Mexico Business Review 2021 by Mexico Business Publishing

2021

KNOWLEDGE IS POWER, GET THE INSIDE PERSPECTIVE! Mexico Business Publishing is the goto resource for the business and political leaders shaping Mexico’s economy. Our preeminent reviews of the country’s top industries are based on thousands of faceto-face interviews and reflect our relentless commitment to quality. Get the inside perspective and download the latest review from our download center!

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Introduction All industries in Mexico have gone through a monumental shift following the pandemic. COVID-19 marked a turning point for consumers and businesses in the country, forcing the latter to adapt their processes to a market that was unknown at the time. While some services and products have seen positive outcomes from these changes, others have not. Companies were forced to innovate, accelerate their digitalization processes and think outside the box to avoid lagging behind. Intermittent lockdowns changed customer behavior, leading all brands to innovate and think creatively to sustain their business. Business diversification was a common practice for the hardest-hit sectors seeking to maintain an income, while those benefiting from the acceleration in technology adoption looked for the best ways to capitalize on the momentum. While the outside world demanded new skills and ways to innovate, companies had to simultaneously look inside. Businesses and leaders who previously did not believe in remote work had to adapt and learn how to manage and motivate their teams remotely. As months went by, workers’ mental health also became a corporate priority. As more countries transition to a new normal, more regulations on remote work have been brought to the table, making it clear that this is a trend that is here to stay. By looking inward, companies also became aware of those elements that were being taken for granted. Leaders of the world’s largest companies noted that what helped them keep their businesses afloat during the toughest months of the crisis was returning to their core values, building authentic relationships with customers, supporting their team members and finding a balance between professional and personal life. The road has not been easy for anyone. Limited budgets, uncertainty over the course of the pandemic and even a lack of legal clarity are some of the hurdles that companies have faced and that remain a barrier in the medium term to investment and expansion in the country. However, opportunities for growth remain. Investors continue to eye the region and business leaders agree that the country still has time to take a different direction to become a more globally competitive nation. Mexico Business Review 2021, now in its first digital edition, presents a general overview of some of the country’s most prominent industries and the strategies that their leaders have implemented to not only survive but thrive in an uncertain environment.

Table of Contents

Introduction

State of the Economy

Entrepreneurship

E-Commerce & Digitalization

Fintech

Cybersecurity

Talent

Logistics

115

Health

134

Automotive

152

Energy

170

Oil & Gas

189

Mining

206

State of the Economy The Mexican economy is navigating uncertain waters as it moves toward recovery. In the effort to rebuild itself after the COVID-19 pandemic, the government and the private sector each have a role to play in shortening this path and making it inclusive. Together, these two players will be instrumental in returning the economy to pre-pandemic levels and maintaining sustained growth. It will not be easy. The business community has expressed concern over public policies, while the government’s interest in supporting and partnering with the private sector is almost non-existent. Meanwhile, efforts to stimulate the market have resulted in the reactivation of economic activities that until recently had been on hold, which might prove negative in the long run. According to the World Bank, countries that adopted a gradual, staged reopening experienced a stronger economic recovery compared to those that rushed into lifting restrictive measures before the pandemic was under control. Governance is also critical, says the institution, as a higher level of trust in the public sector is associated with higher economic activity among countries that undertook a gradual reopening process. An inequitable vaccination process also represents a challenge that is bound to become a burden for recovery sooner or later, analysts agree. Despite all this, the country still has time to capitalize on the opportunities of the recession and position Mexico as a star investment destination.

State of the Economy

Analysis The Road to Economic Recovery

Expert Contributor Enoch Castellanos | President of the National Chamber of the Transformation Industry (CANACINTRA)

Analysis Economic Recovery Hindered by Political Agenda

Conference Highlights Vaccination, Elections Keys to Accelerating Mexico’s Recovery

Expert Contributor Federico Cerdas | CEO of Global Businesses Inc.

Analysis MORENA’s Weaker Grip on Congress Brings Greater Certainty

Roundtable How Do Elections Impact Mexico’s Economic Prospects, Investment?

Analysis How the Elections Will Shape Mexico’s Productive Industries

Expert Contributor Carolina Barreto | Program Manager Latin America of Climate Bonds Initiative (CBI)

Expert Contributor Leonardo Beltrán | Board Member of SEforALL and NonResident Fellow Institute of the Americas

Roundtable What is Needed to Accelerate the Country’s Economic Recovery?

Analysis Automotive and Aerospace Expectations Post-Midterm Elections

Conference Highlights Nearshoring Opportunities Abound as Global Supply Chains Shift

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

Content Links

State of the Economy | 7

The Road to Economic Recovery TABLE 1. MEXICO’S GDP

In 2020, Mexico faced a dark economic scenario. The severity

Annual variation (percentage)

was clearly evident in the economy’s bottom line at the end of

Quarterly variation (percentage)

the year: GDP plummeted 8.5 percent, its deepest drop since 1932. Over a year into the pandemic, expectations for Mexico’s

1Q18

2.5

1Q18

1.2

economic recovery have fluctuated amid a climate of uncertainty.

2Q18

2.2

2Q18

0.1

The debate on inflation control, investment attraction through

3Q18

2.8

3Q18

0.2

4Q18

1.2

4Q18

-0.3

1Q19

0.3

1Q19

0.3

2Q19

0.3

2Q19

3Q19

4Q19

-0.8

4Q19

-1.1

1Q20

-2.2

1Q20

-1

2Q20

-18.6

2Q20

-16.8

3Q20

-8.5

3Q20

12.4

4Q20

-4.5

4Q20

3.3

1Q21

-2.9

1Q21

0.4

public policies, fiscal incentives to mitigate the impact of the crisis and the political agenda of President Andrés Manuel López Obrador’s administration has intensified in recent months. With the vaccination of senior citizens in Mexico starting on Feb. 15, hopes for an economic revival arose among private investors. Still, there are many obstacles on the path to economic recovery. Much of the country’s economic recovery will be driven or affected by Mexico’s largest trading partner, the US, as well as the speed of the vaccination process, said geopolitical risk strategist and Associate Practice Leader Mexico and Central America at FrontierView Alejandro Valerio. “Mexico needs to ramp up the vaccination rollout if it wants to reach the expected economic recovery,” he says. Investors in Mexico, however, will continue to face a challenging environment in 2021, a FrontierView study reveals. López Obrador’s policies opposing private investment,

Source: Banxico

along with the lack of financial support for SMEs, are among the main factors that hinder Mexico’s economic recovery, the study says. As of March 2021, over 1 million SMEs have closed, resulting in losses of MX$500 billion (US$25 billion), INEGI figures show.

TABLE 2. HOW MUCH IS THE MEXICAN ECONOMY EXPECTED TO GROW?

While some segments, such as the services sector, are beginning to show signs of recovery, others, including tourism and automotive,

SCHP

2021

2022

Date of of forecast

5.3%

3.6%

3/31/2021

still have a long road ahead. Yet, the decline in Mexico’s economic measures and the reactivation of some activities considered non-

activity softened in March, mainly due to the easing of lockdown essential in Mexico City. According to INEGI’s Timely Indicator

International Monetary Fund (IMF)

4.3%

2.5%

1/26/2021

Banxico

4.8%

3.3%

3/3/2021

World Bank

4.5%

3/29/2021

Barclays

3/5/2021

Wells Fargo

2.8%

2/26/2021

Oxford Economics

5.6%

3.8%

3/5/2021

OCDE

4.5%

2.1%

3/9/2021

Monex

3.8%

2.3%

3/5/2021

because vaccines are a success of science but a failure in terms

JP Morgan Chase

5.6%

4.1%

3/5/2021

of application logistics in Mexico. Unfortunately, the federal

Moody's

5.6%

2.7%

5/3/2021

Source: SCHP, Organizations and agencies

of Economic Activity (IOAE), the Overall Indicator of Economic Activity (IGAE) increased 0.71 percent compared to last February, its strongest growth in five months. Business leaders in Mexico are also concerned about the uncertainty surrounding political moves. According to PwC’s Global CEO Survey, 83 percent of respondents in Mexico said that political uncertainty in the country is the biggest concern this year, followed by populism (79 percent) and pandemic and fiscal policy uncertainty (74 percent). Meanwhile, there is still the lingering issue of the COVID-19 pandemic. “COVID-19 cannot be defeated if society, government and the private sector act on their own. We need to team up

government is not doing enough,” said Enoch Castellanos, President of the National Chamber of the Transformation Industry (CANACINTRA), in an article for MBN. Despite the positive impact triggered by the new fiscal policy direction in the US, the Mexican economy will not return to pre-pandemic levels before 2023, according to a study by the International Monetary Fund (IMF). Mexico lacks strong fiscal support and weak investment is expected to continue. The country spent less than 1 percent of GDP on fiscal stimulus, IMF data show. The agency expects Mexico’s GDP to rebound by 5 percent this

a strategy for economic recovery that is working for us. We 44,774

115,287

88,771

47,919

148,719

113,850

200,641

92,290

123,139

are going to recover faster from the economic crisis than other countries. I said it was going to be like that, in a ‘V’, and it is being

-300

-555,247

-400 -500

-3,907

Employment, another indicator of economic recovery, has slowly picked up in Mexico. As a result of the pandemic, 647,710 jobs were lost in 2020, 560,473 of which were formal and 87,237

-277,820

-200

Fragile Labor Market

-344,526

-130,593

-83,311

-100

were temporary, according to the latest figures published by the Mexican Social Security Institute (IMSS). In Latin America, only two-thirds of those who lost their jobs at the start of the pandemic in Brazil, Chile, Colombia, Mexico and Peru were employed by

2020 2020

Apr

Mar

Jan

Feb

Dec

Nov

Oct

Sep

Jul

Jun

Apr

May

Mar

Jan

the end of last year, mainly in the informal sector, states the Feb

-600

economy is showing a V-shaped recovery. “We have implemented

achieved,” he said on April 9 at his morning conference.

Aug

100

68,955

200

year and then expand by 3 percent in 2022. This is somewhat short of López Obrador’s expectations. He recently said that the Mexican

300

2021 2021

International Labor Organization (ILO). In February, 500,000 Mexicans joined the informal economy, bringing the total to 29.4 million people, according to INEGI.

Source: IMSS

Unemployment withdrawals recorded by the retirement fund administrators (Afore) in 1Q21 also herald a slow recovery. According to data from the National Commission of the Retirement Savings System (CONSAR), Afores registered a total of 452,605 unemployment withdrawals in 1Q21, which meant an outflow

INTEREST RATE BEHAVIOUR IN MEXICO GRAPH 2. INTEREST RATE BEHAVIOR IN MEXICO

of MX$5.09 billion (US$257.4 million). This is the highest figure recorded for a similar period since 2005. It also meant an annual were recovered in 1Q21, the figure falls short of the 269,143 jobs

A total of 47 percent of Mexican employees were optimistic about the job market in 2021, of which 27 percent said they were feeling

6.5

Despite the landscape, Mexicans seem optimistic about the future.

7.00

7.25

created in 1Q19, IMSS data shows. 7.50

7.75

increase of 37.3 percent in real terms. Although 251,977 formal jobs 8.00

8.25

very optimistic, according to data from a survey conducted by job

6.00

site Indeed. 5.50

The US, Catalyst for Mexico

5.00

2020

Source: Banxico

4.00

US$1.9 trillion coronavirus relief package and a massive vaccination

Feb-May

4.25

recent months, driven mainly by President Joe Biden’s recent

Sept-Feb

Aug-Sept

2021

Jun-Aug

May-Jun

Feb-Mar

Apr-May

Dec-Feb

Nov-Dec

Sept-Nov

2019

Mar-Apr

Aug-Sept

In the US, forecasts for the economy have also brightened in 4.50

Jan-Aug

State of the Economy | 8

CREATION AND LOSS OF JOBS IN MEXICO (THOUSANDS) GRAPH 1. CREATION AND LOSS OF JOBS IN MEXICO

campaign across the country. Testifying before Congress on March 23, Secretary of the Treasury Janet Yellen said the economy is set for strong growth this year. However, she pointed out that at least 9.5 million jobs are still missing from the labor force and that full economic recovery depends on bringing the pandemic under control. There, many Republican policymakers, investors and economists expressed their concern that the economy will not be able to absorb a massive stimulus package and post-pandemic consumer spending, pushing prices sharply higher. Given that scenario, monetary policy will be key for economies to achieve growth. On March 4, Federal Reserve Chair Jerome Powell told investors he did not assure that inflation and bond yields will be under control when the pandemic ends and economic activity rebounds. For several years now, the Fed has been targeting 2 percent annual inflation without much success. In August, the Fed released a policy framework that said it would temporarily tolerate

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inflation creeping above 2 percent and that inflation would have to be on that path before the Fed would consider responding with an interest rate hike.

he year 2020 and so far, 2021, have undoubtedly been the most complex in memory. Derived from the COVID-19 pandemic, chaos was unleashed in the country, mainly hitting the economy. Human losses continue to multiply. Economic costs keep rising.

In Mexico, almost 2 million formal jobs have disappeared. Extreme poverty has returned to levels not seen in a generation. Inequalities have widened. The situation is affecting 51.9 million Mexicans. To counter this situation, CANACINTRA, which is socially responsible and works to ensure the well-being of people, industries, the economy, and our environment, is the first organism to call for the establishment of a National Economic and Social Emergency Agreement in the face of the COVID-19 pandemic. We have presented 10 concrete actions for the rescue of micro, small and medium business challenged by this contingency.

State of the Economy | 9

In this year, vaccines are the first great moral test ahead of us.

Changing Gears for a Better Mexico Enoch Castellanos President of the National Chamber of the Transformation Industry (CANACINTRA)

Governments have the responsibility to protect their populations, but COVID-19 cannot be defeated if society, government and the private sector act on their own. We need to team up because vaccines are a success of science but a failure of application logistics in Mexico. Unfortunately, the federal government is not doing enough. Recent studies have revealed that vaccine hoarding could cost the world economy as much as US$9.2 trillion, nearly half of which would impact the richest countries. There is only one winner in a country where some have vaccines and others do not: the virus itself. Mexico will not be able to cure itself of the virus if the economy remains in intensive care. It is time to start an inclusive and sustainable recovery. In 2020 in Mexico, exports of goods and services contracted 7.3 percent and imports of the same items contracted 14.8 percent. This also affected gross fixed investment, which fell 18.2 percent compared to 2019. 2021 is also a critical year for climate and biodiversity. Clean and renewable energies are not only a solution, they are the necessary path. It is time to put a stop to carbon emissions. To stop building new coal and oil power plants. We also need to address the pandemic of poverty and inequality. More than 70 percent of the population is experiencing increasing wealth inequality. The pandemic has made the situation worse. We see it in the way COVID-19 has dealt with the vulnerable and marginalized. A report released by Oxfam revealed that with just the increased wealth of the 10 richest men during the crisis, there would be enough to prevent anyone from falling into poverty because of the virus and to pay for vaccination against COVID-19 for the whole world. I reiterate my call, which I have made on several occasions, to have socially responsible businesses, so that all people have prospects for the future and enjoy protection. It is time to correct the mistakes of the past and to combat the systemic injustices of our time. Fulfilling our promise not to leave anyone behind is possible. We must achieve it. In 2021, we need to move from death to health; from disaster to reconstruction; and from

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despair to hope. It is possible to build the Mexico we want. CANACINTRA is a fundamental part of this. But we need to do it with energy and, of course, with all the strength of the industry.

