphic Designer: Mónica López Design Director: Marcos González Web Development: Omar Sánchez Collaborator: Antonio Gozain Collaborator: Miriam Bello Collaborator: Paloma Durán Director General: Jeroen Posma

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