GDP SCENARIOS FOR MEXICO (IN PORCENTAGES) GRAPH 1. GDP SCENARIOS FOR MEXICO

As Mexico heads toward economic recovery, risks remain, driven

4.10 3.40

2.90 2.90

2.80 2.90

1.20

1.10

2.10

2.50 2.50

mainly by government policies, according to a study by market 2.90

0.90

external sector has greatly benefited from the strong US economic recovery and President Joe Biden’s US$1.9 trillion stimulus package. “Mexico will capitalize more than any Latin American in 2021, which will continue to lift Mexico’s external sector. Joe

0 -1

intelligence and advisory firm FrontierView. But the country’s

market from the robust growth the US economy will experience Biden’s stimulus package, coupled with the reopening of the

-0.50

State of the Economy | 10

Economic Recovery Hindered by Political Agenda

service industry in the US, all but guarantees that remittances inflows to Mexico will remain positive in 2021, sustaining the

-2

consumption outlook,” FrontierView said in its report.

-3 Domestically, companies in the country will continue to deal with

-4 -5

a “hostile operating environment” stemming from the policies

2021

2022

Worst-case scenario SCENARIO DOWNSIDE Best-case scenario Source: FrontierView

2023

2024

2025

Base-case scenario

BASE CASE

UPSIDE SCENARIO

of President Andrés Manuel López Obrador’s administration that affect investment, particularly toward the energy sector, FrontierView said. “Depending on the outcome of the upcoming elections, López Obrador might try to push forward other initiatives, such as a tax reform or a further rollback of the 2014 Energy Reform, which will continue to affect private investment, currently the weakest element in Mexico’s GDP,” the report reads. Although the vaccination process has picked up speed in Mexico City as the election draws near, FrontierView notes that Mexico is likely to continue struggling to curtail the pandemic at a faster pace because of the slow vaccine rollout at a national level. According to FrontierView’s report, Mexico’s GDP will rebound by 4.1 percent in 2021, mainly driven by exports (4.9 percent) and consumption (5.2 percent). “The better-than-expected US economic recovery at 6.5 percent will lift Mexican exports and the key manufacturing sector, keeping remittances inflows positive throughout 2021,” the company states. Starting in 2Q21, economic activity will rebound after the expected contraction in 1Q21 due to the dire situation generated by the pandemic in key retail hubs such as Mexico City. “However, companies should expect weak investment in 2021 due to López Obrador’s policies.” Countercyclical measures implemented by countries, such as fiscal support or direct capital transfers to businesses and households, played a key role in lessening the impact of the pandemic, said Ángel García-Lascurain, President of the Mexican Institute of Finance Executives (IMEF), at Mexico Business Forum 2021. In 2020, almost 18 percent of the UK’s GDP consisted of resources that its government injected into businesses and households. France injected 15 percent of its GDP and Germany 14 percent. “In Mexico, we did not have that support. There were not enough measures to preserve jobs, support the liquidity of companies and support families’ consumption habits,” GarcíaLascurain said. According to INEGI, more than 1 million SMEs have shutdown permanently in Mexico. “Job creation will remain weak throughout 2021, mainly driven by lackluster investment. Firms should expect that consumer spending will be sustained by cash transfer and remittance inflows in 2021 and that the labor market is poised to recover to pre-pandemic levels in 2022,” states the FrontierView report.

State of the Economy | 11

Mexico also has a key advantage over other emerging economies: its proximity to the US, said Carlos Hurtado, Director General of the Centre for Economic Studies of the Private Sector (CEESP) on June 1, during a forum organized by CCE. Hurtado added that the opportunities for Mexico’s economic reactivation are mainly in sectors like manufacturing, tourism and food. “The strength in the manufacturing sector lies in replacing the spaces that are being hollowed out by the trade war between China and the US, taking opportunities offered by companies that are not going to relocate to places like Thailand,” he said. Economic Scenarios In 4Q20, Mexico’s GDP grew 3.3 percent quarter-on-quarter, driven mainly by exports and government spending. Agriculture and manufacturing supported the recovery as the former grew in 4Q20 on an annual basis at 4.9 percent on the back of US demand, while manufacturing grew 3.9 percent led by the ongoing US recovery, according to FrontierView. FrontierView’s analysis highlighted that in the best-case scenario, Mexico will see economic recovery by 2022, with a 10 percent probability, mainly through these key drivers: + A moderate fiscal response (equivalent to 4 percent of the national GDP) with adjusted fiscal spending and the government agreeing to help the private sector + MORENA losing control of Congress and relinquishing some governorships after the elections on June 6 + A change in the government’s energy policy as a result of PEMEX’s dire situation, which would lead to a stable credit rating + Infrastructure spending prioritized via fasttracked public-private partnerships + The US prioritizing trade over immigration, decoupling both issues and taking them back to pre-Trump administration levels. The worst-case scenario, with a recovery forecast for 2028 and a 35 percent probability, depends on the following elements: + Insufficient economic stimuli and an emphasis on the austerity promoted by López Obrador + MORENA losing its legislative majority and most of the governorships, propelling President López Obrador to a showdown with the opposition, heightening uncertainty + A downgrade of Mexico’s sovereign rating to below investment grade in 2021 due to PEMEX’s dire situation + López Obrador’s administration failing to implement its infrastructure plan + The US administration standing by Trump’s hardline immigration policy The 55 percent probability scenario, meanwhile, projects a recovery by 2024 under the following conditions: + President López Obrador’s fiscal response remaining below 2 percent of the national GDP amid an economic recovery environment led by exports + MORENA falling short of gaining an absolute majority in the Chamber of Deputies but winning most governorships and retaining control of the Senate + A sovereign rating downgrade in 2021 due to PEMEX’s dire situation but not below investment grade Read the complete article More about this topic

+ Infrastructure plans being implemented in 2020 and accelerating in 2021, led by the Mayan Train + López Obrador establishing a good working relationship with the Biden administration

Conference

Highlights State of the Economy | 12

fter an historic economic downturn caused by the COVID-19 pandemic, Mexico is on the path to recovery. The speed of that recovery will depend on the government’s vaccination plan, the results of the June 6 elections and whether Mexico’s ruling

party MORENA gains an absolute majority in the lower chamber of Congress, said Alejandro Valerio, Associate Practice Leader for Mexico and Central America at FrontierView, during the inaugural virtual edition of Mexico Business Forum 2021. Valerio provided an overview of the variables influencing the recovery of Mexico’s economy and the scenarios the country might face. “Mexico’s economy is undergoing a slow recovery. We should expect it to remain a really attractive economy in the middle and long term compared not only to Latin America but also to other emerging economies.” Vaccination will play a central role in the path toward recovery, Valerio said. “Mexico has not flattened the COVID-19 death curve. The country has the highest death toll in the region, which has led to a significant economic impact,” he said. To date, public figures show that Mexico has vaccinated 8.3 percent of its population.

Vaccination, Elections Keys to Accelerating Mexico’s Recovery Alejandro Valerio Associate Practice Leader Latin America of FrontierView

Following that pace, the country should reach 80 percent inoculation sometime during 1Q23. In an earlier statement, Deputy Minister of Health Prevention and Promotion Hugo López-Gatell estimated that Mexico could achieve herd immunity as early as August. Government officials describe herd immunity as achieving immunization for 75 percent of the population. The government has also released a Diplomatic Management Platform detailing Mexico’s vaccine contracts. The second key variable for Mexico’s recovery is political, said Valerio. Over 20,000 public positions are elected this year. MORENA won a landslide victory in 2018 thanks to President Andrés Manuel López Obrador. The question now is whether MORENA will regain an absolute majority of more than 333 seats or just a simple majority. The party’s key states are Mexico City, State of Mexico and Veracruz but the recent accident on Line 12 of Mexico City’s subway system impacted polls. The lower chamber of Congress is important given that there are several reforms that if approved could send negative signals to investors, said Valerio. Among those are the reform of Banxico’s autonomy, a thorough energy reform, a tax reform and a judicial reform. Valerio also highlighted the record remittances in 2020 and that these payments continue apace this year, with an accumulated US$10 billion during 1Q21, an annual increase of 13 percent. However, Mexico’s fiscal stimulus programs to alleviate the effects of the pandemic remained at only 2 percent of GDP, according to the IMF, leading over 1 million SMEs in the country to close permanently. Scenarios to look forward to include the economic recovery of regions strongly supported by government programs, such as Tabasco and the states involved in the Mayan Train, as well as those states strongly linked to the US economy. “The sectors linked to the US and Canadian economies, such as automotive and agribusiness, are showing a faster recovery rate than industries relying on the domestic market,” said Valerio. Analysts have raised their US

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economic growth expectations from 5 percent to 6.5 percent. Such growth, Valerio said, would have a positive influence on Mexico’s economic sectors and regions strongly linked to the US economy.

he construction sector is one of the main creators of jobs in Mexico and one of the greatest contributors to Gross Domestic Product (GDP). Just in 2019, the National Institute of Statistics and Geography (INEGI) said there were over 6 million jobs related to the

construction industry. However, the poor performance of public policies when facing the health and economic crisis resulting from COVID-19 in Mexico led this and other sectors to stop their activities and, as a consequence, to lose millions of jobs. After almost one year of WHO releasing its statement on COVID-19 and several confinement periods, the questions are: How are we going to reactivate the construction sector where so many companies have had to close down for good? How are entrepreneurs of all sizes being supported so that they can recover their income and, therefore, create new jobs? The health situation is complex but the economic situation is

State of the Economy | 13

even worse. Without any immediate actions by the federal and

Main Challenges for Job Creation, Public Policies in 2021 Federico Cerdas CEO of Global Businesses Inc.

state governments, we Mexicans won’t be able to pull through. Throughout 2020, it has been proven that business leaders have done their very best to keep their companies afloat. More tax incentives are required to reduce the financial pressure on Mexican businesses and families. Moody’s recently stressed that, in the absence of material support from the Mexican government, income and employment levels will continue to fall, resulting in a higher number of bankruptcies; therefore, it is essential that both the government and business leaders work together. In the construction sector, a faster issuance of permits would create not only more jobs but also lead to faster results. By means of this and other actions, we would provide certainty to a sector that wants to invest in several public and private projects. Our work and greatest challenge is to promote the opening of the commercial banking system and create conditions of trust to attract investment. USMCA and the new administration in the White House mean a new opportunity since they are among the strongest tools we have. With the COVID-19 crisis, investment previously earmarked for the Asian market has changed direction toward Mexico due to two main factors: investors realized that having manufacturing plants on the other side of the world was not optimal and that the logistics cost has no comparison given our proximity to the US. The industrial real estate sector is and will continue to be one of the most favored segments after 2020, for which reason the construction of industrial parks and facilities will allow more national and international companies to position their production on Mexican territory. Likewise, one of the biggest opportunities in Mexico is its demographic bonus, which leads to the strengthening of the housing segment, since the need for a home does not stop and we have a very large deficit that we must cover, taking into consideration the new requirements this pandemic has created. However, this will not be possible if we are unable to create trust by means of public policies focused on the economic growth of the country, the safety of investments and the creation of jobs. It is of

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utmost importance that when the López Obrador administration’s term is over, the successful policies, negotiations and/or projects already reached continue, since it is not healthy for ideas to change every six years. Clarity, and especially certainty, must be guaranteed if we wish to move forward.

State of the Economy | 14

MORENA’s Weaker Grip on Congress Brings Greater Certainty ??? GRAPH 1. SEATS IN LOWER HOUSE OF CONGRESS

With the advancement of President Andrés Manuel López Obrador’s constitutional proposals and reforms at stake, voters

250

went to the polls to determine if the president’s MORENA party 111

197

would maintain its majority in Congress. It fell short, and that is good news for private industries.

69 375

256

125

On June 6, millions of Mexicans went to the polls to cast their

44 46 25 21 12 11

2021

2021 Morena PT MORENA PAN Source: PRIINE PVEM PT MC PRD

2018

vote for 20,000 popularly elected positions throughout the

country, including 15 governorships and seats in the Chamber of Deputies. López Obrador’s coalition headed into the midterms

with a two-thirds or qualified majority in the 500-seat lower

house. That number is expected to drop to 265-292 seats, which means MORENA will lose its qualified majority, according to preliminary figures from the National Electoral Institute (INE).

2018 PAN PRI MORENA PRD MC PAN PRI PT MC PES PRD PVEM

PVEM

The party, however, will still maintain budgetary control through

PES

its alliances with the PT and PVEM parties. MORENA won 197 seats in the Chamber of Deputies. Adding those of the PT (37) and the PVEM (44), the coalition would hold 278 seats to control the Federal Expenditure Budget (PEF), according to INE. Meanwhile, the PAN, PRI and PRD coalition will hold an expected 198 seats and Movimiento Ciudadano (MC) will have 24 seats to

PARTY COALITIONS GRAPH 2. PARTY COALITIONS (SEATS IN LOWER HOUSE OF CONGRESS) (Seats in Lower House of Congress)

counterbalance leading coalition. Faced with this scenario, López Obrador said that he does not rule out the possibility of reaching an agreement with the

300

opposition. “If we wanted to have a qualified majority, we could 46

reach an agreement with lawmakers from PRI or any other party, but we do not need many to make a constitutional reform,” he

250

said in his morning conference on June 8.

200

197

17 69

A Good Sign A more balanced house would help reduce political uncertainty in the coming months, according to an analysis by Monex, a view

150

that is also echoed by MBN contributing experts. “The results 111

100

reaffirm Mexico’s rule of law and democracy, providing more diversity in the power balance, which is a good thing for all industries,” said Founder of Rising Farms Pablo Ricaud. “This will generate a positive outlook for investment and development in

the country,” he added. 0

Juntos Hacemos Historia Coalition 279

Morena PAN

Source: INE

PT PRI

Va por México Coalition 197

PVEM PRD

According to an analysis by CI Banco, the opposition’s breakthrough can be seen as a counterweight to MORENA and López Obrador’s administration. The bank added that given MORENA’s need to negotiate with other parties, some reforms should be limited and greater scrutiny over the budget and public appointments is now expected. Both Monex and CI Banco agree that the election results will not have a negative impact on the national currency. “Seats lost by the ruling party create counterbalances, which are always positive as different perspectives are now considered during the decision-making process, which will involve a lot of analysis, research and negotiation,” said Nazareth Black, CEO of Zacua. “I see a positive scenario as counterbalances in Congress will reduce uncertainty for companies and investors, which will help many investment projects to flow, many of them in the automotive sector.”

In agreement, René Espinosa, Plant Manager of Metal Fishing Co, said that global issues such as the pandemic, trade wars and disruption in supply chains open up the opportunity for Mexico to position itself as a strategic destination for large companies looking to relocate their operations. “The election results send a positive message to the industry, business partners and countries that have an interest in Mexico. We are a country that offers high experience in manufacturing and engineering and is considered a best-cost country, with a privileged position for the most important markets in the world,” he said. However, Espinosa added, the government must continue to work to reinforce the message of confidence to investors through public policies. The current lower house, last shaped in 2018, has 61.6 percent representation of the Juntos Haremos Historia coalition formed by the MORENA, PT and PES parties. This means an over-representation of 15.7 percent, according to the National Electoral Institute (INE). To avoid this situation, the Superior Chamber of the Electoral Tribunal of the Supreme Court (TEPJF) endorsed at the end of April a restriction approved by INE to prevent the majority party from achieving over-representation in the Chamber of Deputies by nominating its own members as candidates of another party with which they are in coalition. This new restriction states that the effective membership of each of the winning candidates according to the principle of relative majority shall be verified at the time of the candidate’s registration. A Breath of Fresh Air for Energy The election results also likely put a brake on López Obrador’s agenda in the energy sector, which in recent months has faced an uncertain environment. The main amendments proposed by the president in the energy sector focus on the Hydrocarbons Law and the Electricity Industry Law, which the opposition has called unconstitutional and which are suspended by appeals. One industry leader, who spoke to MBN on condition of anonymity, said the election results might very well influence the final decision regarding these reforms. “There is a higher probability that the Court confirms the cancellation of these initiatives after these elections left the government in a weakened state. But Edmond Grieger, Partner at Von Wobeser y Sierra, S.C., said the overall impact of the election should be positive. “We should see some positive impact in the investment climate surrounding the electricity sector in Mexico, mainly in generation, transmission, and infrastructure projects,” said Grieger. “There have been concerns of a potential constitutional counter-reform in the energy sector that would limit the participation of foreign and national investors in the generation of clean and renewable energy, as well as in the supply of energy to end-users. Under the new panorama, a constitutional counter-reform on energy matters will be more difficult to achieve.”

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State of the Economy | 16

How Do Elections Impact Mexico’s Economic Prospects, Investment?

The results of the June 6 elections have sent a positive message to most of the country’s business leaders. A counterweight in Congress, they say, will provide greater certainty for sectors like energy and infrastructure, while being a catalyst for foreign investment. However, the political power that President Andrés Manuel López Obrador holds outside the lower house poses further challenges to a stable and rapid economic recovery. Breaking this pattern of decision-making will be key to changing Mexico’s perception in the eyes of foreign investors.

Although we would prefer to see this government be more supportive of mining and accelerate the issuance of new mining concessions and new mining permits, we now feel a bit more comfortable investing in new mines in Mexico. These election results are generally positive for the Mexican economy as a whole and for foreign investment in particular. Mining plays a key role in the Mexican economy because most of its positive economic impact is in the poorer rural areas of Mexico. Mining careers provide some of the highest-paying jobs in the country, representing 3-4 percent of total employment.

Bradford Cooke Founder and CEO of Endeavour Silver Corp

The elections only provide limited assurances from the perspective of foreign investors. The main benefit is that without a super-majority in the House of Deputies, the possibility of modifying the Constitution without a vast negotiation with other electoral forces is now more complicated. That is a relevant fact but not sufficient to grant absolute certainty regarding the institutional ability to curb or limit the President’s excessive power. The investment climate in Mexico has deteriorated since late 2018 as a result of poor decisions involving the cancellation of huge projects that had already been awarded and that were in construction. Those questionable decisions by the federal

Juan Francisco Torres Landa Managing Partner of Hogan Lovells

government sent a wave of disagreement among local and international board rooms, which resulted in a severe drop in Mexico’s investment.

The election has sent a loud and clear message that the institutional framework in Mexico is strong and not easily deterred. Not all countries can pride themselves on the high effectiveness of the INE, the large voter turnout and very low incident rate. This is a fantastic signal for the broader investor community and for Mexico’s long-term perspective. I think we will still see a struggle between two very opposite ideological views. Perhaps there will be more balance in the lower chamber but it remains very split. I do not see many of the core issues being completely resolved, so growth perspectives may continue to be challenged. However, given the fundamental

Salomon Amkie Director of Citibanamex

need for infrastructure development in Mexico, the recent outcome of the election should provide greater comfort for the long-term view of investments.

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As a capital fund, it was very important for us that our country’s political leaders had a plan to reopen the economy, which would provide security and above all stability to the country’s financial situation, with the fulfillment of commitments for domestic projects. Although we do not depend on government resources, our industry brings an extremely interesting and important number of foreign investors, who see Mexico as an attractive destination compared to mature countries. At the same time, investors are looking for stability while avoiding surprises that could affect returns. We believe that there will now be a

Guillermo Eduardo Cruz Managing Partner of Maquia Capital Agro Fund

balance in the stability of economic policy and that there will be resistance to situations that do not favor the entry of foreign investors into our country.

Unfortunately, expectations were not favorable for investment, neither local nor foreign. This perception was fueled by the possibility of an overwhelming election that would grant absolute power to a government that has not looked favorably on businessmen and that, therefore, generated distrust in the face of a complicated future. The balance achieved in the recent election generates a favorable change since all those sectors that are restless about the future of the country are reassured by an improving investment climate. Local and foreign capital will surely come to stimulate growth and with this, the economic

Fernando Becerril Orta

perspective of our country is strengthened.

Senior Partner at Becerril, Coca & Becerril, SC

The strengthening of energy, infrastructure and agro-industrial policy in Mexico will be key to ensure a safe and quality investment climate, such as the one enjoyed by projects in the southeast of the country, like the Mayan Train and the refinery in Dos Bocas. We believe that this is not a political issue but rather a business issue, where the political class supports Mexican companies, accelerating the post-pandemic economic recovery while businessmen support politicians in the growth of the country.

Rodolfo Alfonso Esquivel Director of Grupo Roales

The aerospace industry has gradually recovered from the pandemic. After the elections weakened MORENA, tourism will probably continue to grow. Seats won by the opposition will also drive investment expectations, which will create opportunities although some business people will still remain cautious when it comes to growth and new business. The investment climate is still uncertain for many sectors. However, the large turnout in these elections showed that part of the Mexican people demands a political change. Passenger, as well as cargo aviation, will strengthen as a result of increased confidence in the

Benjamín Mejía Director of Aerocharter

country’s recovery. Similarly, the second half of the year will see greater inflation, as well as stability in the exchange rate and in the growth of the national GDP

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How the Elections Will Shape Mexico’s Productive Industries Even though President Andrés Manuel López Obrador’s name was not on the ballot, the June 6 midterm elections in many ways served as a referendum on his policy direction. After he took office in 2018, Mexico’s productive industries found themselves in a shifting environment. Halfway through his six-year term, the elections set the stage for what is to come in energy, mining and oil and gas. Golden Age for Mining? López Obrador’s tenure has been received with mixed feelings by Mexico’s mining industry. Positive notes include the government not raising taxes and maintaining regulations. A recent plan floating around to nationalize the production of valuable lithium was axed as well, with the government now looking to enlist the help of private companies. But the outlook is not entirely rosy. Industry insiders showed concern about the president’s rhetoric, as well as his freeze on new concessions and general difficulties to obtain environmental permits. But with the results of the elections bringing a greater deal of balance in the chamber, mining companies can benefit from greater stability and thus a better platform to attract investments. “These results give us the confidence that it will no longer be so easy to make decisions without analyzing all the factors and actors involved and I believe that this will give investors more confidence,” said Ana Muñoz, Secretary of Women in Mining Mexico. Relief for a Beleaguered Energy Industry In recent years, Mexico’s energy sector has been marked by the efforts of the López Obrador administration to roll back the 2014 Energy Reform. This reform welcomed private companies and boosted both foreign investment and private renewable energy development. Seeking to bolster state-owned utility CFE, the government worked to reshuffle the energy sector to favor CFE over independent power producers. After several measures and a congressional change to the Electricity Industry Law (LIE) stranded with suspensions from federal judges, López Obrador hinted at a potential change in the constitution to undo Peña Nieto’s liberal reforms. Such sweeping changes are now unlikely, unless the ruling coalition finds a route supported by a broad consensus, said Edmond Grieger, Partner at Von Wobeser y Sierra. “Any future initiative intended to reform the Constitution will require the consensus of not only one party and its allies but of the majority of the parties in the house, plus the approval of the majority of the 32 state legislatures.” Calming Nerves in Oil and Gas Like those active in the energy sector, companies involved in the oil and gas value chain also experienced widespread uncertainty because of the government’s measures to save Mexico’s massively indebted state-owned PEMEX. Several of these governmental efforts dominated the discussion in the oil and gas sector, such as a recent congressional overturning of the Energy Reform’s Hydrocarbons Law. “I believe that the result of the opposition Read the complete article More about this topic

majority in Congress will be a counterweight in the decisions of the executive, which will calm investors’ nervousness,” said Alfredo Garcia, Executive Managing Director of Siete Energy.

reen bonds have emerged to revolutionize the way sustainable finance is perceived today. Their risk and return are similar to those of vanilla bonds so there is no need to sacrifice return for a higher positive environmental impact. On the contrary, green bonds

have attracted a larger book cover than vanilla bonds on average and have exhibited greater spread, according to the latest Climate Bonds report, Green Bond Pricing in the Primary Market. Currently, in countries like Mexico, the green bond market is dominated by issuers in the renewable energy, construction and transport sectors. Issuers in other sectors such as cement, steel, copper and chemicals — characterized by high emissions — have not entered the green financial market. This may be due in part to the reputational risk of greenwashing. So far, there are no specific local rules or criteria in Mexico to evaluate a green transition bond. Globally, the Climate Bonds Initiative and the International Capital Markets Association (ICMA), have opened this discussion. ICMA

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published a general handbook on credible transitions with four

Transition to a Decarbonized Economy: A New Market Carolina Barreto Program Manager Latin America of Climate Bonds Initiative (CBI)

high-level recommendations for an entity looking at transition: + Climate transition strategy and governance + Business model environmental materiality, important to identify their greenhouse gas emissions (GHG) + Climate transition strategies need to be “sciencebased,” including targets and pathways + Implementation transparency ICMA is proposing these four elements listed above for issuers that want to go to the debt market with a use of proceeds or sustainability-linked bond, especially from a high-emitting industry. The Climate Bonds Initiative is aligned with this approach and complements it with a more specific strategy framework at the entity level and/or activity level: green transition strategies need to be inclusive (all sectors), ambitious (zero carbon by 2050, among other environmental goals) and flexible (different financial instruments channeled towards entities, activities and projects). These features are present in the paper, Financing Credible Transitions, published jointly by the Climate Bonds Initiative and Credit Suisse in September 2020. To be ambitious, the entity needs to set up a target aligned to international climate goals, aiming at reducing half of its emissions by 2030 and reaching zero emissions by 2050. The transition strategy needs to be flexible enough to apply to a wide range of market instruments, and to be implemented by whole entities in all their activities. Additionally, the paper proposes five guiding transition principles. By meeting these principles, the entity, activity or project will be on a pathway toward a credible transition, and to meeting the Paris Agreement goals: 1. In line with 1.5-degree trajectory and the Paris Agreement 2. Established by science 3. Offsets do not count 4. Technological viability trumps economic competitiveness 5. Action not pledges

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To achieve the real shift necessary to deliver net-zero emissions, many sectors will need to completely reimagine how they operate to deliver confidence to investors, clarity to bankers and credibility to issuers.

orldwide, the sentiment that 2021 will be a better year for humanity is based upon the availability of the COVID-19 vaccine. However encouraging this might be, the sole existence of the vaccine is not a

sufficient condition to start the reset of the economy. There should be a tantamount effort to develop the distribution chains to deliver the vaccine to all corners of the world. This is one of the reasons why public-private partnerships are fundamental in leaving no one behind. The public sector covers the high cost of reaching the last mile, ensuring that less accessible areas are not excluded, and the private sector takes care of the areas where they can deliver the product competitively. Those countries that have internalized the advantages of coordination and the benefits of bringing all the relevant stakeholders to the collective effort are in a better position to

State of the Economy | 20

face the challenge of distribution.

National Electric Grid Key to Faster Economic Recovery Leonardo Beltrán Board Member of SEforALL and Non-Resident Fellow Institute of the Americas

Similar to the health challenge, the energy sector is facing an analogous test. The Mexican government in its last Program for the Development of the National Electric System (PRODESEN – 2019-2033) indicated that the country would add 70GW of new capacity and more than half (55 percent) would be clean energy technologies. Yet, in 2019, national state utility CFE only contributed 20 percent of the planned total. In the last PRODESEN, the diagnostic of the grid expressed that all regions of the national electric system operated at their limit or even above because of congestion, transformer overloads, hydro power variability or a very low operational margin resulting in curtailments. Perhaps using a common practice from the health sector and international experience can help us face this challenge. For example, in Brazil, all new transmission infrastructure must be recommended by planning studies coordinated by the Energy Research Company (EPE). In the Mexican case, the independent system operator (CENACE) has the mandate. The process begins with the preparation of a report, where EPE indicates the best alternative to address a system need, based on technical, economic and socio-environmental feasibility analyses. The plan is then incorporated into the official planning documents of the Ministry of Mines and Energy (MME), and in the next stage there are transmission auctions. The auctions will require the preparation of four documents that present the technical details of the project; the guidelines for the transmission lines and the location of the substations, as well as the associated socio-environmental analysis; the requirements of the node; and the estimated land costs. Between 2005 and 2018, 90,000km of transmission lines have been tendered. Only in the last auction last year, 1,958km of transmission lines were auctioned, resulting in an average

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cost that was 55 percent below the price ceiling, US$1.4 billion in investments and 15,000 new jobs. Perhaps a “sambainspired model” for the national electric grid and/or new business models in the energy sector in general should be on Mexico’s 2021 agenda to allow for a fast economic recovery.

State of the Economy | 21

What is Needed to Accelerate the Country’s Economic Recovery?

On the road to economic recovery, many factors need to be taken into account to speed up progress, from government incentives for SMEs to capital injections and more inclusive public policies. The uneven process of vaccination across regions and throughout the world also poses a challenge for getting the economy get back on track and to pre-pandemic levels. Sector leaders discuss the developments in their areas of expertise.

CANACINTRA, which is socially responsible and works to ensure the well-being of people, industries, the economy and our environment, is the first organism to call for the establishment of a National Economic and Social Emergency Agreement in the face of the COVID-19 pandemic. We have presented 10 concrete actions for the rescue of MSMEs challenged by this contingency. 2020 brought us tragedies and danger. 2021 should be the

Enoch Castellanos President of the National Chamber of the Transformation Industry (CANACINTRA)

year we change speed and hit the accelerator on the right path for Mexico. It is possible; therefore, we must achieve it, from a position of unity and with all the strength of industry.

The real estate market, whether in housing, hospitality or industrial, has a unique place within the wider economic landscape. Since 2014, the real estate sector has been experiencing strong growth in Mexico. According to INEGI, the real estate services and rental sector contributed 10.3 percent to national GDP, equivalent to MX$2.4 billion (US$121 million), during 1Q20. Its survival and path back to growth is instrumental for the country’s economic recovery. 2021 will see great challenges to bring back stability.

Nico Barawid CEO and Co-Founder of Casai

However, this represents a time of innovation to set the foundations for safer and smarter cities and spaces with a focus on cultural sustainability and local development.

The energy sector is facing an analogous test. Between 2005 and 2018, 90,000km of transmission lines have been tendered. Only in the last auction last year, 1,958km of transmission lines were auctioned, resulting in an average cost that was 55 percent below the price ceiling, US$1.4 billion in investments and 15,000 new jobs. Perhaps a “samba-inspired model” for the national electric grid and/or new business

Leonardo Beltrán

models in the energy sector, in general, should be on Mexico’s 2021 agenda to allow for a fast economic recovery.

Board Member of SEforALL and Non-Resident Fellow of the Institute of the Americas

Entrepreneurship is considered an important driver of economic growth because it contributes to the creation of new jobs, new employment opportunities, the emergence of new innovations but also to the stimulation of competition and competitiveness. The link between entrepreneurship and economic growth is shown when entrepreneurs act upon profit opportunities and in the process, make the economy more productive by creating more economic activities that

Pablo Ricaud Arriola President of Rising Farms

invariably generate employment opportunities and boost gross domestic product.

State of the Economy | 22

Automotive and Aerospace Expectations Post-Midterm Elections The results of Mexico’s midterms elections held on June 6 are a positive sign for investors and industry leaders. President Andrés Manuel López Obrador’s ruling MORENA party is now below the qualified majority in the lower chamber of the Mexican Congress that is needed to amend the Mexican constitution, a development that will boost the confidence of foreign investors, industry leaders say. In terms of governorships, Queretaro and Chihuahua — key automotive and aerospace markets — remained under the leadership of their current parties, while a third, Nuevo Leon, saw a change at the top. Results Provide Certainty Industry leaders agree that the election results send the right signal for investors. “Today, the automotive industry in Mexico faces the challenge of remaining competitive. Having different views and political positions in Congress now is good, but we need to align the interest of the business community with that of politicians. For us, the election results are a positive step because we will now see different ways of thinking represented. The results of the elections will help to attract more investment to the country as the House of Representatives will be more diverse in terms of political parties. This will give foreign investors more confidence in Mexico,” said Manuel Montoya, President of the Mexican Automotive Cluster Network. Miguel Elizalde, leader of the association representing the interest of heavy-vehicle OEMs in the country, ANPACT, agrees that plurality is a bridge to constructive dialogue. “We will have a plural Congress, where dialogue and agreements will play a central role, particularly regarding constitutional reforms,” The Right Sign for Investors Although CEOs of major companies in the automotive and aerospace sectors generally believe that the election results do not fundamentally alter their business, they also think the results send the right signs for potential investors. “Foreign investors will remain vigilant of the results and how they can provide certainty in the economic policies that sustained Mexico’s growth,” said Jaime Gutiérrez, Site Leader Shared Services Mexico at aerospace supplier Incora. According to Gutiérrez, legislators should focus on ensuring policies help industries to grow their manufacturing footprint in Mexico, together with national and global players. Brand Manager of Mexican EV automaker Zacua, Nazareth Black, also sees a promising scenario after the election. “Seats lost by the ruling party create counterbalances, which are always positive as different perspectives are now considered during the decision-making process. I see a positive scenario as counterbalances in Congress will reduce Read the complete article More about this topic

uncertainty for companies and investors, which will help many investment projects to flow, many of them in the automotive sector,” she said.

Conference

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Highlights

Nearshoring Opportunities Abound as Global Supply Chains Shift René Espinosa President of FEMIA

Jesse Damstra CEO of Philips México

Vladimiro de la Mora President of General Electric México

Héctor Ibarzabal Managing Director México at FIBRA Prologis

Sergio Tagliapietra President of IVEMSA

f recent events have highlighted anything for companies, it has been the importance of having strategic geographical hubs. The US-China trade war, the pandemic and, later, the blockade of the Suez Canal raised awareness about the importance of having facilities closer to home to attend to

the needs of the North American market — and Mexico could be the perfect fit. “The country is one of the most important business partners for the US, which is our largest export destination and with whom we have a newly renewed FTA that has propelled local growth by 30 percent,” said Vladimiro de la Mora, President of General Electric México. The effective vaccination rollout in the US could further help Mexico increase its attractiveness as a business partner, said Sergio Tagliapietra, President of IVEMSA. “(The US) economic activation will inevitably reflect on Mexico due to our importance. It can also make other countries take note of Mexico’s geographic position and excellent human capital and establish here,” said Tagliapietra. However, he explained that companies should not only look at a country’s geographical location; businesses should search for the country that offers them the right support and services. “Rightshoring,” Tagliapietra said, consists of a “process to identify the best location for manufacturing, IT or business processes so a company can achieve faster delivery.” This trend could help Mexico while reducing the world’s supply dependence on China. “The pandemic reset supply chains and exposed this large dependence on China,” agreed Jesse Damstra, CEO of Philips México. Damstra explained that Mexico is an attractive partner but to overcome the doubters, the country needs to become more business friendly. Constant education to meet trends such as digitalization will help local companies adopt them, added Damstra. Infrastructure investments, however, are also necessary before more companies come into the country. “Mexico lacks electric infrastructure so some industrial plants have to work with emergency plants, which pollute more,” said Héctor Ibarzabal, Managing Director México at FIBRA Prologis. Mexico’s clean energies must be accessible to companies, added Ibarzabal, but to do so, the federal government needs to be aligned with this vision. Mexico should also identify its strongest areas of

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expertise to attract investment. “National development is an opportunity to understand local supply challenges and meet international ones,” said René Espinosa, President of FEMIA.

firmly believe 2020 has been an unprecedented and unexpected year in many ways, with so many contingencies, unknown scenarios and disruptions to what we once knew as normal. The year will be remembered as a very tough year that showed us that we are not as good nor as powerful

as we thought as human beings. We cannot change what has happened, but we can learn from it. By doing that, we have an immense opportunity to refocus and do things better from now on. That is the only way to reshape the year into a meaningful positive experience for us. In my view, these are the six things we should take from the year to do better in 2021. The aerospace supply chain has been deeply disrupted. It will take many months for the supply chain of many operations to be restored and aligned again. An old friend and guru of aerospace operations told me once that it takes one week to lose a production line and months to recover. It is true! The other challenge aerospace operations are having is that the

State of the Economy | 24

forced stoppage of operations came without synchronization.

What Lessons From 2020 Will Help in 2021? Carlos Robles Vice President, Central Region of FEMIA

While some countries were closed, others were opened and it all happened at different times and durations. That is already bad, but worse, many processes will change suppliers, and many suppliers will change geographical locations in the best of cases, because in the worst some suppliers simply could not withstand the crisis and closed operations. Amid all the chaos, OEMs will take the opportunity to re-leverage and rebalance their supply chain. It will be painful but new volumes will need new contracts and new conditions of supply. Suppliers will have to reposition themselves but with a good strategy, pricing and the right conditions this can be their second call to win contracts where they probably did not in the first attempt. Logistics are also something to consider in the future. Logistics operations simply are being reshaped. According to specialists, 2021 will not see stability. Crazy-high prices moving products to and from Asia will still be present. Today, it costs up to five times more to move merchandise connecting with Asia. Some routes have been altered by restrictions in some ports, some others are lacking capacity due to the extreme demand that e-commerce has created. Cost and complexity to move parts will remain a big challenge next year. Nearshoring and reshoring are our biggest opportunities in the coming two years, at least. If you put together the two previous points, you should have not only a perfect storm but the perfect excuse to reshuffle the way we were thinking about the supply chain in aerospace before the pandemic. The US still represents the biggest market in commercial aviation and if we add the defense sector, it becomes the biggest by far. Many contracts during the previous decade were granted to manufacturing operations in Asia, as those countries were starting operations and had an understanding of the industry. COVID-19 unmasked all the reasons why it is better to have your suppliers closer, in the same region. Logistics are less complex, coordination and alignment are almost natural, communication is far clearer, networking much simpler and development and follow-up far easier. It is neither the biggest nor the strongest but the more adaptable that will prevail. Operations took a big hit from forced stoppages and then from the market contraction in civil aviation. The whole chain is aching. Airlines are struggling

to maintain operations and are either restructuring financially or getting help from governments, but for sure, expenses for new planes will go down. OEMs saw their programs fall to around 40 percent in rates as a result. Manufacturing operations are aligning to those numbers. Services and indirect employment are seeing the same effects and even MRO operations saw how planes parked and the low oil prices increased the maintenance time cycles of common customers either because they were not flying or old planes were entering back into service. In the kind of economic instability we are facing, it is not the big company or the usually strongest who will survive. The regular rules are, in many cases, worthless and almost everything has changed. Therefore, those with the biggest capacity to adapt will be the ones getting a bigger slice of the markets to the detriment of those who once ruled the place but were not able to adapt. Volumes and rates will not increase soon. In my view, we will be lucky if we can produce in 2021 at the level that we produced in 2020. Operations will suffer adjustments and will look for efficiencies to maintain a competitive cost. The talent pool is leaking but it is time to invest in the future. Sadly, we lost direct and indirect jobs in the industry due to rate and volume adjustments. Many of those resources were highly skilled and specialized. It took years for companies and the academy to train and certify those resources. Some of them were able to relocate but many others will have to change their activities to another industry. Please keep their contacts! Volumes will eventually come back, and we will need their skills and experience again. But this is as well a wakeup call to educational institutions, companies and governments to work in a united way and aligned toward the objective of developing the national aerospace educational system that will nurture the future generations of workers needed in the industry. Promotion is necessary more than ever before, but it should be smarter too. ProMéxico disappeared for whatever good or bad reasons. But we urgently need to promote the country and attract foreign investment, nonetheless. We also have to tackle things that do not work properly, such as the lack of presence of an aviation authority, incentives that are more competitive against those offered in Asia, mainly, and the uncertainty among foreign investors created by public policies issued by our government. We have done a very good job in the last 10 years to open new operations, with increasingly complex processes. Big companies have invested in Mexico’s aerospace operations because of its very good ROI, good understanding of quality requirements and proudly, a proven record of efficient operations that in return increased margins and made it worth every penny invested in the country.

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Largest Legal Cannabis Market in the World Guillermo Nieto President, National Association of the Cannabis Industry (ANICANN)

Hydrocarbons Law: The Other Reform Fluvio Ruiz Alarcón Adviser of the Senate of the Republic

From the Telegraph to 5G: A Reflection of Technological Evolution Lior Yafe Economic Counselor of the Embassy of Israel in Mexico

The Light and Shadow of a Year Like No Other Merlin Cochran Director General of AMEXHI

Surviving 2020 to Produce in 2021 Andrés Brügmann Country Manager of Fieldwood Energy E&P Mexico

Arab Initiatives Open Window of Opportunity for Mexico Yemile Mariana Tuma President of the Arab Mexican Chamber of Industry and Commerce

Integrating ESG: A Key Ingredient to Long-Term Success Jorge Rave Country Head of Export Development Canada

The International Green Energy Challenge Len Taylor Sector Specialist in Offshore Wind and Renewables for the Department for International Trade (British Embassy in Mexico City)

Betting on Mexico in the USMCA Jennifer Burge CEO of WorldWise Coaching

Blockchain Tech: Why All Industries Should Be Aware Karel Van Laack President of Holland House Mexico

Entrepreneurship The pandemic has triggered massive business closures, along with mounting job losses and deepening inequality in the country. Still, the entrepreneurial ecosystem has been developing steadily and in 2020, Mexico celebrated the birth of its first unicorn, giving way to a second one in early 2021. The growth of these two companies and the hunger for entrepreneurship in the region have been fueled by the technological adoption unleashed by the pandemic, the attention that foreign equity funds have paid to the country and the drive for more robust regulation to leverage the sector’s projects. This phenomenon is no coincidence. Factors such as the nearshoring opportunities in the region, the unique features of the Mexican market and particular needs that require projects that offer solutions to the issues troubling this part of the world have been the catalysts for the unfolding landscape. While this helps to map out the path for entrepreneurs starting to get off the ground, challenges remain. To prevent projects from dying in their first years of life, decentralization of venture capital funds, greater financial education related to the ecosystem and access to financing tools are among the potential solutions leaders in the sector are calling for. This comes on top of calls for speeding up the licensing process for fintech companies granted by the public sector, which during the pandemic provided insufficient microcredits to SMEs to make up for the lack of liquidity, according to Mexico’s Entrepreneurs’ Association (ASEM).

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VENTURE CAPITAL INVESTMENT GRAPH 1. VENTURE CAPITAL INVESTMENT VALUE IN MEXICO (IN MILLION US DOLLARS) IN MEXICO (US$ MILLION)

The entrepreneurial ecosystem in Latin America is booming and Mexico is enjoying its fair share of the bounty, including its first two unicorns. There is every reason to believe the country is

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just getting started. “Latin America hosts an incredible market opportunity. There are 620 million people and over 17 million businesses across the region. Even if you are just focused on Mexico, which hosts 126 million people and over 4 million

1,200

1500

businesses, you have the ability to build a billion-dollar business by just capturing a tiny fraction of the market,” Founder and CEO of Runa HR Courtney McColgan wrote for MBN.

1000

A strategic geographical position and a booming consumer 531

market mean Mexico is fertile ground for entrepreneurial projects to develop. Foreign venture capitalists (VCs) are

500

taking notice and putting their money in play. The largest VC 172

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VCs Show Confidence in Mexican Entrepreneurship

investments identified in Mexico in 2020 exceeded US$10 million, five times higher than the largest amounts recorded in

2019, which totaled US$2 million, according to information from 2016

2017

2018

2019

2020

the Mexican Private Equity Association (AMEXCAP). According

Source: Statista

to Liliana Reyes, Director General of AMEXCAP, funding for entrepreneurs has been impacted only to a minor degree by shocks like the pandemic. “The industry consolidates and

LATIN AMERICA'S MOST VALUABLE GRAPH 2. LATININ AMERICA’S VALUABLE UNICORNS 2021 (INMOST BILLION US DOLLARES, UNICORNS IN 2021 (US$ BILLION) AS OF MAY 2021)

strengthens when there are complex conditions because there are problems to be solved and areas of opportunity,” she said in a statement. 25

Nubank

Kavak Rappi

Mexican Unicorns

3.5

Wildlife Studios Loft

The thought that a Mexican startup could become a unicorn

was unheard of a couple of years ago. But there are always

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Bitso

players like Kavak who charge against the tide and succeed. In October 2020, the company became the first Mexican

2.1 1.75

C6 Bank Creditas

unicorn after reaching a valuation of US$1.15 billion. The startup implemented a digital model based on purchasing cars from

dLocal

1.7 1.2

LifeMiles

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public. “Kavak will be the unquestionable leader in Mexico in

VTEX

1 1

Movile iFood

its segment. In five years, we will be operating in a few more countries across the region, with a market share similar to

1 1 1 1

Loggi QuintoAndar EBANX Madeira Madeira

individuals, refurbishing them and offering them for sale to the

what we enjoy in Mexico. All consumers involved in purchasing, selling or financing a vehicle will see Kavak as their first option given the benefits we will offer. In five years, we may go public 5

as well. We have great ambitions,” Carlos García, Founder of the company, told MBN. In April, Kavak reached a US$4 billion

Brazil BRAZIL

MEXICOMexico COLOMBIA

URUGUAY Colombia

Uruguay

Source: Statista

valuation after raising US$485 million, making it one of the bestvalued startups in Latin America. In May 2021, the Mexican market witnessed the emergence of its second unicorn. Crypto platform 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. “We want to make sure that folks in the region really benefit from accessing these global financial services that are getting built on top of blockchain,” said Daniel Vogel, Co-Founder and CEO of Bitso, in a statement. “The growth of the cryptocurrency ecosystem this

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year has been remarkable. It took Bitso six years to reach its first million customers. Now — less than 10 months later — we have reached 2 million,” Vogel added.

Conference

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Highlights

Mexico Could Become Latin America’s Tech Hub Courtney McColgan Founder and CEO of Runa HR

Fernando Lelo de Larrea H. Partner at ALLVP

Javier Mata Founder of Yalo

Vincent Speranza Managing Director and Latam Regional Adviser at Endeavor México

Francisco Padilla Co-Founder of Konfio

atin America’s entrepreneurs are on fire. Mexico is already home to two unicorns and continues to attract both local and foreign investment funds. While opportunities for entrepreneurship are increasing, there is still a need to address the region’s remaining

challenges in helping startups have a greater impact. “It is most impressive that Mexico has achieved all this success in the midst of a pandemic and a global financial crisis. If this is bad, I cannot wait for it to be good,” said Courtney McColgan, Founder and CEO of Runa HR. Getting to this point was neither quick nor easy. According to Francisco Padilla, co-Founder of Konfio, the journey started almost 30 years ago with NAFTA, a treaty that opened the borders to trade with the US. “This led to the migration of talent to the US who trained there and returned after a few years, creating a partnership between both countries that at the end of the day has brought us closer to more advanced places like Silicon Valley.” “Getting to where we are now is a process that has been compounded over many years. It is the joint effort of many people with a long-term vision,” added Fernando Lelo de Larrea H., Partner at ALLVP. He mentioned that it is important not to get lost in the ecosystem’s hype as investment rounds are announced more and more frequently. Another reason why Mexico and Latin America are experiencing the current boom is that the region “imagines a future that does not depend on legacy technologies,” said Javier Mata, CEO and Founder of Yalo, which recently raised US$50 million. Mata said the lack of digital infrastructure is the region’s biggest opportunity and investors are noticing. But the current state of the entrepreneurial ecosystem is not the result of magic. To understand the present, it is important to remember the first decade of the 2000s, explained Vincent Speranza, Managing Director and Latin America Regional Adviser at Endeavor Mexico, when Mexico’s entrepreneurial ecosystem was only focused on retail, food and beverages and family businesses, with no public policy, little participation of women and no technology. “This became a great opportunity because we needed to close the gap that was created in that period,” he said. One of the first milestones for the region’s ecosystem was the first round of capital raising that exceeded US$100 million, achieved by the Mexican fintech startup Clip in 2019 and led by Softbank,

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said Speranza. “This made international funds look at Mexico for the first time. This was a validation of the value of the market in the country and opened a window for others,” he said.

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from the

Q: How has the pandemic exposed the vulnerabilities of entrepreneurs? A: For SMEs, the main challenge is lack of liquidity. Almost 75 percent of SMEs die in their first two years, primarily because of a lack of cash. The pandemic made this worse. Our economy is dominated by traditional business models, which are characterized by self-employment and low productivity. At the start of the pandemic, we did a survey with approximately 1,300 business owners in all sectors. We asked them for how long they had money to cover their expenses. Nobody answered more than two months. Another issue that affects this is the long timespans of payments from large companies. When they hire a product or service from a smaller company, they take up to 60 to 180 days to pay. In that time, SMEs can fail in trying to access more capital. Lack of access to credit or investment is an issue that further worsens liquidity. More than 90 percent of entrepreneurs in Mexico use their own resources. About 28 percent use those of family and friends. COVID-19 has also demonstrated the strength of entrepreneurs. It is important to point out how we see entrepreneurs. Many people think of the stereotypical image of a kid who has just left university and wants to build an app. For us, entrepreneurs are people who create and run companies. During this pandemic, we have seen many people who are very resilient. They have kept

Juana Ramirez

their companies running, with many keeping all of their staff members. We know now that the pandemic is going to be longer than thought. Entrepreneurs will continue to need to be resilient and part of our mission is to equip them with the tools to better

President of ASEM

prepare for adversity. Among our efforts, we have been working on the Payment Law in 30 Days. This would provide more legal tools for SMEs to pressure large company clients to pay them for their

A Roadmap to Strengthen Mexico’s Entrepreneurial Landscape

services within that time frame. They could, for example, charge interest on outstanding bills. Another tool is fines placed on a company that fails to pay. Also, there should be commissions for the resolution of payment conflicts. To this end, we have been collaborating with Tecnológico de Monterrey’s Law School. We have also been promoting an initiative for auto-regulation. Large companies publicly accept the responsibility to pay within 30 days. More than 100 large companies have committed to this. Q: Where does Latin America stand in terms of regulations that recognize and benefit entrepreneurs? A: ASEM is part of the Association of Latin American Entrepreneurs (ASELA). We have witnessed more political willingness to improve the standing of entrepreneurs in the region. I think the country with the most important advances is Chile, with its SECH law. Argentina has also moved forward with SEA. We still have a big challenge before us in having governments recognize the importance of entrepreneurship.

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This has to do with the stereotype mentioned earlier. In Mexico, entrepreneurs generate 70 percent of all jobs and contribute 40 percent of GDP. Overall, I would say we do not have a country in the region yet, that is really an example of an entrepreneurial country, like the US or Israel. We are not there yet.

oes anyone else realize that a Starbucks coffee can cost up to US$50? That is probably why I don’t have a credit card. I am paranoid about expenses, both in our firm and personally. Our human nature is wired with the software

of i) hyperbolic discounting for consumption, and ii) a poor understanding of the power of exponential functions and compounding for investments. While most would prefer US$9 today versus US$10 in a week (implied IRR of 24,000 percent – and this would be the hyperbolic discounting), very few would calculate and consider how much a reinvestment of US$100,000 at 20 percent for 30 years would get your net worth to US$23 million. Doing the same for 50 years would make you a billionaire (exponential growth and compounding).

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Given how difficult it is to think in exponential terms and imagine

Why Scaling Up is Like A $50 Cup of Coffee Jorge Combe Co-Founder of DD3 Capital Partnersn

what can be done in 20-50 years, very few entrepreneurs can establish a barbell strategy that simultaneously focuses on the big picture of solving a long-term problem on a long-term trend while having the ability to trace a road and decide where is the first stone. This ability to zoom in and out of your company’s long-term vision and day-to-day operations is probably the most challenging and difficult skill set an entrepreneur can have. This rare skill would involve: setting a goal; pivoting from that goal as you learn from short-term experiences; and at the same time, making numerous daily decisions that seem irrelevant individually but that constitute the necessary steps to grow and expand. Once you have a vision, your first step is a minimum variable product. When you find something that works, you need to apply as much leverage as possible to grow and reach your goal. Perfection in a business doesn’t exist; you cannot aim to shoot for perfection but only to refine and iterate your model and assumptions constantly until you improve constantly. In order to fuel your growth and become an exponential organization, you need to apply leverage, which can come in different forms and scales. Exponential growth results from a combination of a growing business with leverage (in its different forms). At our office, we have a big poster with Warren Buffet’s phrase: “Rule No. 1: Never Lose Money. Rule No. 2: Don’t Forget Rule No. 1.” Once you understand and fully assimilate how compounding works, you cannot lose money in a single quarter or a year. The way we implement our barbell strategy of growing exponentially is to focus on the small/chaotic things in the short-term and every now and then, take a pause to raise our head and make sure we are heading in the right direction. Small savings and small wins compound over time. Focus on the short term, have discipline, be patient and let the magic of compounding work for you.

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Next time you go for a coffee, do the math. A 50-buck coffee sometimes is worth it … sometimes it’s not.

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(For those still wondering how a Starbucks coffee can cost up to US$50 per cup, please read the full article.)

enture Capital has always been considered a mostly financial activity. True? Who could blame someone who answers yes to simplify the asset class, as it does have “capital” in its name. The reality is that the initial input and the final

output of a VC fund is indeed capital, but is it really a “mostly financial” activity? Think about the venture capitalist’s job for a bit. In a super simplistic way, you could think that he/she screens hundreds of projects, interviews tens of founders and does due diligence on a handful of opportunities to choose one investment. Most certainly, a financial background comes in handy when doing the number crunching and analyzing the lifetime value over customer acquisition cost ratio to understand how sustainable a business will be in the long run. From there, you only need to put the numbers into a master excel spreadsheet and let the

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formulas do the trick, right?

The Business of Venture Investing Hernán Fernandez Managing Partner of Angel Ventures

To be honest, a good venture capitalist definitely does something like this, but only as part of a far more complex decision-making process that involves the least objective of inputs: people. Good venture fund managers have to network themselves into the most promising deals, and this is not a full-time job, it’s a full-life job. You have to constantly remind the founders in your portfolio that you are looking for the next big idea. You have to schedule regular meetings with your investment-active limited partners to compare notes and bounce around a couple of names. You have to remind your peers and colleagues why you are a good co-investor into their good deals. All of this is easier said than done. To achieve this degree of trustworthiness by your invested founders, limited partners or peers, among many other stakeholders, requires an immaculate track record of being a team player and someone who really, in practice, adds value. In my experience, it all boils down to understanding if the problem that keeps you up at night as a founder is big enough as a market and if you are getting the right team to tackle the opportunity. The lack of a clear answer to some questions at this point says a lot about who you are as a founder. If you do not have a co-founder or a strong team with decent equity, I might have second thoughts about your leadership skills. If you cannot sell the dream to other dreamers, then you need the money to hire mercenaries, and I would be concerned about when the next unicorn will be looking at your startup to poach talent. Coming from my angel investment days, one key question I always ask is who took part in your “friends and family” round. The answer to this is critical, in the sense that it is not about the amount of money but about the specific task of asking your most trusted networks for support and backing. No money from grandma, former boss, soccer buddies, coworkers or business school classmates might be telling me that you’re a gambling

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drunk who is going through a nasty divorce and does not honor his/her dues. As venture capitalists, we like to see our projects be like ham and eggs. VCs are the chickens that provide the eggs, and we want to see the entrepreneurs be the pork putting its skin (literally, in this example) in play.

ntrepreneurship is considered an important driver of economic growth because it contributes to the creation of new jobs, new employment opportunities, the emergence of new innovations, but also to the stimulation of competition and competitiveness.

The link between entrepreneurship and economic growth is shown when entrepreneurs act upon profit opportunities and in the process, make the economy more productive by creating more economic activities that invariably generate employment opportunities and boost gross domestic product. Small and medium enterprises (SMEs) are the main developing force of the developed market economies. SMEs provide the catalyst for technological and industrial take-off and economic growth. Without doubt, entrepreneurship has the potency and drive to accelerate economic growth and development. In developing countries like Mexico, factors responsible for the

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slow growth of entrepreneurship and the lack of innovative spirit

How Entrepreneurship Dies in Mexico’s Medium-Sized Cities Pablo Ricaud Arriola President of Rising Farms

include our faulty education system, no incentives or environment to innovate, the lack of proactive government policies, and the most important in my view: access to capital. For the past five years, Mexico has seen a dramatic rise in risk capital allocation, both from local and international sources. This has been tremendously good for the ecosystem and has evolved into great innovation and a rising entrepreneurial class that is striving for more and finding ways to get there. The problem is that funding is almost completely concentrated in Mexico City, with the remaining chunk going to Guadalajara and Monterrey, leaving medium-large cities like Queretaro, Merida, Oaxaca and Leon dry. I am not saying that funds and investors are not keen to invest in these geographies, they usually do if the opportunity is in front of them; the hiccup is that the sample of entrepreneurs that are sophisticated enough to access them is egregiously small. Stanford MBAs know where the capital is, no matter where they live, but what happens with the good ideas of great entrepreneurs who don’t have the same access or opportunities and just need more guidance? The matter is made worse when you consider that institutional venture capital in Mexico usually rallies around trends and the most “innovative” industries, mimicking US funds and leaving the more traditional ones with only one option: friends and family. If you don’t have those kinds of friends or family, you are in for a big fight. It would be easier if we all just jumped onto the fintech bandwagon. I’m talking from experience. I’ve been lucky (and stubborn) enough to access the right people, sometimes in the tightest of frames to make funding work in a traditional industry, while not under the cover of the cherished Ivy League MBA. Regarding the traditional funding options, aka banks and other credit institutions, there’s zero chance for a startup to get funded by them. This is not hyperbole. Banks, and their “fintech” counterparts – mostly lenders with a cool webpage and exactly the same process of a bank or worse – ask for years of financial information and existence that these startups and entrepreneurs simply do not have. If by a miracle you do have it, chances are they’ll hit you with the dinosaur Mexican special requirement: 2:1 real estate guarantee for the loan. That is an impossible requirement for the absolute majority of aspiring entrepreneurs. Nonexistent, like I said. This is why in these places, most of their

ideas die. I can’t blame them. It’s not that people shy away from the battle, or the uphill climb, it’s difficult to start the climb when you don’t know there even is a hill. The solution is attainable with more engagement on both ends – more investors engaging outside the “hubs,” and more entrepreneurs engaging in the ecosystem that has united to accelerate their growth. That puts growth and prosperity within our own sphere of control. How to Start? In these geographies, capital is concentrated disproportionally in safe-seeming investments, like real estate. It’s like dying of thirst while a gigantic glacier (of capital) is frozen in front of you in the form of real estate. There is money, lots of it. Lack of sophistication on both ends is to blame. On one side, most aspiring entrepreneurs are not equipped with the right tools to structure business ideas in the right way or present them in an adequate format that makes sense for the very few venturing investors out there. On the other end is the capital in the form of big industrialist empresarios and families that fail to understand the kind of risks associated with these investments, or the right way to look at them, creating an environment of the blind leading the blind. If I don’t understand how an investment works, or see its potential, and moreover, the only ones I see are dimly lit and make no sense, you bet my hard-earned cash is going to the real estate mattress. What those environments need are catalysts that channel both sides in the form of entities like funds or sophisticated angel investors. These can filter the opportunities and understand the risk in the stead of those people with capital, and also educate and guide the entrepreneurs in the right direction. They can provide not only financing but also mentorship, strategic guidance, network access, and other support. We urgently need to start working to create these catalysts for the country to grow together, to decentralize, for opportunity to reach far and wide. Is not the greatest opportunity the one that nobody focuses on? Imagine having a front row seat to every and all the best ideas in these mid-sized cities that are falling right through the industry’s net. Those, I would argue, are the vast majority and the only thing they need is a little guidance, a little light. Reality usually follows what our mind is certain is bound to happen. What if people, and therefore our collective society, knew that tools are available for us to create, to aspire to more? Escaping the rat race. A compounding effect causing people to release their minds because there is a chance that if I do it right, I no longer have to merely survive or hate what I do. I can flourish. Possibility is powerful.

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aving watched the startup ecosystem evolve and shapeshift over the last five years in Mexico, a lot of the change is being driven by foreign entrepreneurs and capital. It started early with the Linio Mafia, many of whom were recruited from abroad, as documented

by Endeavor’s study into the long-term success generated by the Rocket Internet company. But Linio was just the initial spark to a movement that has been growing rapidly here in Mexico. Above all, foreign capital has been leading the charge. About 90 percent of Mexican startups are self-financed by entrepreneurs themselves for the first three years, as reported by the Mexicans Entrepreneurs Associated (ASEM). The best way of remedying this now is through foreign venture capital. Prior to 2016, the number of foreign VCs leading investments in Mexican companies was nearly non-existent, with only five deals led by a foreign VC that year, according to Crunchbase. Since 2019,

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the number of deals led by foreign VCs has grown exponentially,

Startup Boom in Mexico Driven by Foreign Founders, Capital Nick Grassi Co-CEO of Finerio Connect

despite the pandemic, with 89 rounds led by foreign VCs into Mexican companies. It’s important to remember though that these numbers still pale in comparison to the US, where almost 2,000 deals were done in 2020 in Silicon Valley alone. We’re just starting to scratch the surface of the potential in Mexico. We should also start to see median check sizes grow in the short term, as companies begin to reap the rewards of those initial investments into larger growth rounds. While we’re still only two months into 2021, the median deal amount is way up so far. That is not to say that foreign capital is better positioned to understand the market than the local players, but the expectations and valuations are typically much larger, for better or worse. Foreign VCs will have to continue to develop their expertise in the market over time, but it’s important to have them invested in Mexico’s success. Raising over Zoom appears to be contributing to a diversification away from just Silicon Valley, according to some of the recent trends. In Mexico in 2020, more than half the deals were led by foreign VCs, but the actual number is probably much higher. This is because many deals don’t include an official lead investor since they are often being raised via Convertible Notes and SAFEs. Overall, combining the knowledge that foreign VCs have of scaleup-sized businesses, the amount of capital they provide, and the growing confidence and experience they now have in Latin America is leading to an explosion in the number and quality of deals in Mexico. On the entrepreneur side, Mexico is an exciting market to get started in. There’s a lot to like, from culture, to climate, to price. Many of those ingredients are what lured people to Silicon Valley in the first place but its appeal has faded a bit over the years. While there are no concrete numbers on how many foreign founders are in Mexico, a cursory glance over the same deals analyzed earlier revealed a foreign founder or cofounder in almost one in five of the deals.

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There are now more opportunities for Mexican and foreign entrepreneurs alike to both start a company and work in one. The market is ripe and the talent is there to create the next generation of the Linio Mafia.

s an active and avid participant in the financial technology sector, I have been acutely aware of the conversation on banking the Mexican population. It is surely one of the key indicators of financial inclusion, which is not a minor issue in a country

where access to service infrastructure is highly unequal. Despite the many attempts and programs that have been put

in place over the years to bank the population, Mexico still lags behind, even compared to other countries in the region. According to the latest national Financial Inclusion Survey, less than 50 percent of the population has a bank account. Similarly, the penetration of financial services and their use decreases radically for smaller and less populated towns in Mexico. In contrast, we have seen a wave of growth in the fintech sector in recent years. According to Finnovista, since 2016, the average annual growth of the sector has been 23 percent. There are now

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over 400 fintech companies in Mexico. In 2020, there were 14

The Next Wave of Mexico’s Fintech Boom

percent more fintech companies than in 2019. If we look at this context panoramically, the following scenario emerges: traditional banking services that are necessary for the overall financial system to function correctly but a population that has yet to adopt these services. Simultaneously, we have a population that is highly connected to

Héctor Cárdenas

the internet (over 71 percent of the population has access to it)

CEO and Founder of Conekta

and it has become a relevant market for large social media and

and that has shown high adoption rates for other digital tools. For example, there are over 80 million smartphone users in Mexico streaming-service companies. At the same time, a wave of fintech has washed over Mexico, starting to bridge the gap between financial tools and the market. Access and adoption are two key elements of how we measure financial inclusion. They should remain key elements but we need to radically rethink how we look at these variables. When it comes to understanding the adoption of financial tools, we should shift from measuring how much adoption there is among a population, to how well is the specific tool serving the population that it is intended to serve. By doing this, we will be able to focus on solving the pressing questions that still exist in Mexico, and in Latin America, in relation to financial inclusion. As we start dissecting those answers, we will find that, perhaps, we have not focused our innovation efforts correctly. As a sector focused on disruptive innovation, we must continue pushing ourselves to develop the technology that will have the greatest impact on people’s lives. This means leaving the preconceived notions that certain tools will be effective in solving certain problems simply because they have done that in other markets. We also need to let go of the idea that because a tool is useful for a certain population, it will be for other groups as well.

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As a sector, fintech companies must continue striving toward rethinking the model, and not just the technology. Currently, a vast majority of the Mexican population is far removed from the “center” of innovation. But they should be the center of it.

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How Can Entrepreneurial Projects Have a Greater Impact?

Raising capital is among the biggest hurdles that entrepreneurs face, leading to more than half of the newborn companies failing in their first years of existence. Although industry leaders have different opinions regarding the foundations that should be laid for more impactful ventures, the bottom line is that the country has a great opportunity to become the cradle of high-impact projects. Collaboration is key.

For SMEs, the main challenge is lack of liquidity. Almost 75 percent of SMEs die in their first two years, primarily because of a lack of cash. The pandemic made this worse. Our economy is dominated by traditional business models, which are characterized by selfemployment and low productivity. Another issue that affects this is the long timespans of payments from large companies. When they hire a product or service from a smaller company, they take up to

Juana Ramírez President of Mexico’s Entrepreneurs’ Association (ASEM)

60 to 180 days to pay. In that time, SMEs can fail in trying to access more capital. Lack of access to credit or investment is an issue that further worsens liquidity. More than 90 percent of entrepreneurs in Mexico use their own resources.

As entrepreneurs, we must understand that we are not always the experts of all disciplines. We are always learning and showing vulnerability is important to make stronger connections in a humble way. In 2020, five entrepreneurs contacted me because they wanted advice on how to start a new project or because they had some innovative ideas for their businesses and needed some advice around that. In some cases, I noticed that the individuals were nervous about sharing their ideas out

Enrique Rodríguez Aréchiga Co-Founder and COO of Someone Somewhere

of fear of someone stealing them. However, in my experience, sharing your ideas is one of the most important things you must do as an entrepreneur.

For the past five years, Mexico has seen a dramatic rise in risk capital allocation, both from local and international sources. This has been tremendously good for the ecosystem and has evolved into great innovation and a rising entrepreneurial class. Regarding the traditional funding options, aka banks and other credit institutions, there is zero chance for a startup to get funded by them. What those environments need are catalysts that channel both sides in the form of entities like funds or sophisticated angel

Pablo Ricaud Arriola President of Rising Farms

investors. These can filter the opportunities and understand the risk in the stead of those people with capital and also educate and guide the entrepreneurs in the right direction.

I strongly believe startups and venture capitalists can and must have an impact. How can VCs and startups help anyone enter the startup environment? I believe professional social media are not the only resources available and young people who are not yet in the workforce are invisible on LinkedIn. Students are not really there so how can they know we are happy to welcome anyone who can help and wants to? Maybe we can reach out to high schools and universities and share our stories? Not that no one ever did

Piotr Godzinski Co-Founder of Finnu

that. I bet it might actually be common in some countries or with elite schools but no startup or VC within my network has ever mentioned such a thing to me.

020 is a year that entrepreneurs will never forget. I personally learned that having an innovative and resilient mindset are imperative to reacting well in any situation. I also came to realize that allowing yourself to be vulnerable and sharing your ideas with others can

help you overcome complex situations along the way. In our company, Someone Somewhere, an innovative mindset enabled us to produce face masks in two weeks. These became the bestselling face mask for more than six months, generating more income than our entire line of backpacks. Further, these face masks were made with artisanal fabrics and techniques from Oaxaca, so the artisans were able to continue working during the most difficult economic times of the pandemic. Resilience also was crucial during the pandemic, especially when the government established the protocol to close all retail stores for more than three months. At this point, many startups and local companies had to lay off and let go of their workforces to make it through the crisis. For us, that

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was not an option and we wanted to keep all our employees active

Overcoming Hard Times as Entrepreneurs Enrique Rodríguez Aréchigae Co-Founder and COO of Someone Somewhere

so we could continue with our ambitious plans for the year. To ensure our retail staff were productively contributing, we decided to upskill them to become sales account agents, so they could generate sales opportunities. This was the start of a new sales channel, Business Solutions, that enabled us to sell our products to B2B clients. Although not initially part of our strategic plan, we found an important niche that allowed us to close many sales opportunities and to compensate sales lost in the retail channel. Strength in Vulnerability In normal times, when people talk about their business, they tend to share the good news, the opportunities and the growth they are achieving. Some might exaggerate to show strength and success, trying to avoid the tough issues and problems. When the pandemic started, we were all shocked, so I really turned to my network. As entrepreneurs, we must understand that we are not always the experts of all disciplines. We are always learning and showing vulnerability is important to make stronger connections in a humble way. Share Your Ideas Last year, five entrepreneurs contacted me because they wanted advice on how to start a new project or because they had some innovative ideas for their businesses and needed some advice around that. In some cases, I noticed that the individuals were nervous to share their ideas for fear of someone stealing it. However, in my experience, sharing your ideas is one of the most important things you must do as an entrepreneur. Here’s the how: 1. Clarify yourself. 2. Get feedback. 3. Always ask for help. 4. Connect. 5. Never walk alone. 2021 is a very uncertain year. Some sectors and industries will suffer more than others, some businesses will finally desist, but

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some others will resist, innovate and take advantage of the new opportunities thanks to that resilient mindset. I am sure that if you put in practice these mindsets, you will learn a great deal, you will create stronger relationships, you will meet great people willing to help and you will be able to succeed in these complex times.

ue to the recent boom of cryptocurrencies worldwide, it would seem surprising if someone has not at least heard of the term “cryptocurrencies,” which refers to digital currencies that work using a complex cryptographic system. The media,

magazines, books and movies have explained in various ways bitcoin’s creation, operation and how it is traded, so anyone with a little interest in the financial market is able to describe what bitcoin is. However, few people have noticed one important feature of this technology: its design. In late 2020, it came to my attention that the teaching center IIT Institute of Design, under the Illinois Institute of Technology, Chicago, conducted a study commissioned by Fortune magazine, which included the 100 best designs of the last 100 years. This compilation included various types of designs and innovations, such as the Sony Walkman; it included highly technological products, such as the Smartphone; and it also included projects

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that have transformed the lives of millions of people, such as

The Role of Design in the Mass Adoption of Cryptocurrencies Pablo González Co-Founder and Chief Design Officer of Bitso

bitcoin, the first cryptocurrency that was created 12 years ago. This is not surprising, because from my experience in design, marketing and product development, I have been able to identify the factors that influenced bitcoin to be considered one of the best designs of the last 100 years; this is characterized by its golden letter “B,” crossed by two stripes that mimic the dollar sign, that is surrounded by futuristic elements and words like “decentralized” or “peer to peer,” characteristics of the currency. And this is not to mention in technical depth, the design behind its operation and blockchain, which are also other important factors when talking about bitcoin. However, when talking specifically about financial products, the issue is even more important and necessary, because while traditional financial service providers evoke the nature, architecture or even the traditional history of each country when designing the communication of their services, when talking about cryptocurrencies, at Bitso, we have identified a great challenge: to convey the benefits and power of the money of the future, to which people have access today. It is true that using bitcoin was complicated and storing it was even more difficult. To access this new digital economy in those early years, you needed technological know-how, patience and a lot of optimism. All those people who adopted the technology early on had to encrypt their own wallets and send transfers around the world. After 12 years, things are very different, as bitcoin is no longer just for a techie community. It has been simplified in such a way that anyone, including the boomer generation, can use cryptocurrencies in their daily lives easily and securely. For Bitso, everything changed the day we saw the first user using bitcoin to send money to his mom from the US to Mexico. This small action validated what we were trying to create from the beginning. We also realized that there was a long way to go to improve not only the experience, but also to contribute to the community through the development of innovative and simple

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products that really generate a positive impact on their daily lives. That is why we decided to make a strong commitment to designing much simpler and more intuitive products, as we are sure that only in this way will we be able to continue driving this technology forward and providing access to the future of money today.

ost readers have probably heard of Bitcoin, the cryptocurrency that entered the world stage in 2009, enjoying a volatile but meteoric path (1BTC = close to US$56,000 as of this writing), all on the back of serious corporate and institutional investor

interest. There is no lack of topics to write about regarding Bitcoin. However, perhaps the most relevant aspect of this story is the massive transformation occurring on the heels of this crypto frenzy and what it could mean for the global financial system. As is often the case, it all begins with a technology. In this case, it is blockchain technology, a version of which underpins every crypto ecosystem. Blockchain is at its core a database technology, with its distinguishing characteristics being the way in which data is stored within it and the possibility to manage it in a decentralized manner, so that no single person or group, but rather all participants, retain control. In a decentralized blockchain, data is immutable and transactions are visible to all participants. A blockchain allows for

Entrepreneurship | 42

distributed, decentralized and secure storage of data as well as

From Bitcoin to Decentralized Finance: Why You Should Care Juan Montoya Chief Co-Build Officer of Rokk3r

transparent, publicly available records. At first glance this may seem a trivial matter, especially to those of us who are less technically inclined. However, this technology, coupled with a few others such as Smart Contracts (self-executing contracts written in computer code that permit transactions between unknown parties), is nothing short of a key enabler for the reinvention of many of the systems that govern our lives. The most important byproduct of any blockchain and smart contract-based system is trust, or, viewed differently, the elimination of the need for trust to successfully execute transactions between parties. In turn, it can be said that the need for trust at scale is the key driver behind our existing governance systems. That is, the structure of our political and economic systems largely responds to the need to generate trust. As a result, we have erected a system in which large centralizing institutions, from governments to private regulated entities, act as trust brokers that hold sensitive information, define rules and enforce them. These systems have enabled the advancement of our society, but, like any system, have flaws that can be addressed through innovation and must be revisited as more tools become available to improve or rethink them. In the case of the financial system, trust is built and managed through multiple institutional layers, starting with regulations created by officials and enforced by a wide array of governmental bodies. These bodies, in turn, charter and regulate financial institutions which centralize the various key components of the system, facilitating every transaction from payments to lending, borrowing and investment. They often act as gatekeepers, following a business model highly reliant on centralization and high barriers to entry. At its best, the system is a virtuous circle where market signals inform capital allocation and prices, powering the economy and generating wealth for those who can access it. At its worst, the system is exclusive, plagued with inefficiencies and prone to systemic collapse. Ultimately, access remains an important challenge: about 1.7 billion people remain unbanked, according to the World Bank and many more are underbanked and only able to access expensive, subpar financial products. There are, of course, some interesting immediate trends transforming the financial landscape, as I discussed in a prior article. In a slightly more distant future decentralized systems, at scale and more thoroughly developed, can further transform this

landscape, eliminating or reframing the need for trust while at the same time more efficiently generating access to financial services and their wealth generation effects. Decentralized Finance So what might such a system or systems look like? Welcome to the world of Decentralized Finance, or “DeFi.” DeFi is, in my opinion, the most revolutionizing ongoing development in the world of finance. Powered by technology, entire decentralized, peer-to-peer financial ecosystems are active or being developed. This combination of decentralized applications, cryptocurrencies and smart contracts can essentially put any financial service at anyone’s fingertips. Within them, participants can both offer and consume these services without interacting with a traditional financial institution. As an example, a more mature case is lending and borrowing protocols such as Compound where users are able to offer crypto assets as lenders or borrow them from other participants. Lenders earn interest rates, which are determined via smart contracts and algorithms, while borrowers can access leverage for other operations. Smart contracts dictate collateralization amounts and are self-executing, thus guaranteeing trust. Anything from derivatives creation and trading to automated wealth management and even digital art marketplaces can be found in the world of DeFi. The implications of this are far-reaching. As they develop and scale, decentralized, self-governing financial systems, unconstrained by the structures of the traditional financial system, have the capacity to bring the benefit of financial services to many more people. Within them, users can participate as both suppliers and consumers and even vote on system regulations and decision-making, generating more wealth and equitable distribution for participants. Financial innovation is also exponentially increased as it becomes possible to create, fund, and execute a wide array of user generated, customized products, further increasing reach, impact, and relevance. It is also true, however, that DeFi is in its infancy. As of this writing, only about US$43 billion is estimated to be locked into its different protocols, though it has risen exponentially from the US$1 billion estimated last June. Still, it will take time to fulfill its promise. Technologies must improve, especially scalability and transactional costs. Access and products are still largely limited. Furthermore, as these applications mature, the question of regulation looms larger and will likely take center stage soon, affecting development in different geographies. Regardless, as we have seen with cryptocurrencies already, if there is a real value and use case, all the pieces start falling into place.

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Stop Thinking Big. Start From Within René Freudenberg CEO of Interlub Group

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Initial Investment Is Crucial for Products to Reach the Market Benjamín Morales and Antonio Ruiz Co-Founder and CEO / Co-Founder and CFO of Machina Innovation Lab

Data Must Tell Its Own Stories Pablo Martínez Flores CEO and Co-Founder of Klustera

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E-Commerce & Digitalization Bill Gates said a few years ago that, “If your business is not on the internet, then your business will be out of business.” This statement became a harsh reality after the pandemic hit. As governments rushed to impose lockdowns and prohibit the operation of non-essential activities, companies without a digital presence struggled. Under pressure, most looked for ways to access a digital marketplace or establish their own. However, companies found that opening a digital sales channel involved the same or even more work and investment than a brick-and-mortar shop. Large, well-established retail companies learned the hard way that meeting the expectations of online customers was no mean feat. Once neglected, logistics and customer service have now become an essential part of a company’s digital strategy. However, while the new guys are still figuring out the recipe for e-commerce success, digital veterans stepped up to the plate to make the most of the situation. In 1Q21, e-commerce giants Amazon and Mercado Libre reported better-than-expected results driven by consumer spending while in confinement. These marketplaces have set the bar quite high for others, leading the way in customer service, strategic partnerships, delivery times and best practices for sellers. E-commerce is here to stay and there are still opportunities for newcomers to make the most of a difficult situation.

Tech

Analysis E-Commerce Revolution: There Is No Going Back

Conference Highlights Traditional vs. Disruptor: The Battle for the Future of Shopping

Analysis Kavak: The Story of Mexico’s First Unicorn

View From the Top Iliana Vetrano | Vehicle, RE and Services Marketplace Director of Mercado Libre México

Expert Contributor Francisco Álvarez | CCO and Co-Founder of Getin

Expert Contributor Eduardo Medeiros Cardoso | Chief Digital Officer – Latam of Office Depot

View From the Top Gretta González | General Manager Shared Rides of Uber México

View From the Top José Andrés Chávez | CEO of Bayonet

Roundtable How Can Mexico Become Latin America’s Tech Hub?

Expert Contributor Mario Gamboa | Founder and CEO of Intelimétrica

View From the Top Douglas Montalvao | Director General of Adobe Mexico

Content Links

E-Commerce & Digitalization | 48

E-Commerce Revolution: There Is No Going Back TOP CONSUMER CATEGORIES IN 2021 (PORCENTAGES) GRAPH 1. ONLINE PURCHASING PREFERENCES BY PRODUCT SEGMENT (PERCENTAGE)

Many people who did not trust e-commerce ventured to make their first purchase out of fear of going out and coming in contact 68

Food delivery

Fashion Beauty and personal care

Electronics

Supermarkets

from consulting firm Kantar, there was a 26 percent increase in online shopping in Latin America during the first weeks of the

contingency. But one fact that pushed people to buy online was the Hot Sale, the largest online sales campaign in Mexico. In 2020,

Office supplies

companies that participated in its seventh edition made total sales

Tools Sports Furniture and home decoration

of MX$20.2 billion (US$890 million) between May 22 and June

1. Over 10 days, digital sales grew 82 percent compared to the

MX$11.1 billion (US$489 million) generated in 2019, according to

Children

information from the Mexican Association of Online Sales (AMVO).

Pets

Automotive

of e-commerce users in Mexico was estimated at around 50.7 from the previous year, according to Statista. According to data

Consoles and video games Pharmacies

online services became the real new normal. In 2020, the number million, an increase of around 9 percent compared to estimates

Household appliances

with COVID-19. Suddenly, e-commerce, food delivery apps and

During the pandemic, companies like The Home Depot, Walmart,

20 30

40 50 60 70 80

Liverpool, El Palacio de Hierro and Office Depot redirected their

Upward tendency against 2020 UPWARDS DOWNWARDS Downward tendency against 2020

strategies and now their efforts are focused on digital campaigns.

Source: AMVO (Online Sales Study 2021)

percent of the Mexican population, made an online purchase

According to AMVO, more than 12 million people, or almost 10 during the Hot Sale. “Our group is going through a complete digital transformation. We have to change the culture of the company, either by evangelizing or letting people go if they cannot accept

TABLE 1. MEXICO’S DIGITAL SHOPPER PROFILE IN 2021(percentage)

this new culture. The physical store will remain important but we will see big changes. Large retailers like Liverpool and El Palacio de Hierro will have to do things differently,” said Eduardo Medeiros,

Gender

Age

Chief Digital Officer for Latam and CEAM of Office Depot Group, in

Women

18-24 years old

an interview with MBN.

Men

25-34 years old

May the Best Win

35-44 years old

For native digital companies, the story is different. While some

45-64 years old

65+ years old

Socio-economic Level (NSE)

large companies modify their strategies to focus on their digital transformation, for tech giants like Amazon, Google or Microsoft the objective is to capture more users while the pandemic is still raging. In 2017, Amazon established itself as the preferred platform

Device Usage

for shopping in Mexico and in 2020 for the first time, it displaced Mercado Libre as the e-commerce leader in the country. Amazon

Smartphone

C+

Laptop

In April 2021, Mercado Libre said it would invest US$1.1 billion in

Tablet

2021 to expand its storage and services space in Mexico. This figure

C-

Desktop

D+

had 8.8 percent of market share and Mercado Libre 8.5 percent.

exceeds the total invested by the Argentine e-commerce giant in the last four years in the country. It is nearly thrice the US$420 million that Mercado Libre invested in 2020. Everyone Wants a Piece of the Pie

Source: AMVO (Online Sales Study 2021)

The pandemic is not over yet and neither is the competition between companies for a slice of the e-commerce pie. “The day we had to stay at home marked a turning point for the industry. From that moment on, all of our purchases were through e-commerce in response to physical restrictions. I do not think we are going to return to life as we had it a few months ago,” said Founder of

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Customer-Centric E-Commerce Leticia Espinosa during ZenDesk’s webinar, “The Impact of Customer Experience on the E-Commerce Industry,” on May 20, 2020.

Conference

E-Commerce & Digitalization | 49

Highlights

Traditional vs. Disruptor: The Battle for the Future of Shopping Roney Almeida VP of Sales Mexico & Central America at VTEX

Marco Casarin Country Manager México at Facebook

David Miller Country Manager México at Amazon

Alejandro Sisniega Chief Commercial Officer & Co-Founder at Jüsto

Alejandro Solís Director General México at Rappi

Arturo Vasconcelos Deputy Director General at Chedraui

Cui Arroyo VP eCommerce Operations at Walmart Mexico

hile digital companies ponder the next step to increase their market share, traditional supermarkets are turning to the internet, with the hope of attracting customers to their online stores. The

balance between the physical and digital experience will be key to engaging consumers in a hybrid future. The pandemic made online shopping a staple for many Mexicans and e-commerce continues to grow by leaps and bounds. In 2020 alone, the supermarket category in e-commerce grew by 40 percent, reported the Mexican Association of Online Sales (AMVO), while e-commerce as a whole increased by a whopping 85 percent in 2020, said Roney Almeida, Vice President of Sales for Mexico and Central America at VTEX. These circumstances pushed “business leaders to create agile strategies to transform their retail offer,” said Almeida. “2020 was a complex year,” said Arturo Vasconcelos, Deputy Director General at Chedraui. “The changes surrounding purchase dynamics detonated shifts in our operations as many of our clients radically changed their consuming habits.” Alejandro Solís, Director General México at Rappi, reiterated that “e-commerce retailers need to stay relevant and continue adding value to their offer.” But the physical element also remains an important selling point, said Alejandro Sisniega, Chief Commercial Officer and co-Founder at Jüsto. In grocery shopping, he explained, it is essential to have an excellent offer that meets clients’ expectations and generates the same emotions that having physical contact with the products would create. A broad variety of products is essential to attract and retain customers, said David Miller, Country Manager México at Amazon. Through a wide variety of products, customers are more likely to find something that meets their needs. “It all begins with the product selection,” said Miller. When making a purchasing choice, price remains a key factor, as well, regardless of the platform. “Low prices are the ultimate goal for retailers, online and in person,” said Cui Arroyo, Vice President of E-Commerce Operations at Walmart Mexico. “This period is not a new normal; it is a transition,” added Marco Casarin, Country Manager México at Facebook. Companies are still adapting to consumer habits, he said, and they have

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discovered that tech allows them to monetize products, services and experiences to deliver more innovation than traditional companies. “Digitalization is a need, not a choice.”

E-Commerce & Digitalization | 50

Kavak: The Story of Mexico’s First Unicorn Kavak, Mexico’s first unicorn, is consolidating its leadership in Latin America while accelerating disruption in the region’s used-vehicle market less than five years after its foundation. The company has almost quadrupled its valuation to US$4 billion after adding more than US$485 million through a Series D round. “When a customer buys a vehicle through Kavak, they should know our vehicles have passed an exhaustive 240-point inspection to guarantee the vehicle is in optimal condition. In addition, we recondition the vehicle in terms of aesthetics. Once polished, we take it to our potential customer’s home for a unique experience. Our customers have a three-month period to test for any malfunction,” Carlos García, Founder of the company, shared in an interview with MBN. As the company entered its fourth year of operations, the COVID-19 pandemic emerged, disrupting almost every business. For Kavak, it created opportunities. “Given the current circumstances, we are the only alternative that allows people to sell or purchase a vehicle without leaving their home,” said García. Kavak’s strong sense for innovation led the company to build a “contactless experience” during the lockdowns, delivering daily growth between 5 and 10 percent, according to García. The First Mexican Unicorn In October, Kavak became the first Mexican company to surpass the US$1 billion valuation mark at US$1.15 billion. Japanese holding SoftBank Group, Hong Kong’s DST Global and Freenoaks Capital of the US led that investment round. SoftBank and General Atlantic bought Mountain Nazca’s shares in Kavak in late April. Kavak has not only attracted outstanding talent to the company – like Federico Ranero, former General Manager of Uber México as its COO – but it has also created strong partnerships with key companies in the sector. “At Uber, we are committed to achieving accessible mobility. Partnering with Kavak for instance, we can enable access for more people to find in Uber a place to generate additional income,” said Gretta González, now General Manager of Uber México. Another important partnership is that with Spanish multinational bank BBVA. Ricardo Duhart, Director of Strategy and Solutions, Companies and Government at BBVA, told MBN that collaborating with Kavak is part of the bank’s digitalization strategy. Kavak’s Series D round attracted investments from D1, Ribbit, Bond and Founders Fund. Since the company was founded, private capital including the latest round has totaled US$900 million. The company has grown from 400 to 2,500 employees. It has 17 locations and four vehicle inspection facilities in Mexico and more in Argentina. “Kavak will be the unquestionable leader in Mexico in its segment. In five years, we will be operating in a few more countries across the region, with a market share similar to Read the complete article More about this topic

what we enjoy in Mexico,” said García when MBN asked about its five-year vision for the company. “In five years, we may go public as well. We have great ambitions,” said García.

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from the

Q: How has the professionalization of vehicle e-commerce advanced in recent years? A: Sales professionalization has been happening for many years now at different stages. We have evolved from small lots to digital dealerships in the automotive market, including motorcycles, heavy vehicles, and motor-like machinery. In terms of sales process digitalization, there have been remarkable developments. Digital sales strategies have been on the table for 10 years but the pandemic and resulting lockdowns have accelerated the implementation of these strategies by five years. Eight out of 10 people look for their next vehicle online but they still want the physical experience before completing the actual purchase. They need to see the vehicle, to test it, to feel it. We have accompanied dealerships in developing their digital strategies, their sales leads, the potential benefits, and how quickly they should respond, among other elements. For instance, users demand an answer within an hour and we have helped dealerships to reduce their response time by 45 percent through alternative means, such as WhatsApp. Taking all this into account, professionalization will need to continue as digitalization increasingly takes a prominent role in vehicle sales. Q: How does Mercado Pago support digital sales strategies?

Iliana Vetrano

A: We are working with BBVA to build an improved credit offering within the platform. Sixty percent of vehicles in the country are purchased via financing, which is set to grow given the market’s economic conditions. This project has been delayed from 3Q20

Vehicle, RE and Services Marketplace Director of Mercado Libre México

to 4Q20 but it is part of the complementary services that we want to offer, which can be fruitful for a bank. The platform could allow preliminary approval for vehicle financing. On the other hand, Mercado Pago is a solution for brands to offer an additional payment method for down payments, for instance. This is not

Mercado Libre Strengthening Dealerships’ Digital Capabilities

limited to online purchases. Q: What lessons have you learned from the pandemic? A: These past months have been exciting for us as we are redefining, creating, and innovating alongside brands and dealerships. This is fertile ground for creating new solutions. From April to July, we held 16 webinars with more than 4,500 participants. These were organized with AMDA, among other partners. Our digital certification was created after listening to the needs of sellers. In times of crisis, when you accompany your customers and become a true strategic partner, you become a solid leader that goes beyond sales and truly commits to the industry. Q: How did the pandemic influence Mercado Libre’s strategies for the future? A: Our goal is to continue being the No. 1 platform in the country when it comes to motor vehicles. In the new market landscape, our challenge remains how to become better strategic partners for our sellers, how to improve our product offering to potential

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consumers, and how to improve their experience. As we address these challenges, we create a virtuous cycle for the entire segment. We cannot expect the sales process, even within digital channels, to remain the same as before the pandemic. We are in turbo mode to accelerate the changes that we had planned for years ahead.

he transformation of the world in which we live has grown hand-in-hand with the incursion of technological processes in all areas. There is no activity that we carry out on a daily basis in which the digital world is not involved.

Commercial activities have benefited from each stage of the evolution of technological development. This has led to significant transformations for sales processes. Today, we are living in an era where the physical and the digital coexist in the same space. The improvements in analyses and processes within the retail sector have made brands more efficient and scalable, which has allowed milestones around commercial activity that have gained relevance with the aim of continuing to capture the attention of clients. This topic has been the focus of analysis among industry specialists. With the popularity of digital channels and the emergence of native buyers of these channels, brands are

E-Commerce & Digitalization | 52

increasingly facing the challenge of retaining current buyers and

The Era of Relationships Over Sales Francisco Álvarez CCO and Co-Founder of Getin

attracting new consumers, who have immediate access to all the facilities needed to choose one brand over another. This context has led to the emergence of new purchasing values. Various factors related to the new generations and their innate use of digital tools have promoted a new purchasing culture. This is where the new trend of prioritizing relationships between brands and buyers as a primary objective over sales starts to gain importance. The evolution of retail buyers goes hand-in-hand with the birth of new generations: In a few years, the largest share of purchases will be by millennials and centennials. These generations are characterized by their primary interest in sensations and positive experiences around brands. From here, theories arise around how brick-and-mortar stores can provide the best shopping experience. This trend among buyers is reflected in the evolution of the formats of malls around the world, in which developers are betting on shopping centers that function as recreational places where people also go to have fun. For these generations, it is normal to use digital media to stay informed about the topics that interest them. This has created better-informed consumers who question where products come from and what is behind them. Thanks to these characteristics, these consumers seek to establish a closer connection with the brands; they look for brands that represent their own lifestyle. Their purchase choices are made according to social interests, such as environmental or health impact. New generations make loyalty easier, since they like to be heard and expect a response. It makes sense for brands to focus their strategies on generating long-term relationships with their consumers over selling them goods at all costs. The digital channel, the new generation of consumers and the rise of e-commerce due to COVID in 2020 have led brands to seek to establish a closer relationship with their buyers by listening to them, for which social networks and digital channels can be great tools. An important point this year is the need for brands to be transparent. To retain customers and attract new consumers, brands must align their messages and be consistent between

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channels. If buyers detect that the brand is only taking advantage of them, it can cause the opposite effect. This year, it is important to cultivate and nurture relationships with buyers, since the market is saturated with options and the added value for retail is directly related to the customer.

any companies are working on the implementation of their strategic plans but many still maintain the same planning format as in previous years because they do not want to risk changing the dynamics of their plans. Unfortunately, many CEOs do not

know how to really innovate their strategic planning sessions, and changing the focus of their annual goals often creates fear. One objective that is listed each year in the strategic planning of any company is innovation/transformation. Many believe that the process of innovating/transforming is simple; that it only requires a certain investment, which is focused on the digitalization of things, on the acquisition of famous brand systems that promise to revolutionize the company. However, before starting to “innovate/ transform,” the company’s management needs to be clear about what innovation and transformation means for them, how they will measure the return on investment and in what time frame.

E-Commerce & Digitalization | 53

Good innovation management starts with alignment and

Blindness to Innovation Among Top Management Eduardo Medeiros Cardoso Chief Digital Officer – Latam of Office Depot

commitment by C-level executives, in addition to the need to have a clear and true understanding of the purpose of innovating. Large corporations, unlike startups, can end up losing sight of what the real innovation and future transformation of their business model is because their goals and size of their structure are often not aligned and top management lose their sense of the operation. At the beginning of the year, CEOs should hold a business model alignment session where they list the innovations with short, medium and long-term horizons. The priority should be the pillars that will sustain these changes and the investments and resources needed to achieve this transformation in the business model. It is also necessary to plan the continuous evolution of processes, culture and policies to innovate. This evolution is one of the main elements of innovation management and is part of the manager’s commitment, since each company has its particularities. Considering the structure of the 4Ps of innovation created by Prof. M. Nakagawa, companies must be clear about what innovation means in their particular business model. Here is my vision on innovation management, using the 4Ps framework. Purpose to Innovate Good planning for any company’s innovation program starts with where it wants to go in the future. Therefore, it is necessary that the entire C-level clearly communicate the vision of the future of the business. Having this direction is essential to prioritize what is really necessary to achieve this innovation, both medium term and disruptive innovations with the greatest potential for impact. That is why it is mandatory for the company’s top management to communicate the vision of the business’ future. This direction will be fundamental to prioritizing innovations, especially those of medium-term maturity and those that are more “disruptive” and with great potential for generating value. Innovation Processes The most successful companies in their innovation and transformation programs are those that devote the most time to reviewing and redesigning their processes, training their employees and communicating internally about the continuous evolution of processes. There is no magic formula when it comes to innovating in processes. What does help to quickly find the appropriate innovation process for your company is to have a methodology built on the basis of trial and error. Once you find

the main processes for your innovation program, you should take your next step in search of which structure will be the most suitable to scale and speed up your program. Do this before creating an “innovation lab” or an “acceleration area.” Remember that many of the world’s largest companies have created their processes uniformly, using the intellectual capacity of 100 percent of their employees. People to Innovate Unfortunately, I saw more than once an attempt by companies to outsource innovation. Innovation is not easy to implement, much less those innovation solutions that are available for sale. The CEO, along with his management team, is the person in charge of taking the company toward its future. Wanting to outsource your innovation program is an exercise in futility. Employees must and can innovate and if they do not have 100% of the skills to perform such a mission, it is the company’s responsibility to invest in the training of its employees. Having this discussion and recognizing the skills that are lacking within the team that will run your innovation program should be done as soon as possible. Innovation Policies Corporate policies are a big part of defining your culture and your culture is what will encourage or inhibit your innovation process. It is necessary to plan an evolution of corporate policies in order to create a cultural identity that allows a rapid advancement of the innovation and digital transformation program. The importance of having a policy aligned with innovation comes from the process of selecting a candidate. Many companies look for talent with a disruptive vision, with intrapreneurial characteristics, but if the internal processes and policies do not allow the execution of such skills, it will be a frustrating experience for the employee and also for the company. For this employee profile, a policy of encouraging innovation is necessary. Within the policies, it is necessary to add innovation criteria with a focus on goals and/or integrate more collaborative and intrapreneurial approaches such as the adoption of OKRs and agile management logic such as squads or tribes. Finally, innovation must be measured by horizons. Shortterm horizon innovation takes place within the company’s core business, differentiating from competitors. Mediumterm innovation is the expansion of the core business to new markets. Long-term innovations are more “disruptive” and uncertain, demonstrating similarity with the most visionary startups. For each horizon, it is necessary to measure. It is easier to find an ROI with those that are short term, proof of concept can be used to measure medium-term innovations and long-term ones can be measured by the results of an MVP.

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from the

Q: What is the nature of Uber’s partnerships with companies like Urbvan and Kavak and what other partnerships are strategic for Uber? A: At Uber, we are committed to achieving accessible mobility. Partnerships with Kavak and Urbvan address key factors for us. Through Kavak, for instance, we can enable access for more people to find in Uber a place to generate additional income. This allows us to provide more affordable solutions for those aiming to acquire a used vehicle to then work with Uber. Urbvan, on the other hand, is one of many initiatives aspiring to be a platform accessible to any user while contributing to sustainability. Urbvan is an inter-city transportation platform for defined routes with a greater passenger capacity. Our partnership implies that our users will have an alternative to moving between cities. Our goal is to be the mobility platform that best adapts to what Mexicans need and that they can trust. Moreover, one of our commitments is to become a sustainable platform to set an example for the future. The public should wait for some surprises and partnerships in this regard over the year. During the pandemic, we also realized how important it was to combat domestic violence. We created a partnership with the national network of shelters and Avon to work on a violence-free

Gretta González

lockdown. Through different schemes, we support women in need of shelter. We have also been working with ACTO, a civil association to promote gender equality.

General Manager Shared Rides of Uber México

Q: What are Uber’s strategies to maintain its market leadership in Mexico amid increasing competition from other platforms? A: Competition is always healthy. It makes us more creative regarding how we can deliver more value to our users and

Uber Mexico: Innovative, Smart, Efficient

partners. We work toward being the most secure and accessible ride-hailing platform. To achieve this, we get really close to our users and listen to their needs, while keeping in mind the needs of our partner drivers. Among our different options, we have Uber Promo, a functionality that allows us to offer 15 percent discounts at times when there is a low demand for rides. This works for both users and partner drivers because users get cheaper rides and drivers get more rides. We are about to launch Uber Taxi. We have opened the channels for taxis to sign-in in Colima, Durango, Manzanillo, Chihuahua, and Monterrey, and we are about to open the product to the rest of the country. Uber Taxi is a radio taxi service through which users can hire the taxi they need at any given moment. This creates demand for traditional taxi services. We also have Uber Moto in Cuernavaca. Uber Moto is 40 percent below the cost of an UberX ride, which works best for last-mile rides and it is usually faster. These are just a few of the projects we are working on to benefit our users while increasing the possibilities for partner drivers. On the drivers’ side, we have also implemented several initiatives.

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During this unprecedented situation, we sought out different schemes to mitigate the economic impact of the situation we are living in. Uber Flash is a clear example and now we are beyond half a million deliveries at the national level. Our different initiatives ensure we remain innovative, smart, and efficient.

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from the

Q: The pandemic led to an e-commerce boom. As an online fraud prevention and revenue optimization company, how has Bayonet performed? A: Any company that sells products or services online can use Bayonet’s service to understand who are their trusted shoppers and make sure their payments go through frictionlessly. Improving payment acceptance rates optimizes profits and the user experience, but in Latin America, you have to be careful about fraud (chargebacks) since fraudulent payment attempts have increased fourfold since the pandemic started. Before the pandemic hit, we already envisioned this market would grow. In 2019, e-commerce in Mexico grew 35 percent, more than in any other country, and recent dynamics caused this segment to accelerate exponentially. From one quarter to the next, transaction volume through Bayonet increased threefold, but we also saw fraud attempts increase fourfold. Fortunately, all of our customers improved their payment success rates by 72 percent and decreased fraudulent payments by 82 percent on average. Q: How does Bayonet prevent digital payment fraud and optimizes payment success rates?

José Andrés Chávez

A: What Bayonet does is replicate human intelligence in real-time. It is like having an army of people checking every transaction in detail, things like the type of card used, the product purchased, the sale’s amount, what IP address is

CEO of Bayonet

coming from and what type of device is the shopper using. Understanding these variables lets us know how legitimate a shopper is. It goes like this: as the online shopper clicks “pay”, our

Online Fraud Prevention to Keep Companies Safe, Profitable

application programming interface (API) receives the parameters of the transaction. Then we do three things. First, we build the user’s profile to see, for example, how many different email addresses, phone numbers, and credit cards they have to detect if he has a fraudulent profile or not. Second, we generate specific decision models for each of our clients to understand what is normal and abnormal for each business model. Third, we connect to payment vendors on behalf of our customers and route the payments via the ones with the highest chances of approval. All this happens in milliseconds, the shopper is not even aware of it. Q: How does Bayonet keep pace with innovative attacks? A: When a company opens up to an online sales channel, it will naturally be subject to fraud. There are services that ensure the cost of fraud, but we prefer not to because this naturally increases the friction with good shoppers. Our vision is to never structure a review process with just the bad guys in mind. Ninety-five percent of the users on average are genuine and the rest are fraudsters using multiple identities. It will always be more profitable to make sure good shoppers can

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pay, than to build a high-friction flow to have no fraud. That’s why although we are a fraud prevention company, our focus is to increase profitability, and that means having a small percentage of fraudulent payments each month but favoring an increase in payment success rate.

E-Commerce & Digitalization | 57

How Can Mexico Become Latin America’s Tech Hub?

For several years now, Mexico has positioned itself as one of the countries that companies look at first when they want to migrate their operations to the Americas. The reputation the country has built through the automotive industry, its skilled labor force and its strategic geographical position are just some of the factors that make it so attractive. Still, there is a long way to go before Mexico becomes the tech hub in Latin America that many expect it to be.

One area where I believe there is a lack of investment is embedded software engineering. The country has many front and back-end engineers, but few graduates focused on this area. Tecnológico de Monterrey, for example, has invested a great deal in software for automotive applications. This includes artificial intelligence and machine learning, which is going to be a central part of the coming revolution of automated driver assistance. Another aspect is government support, like India had at some point. This is necessary

Daniel Chávez CEO of Dextra Technologies

to encourage Mexican software companies to continue training engineers. Also, it would help to increase the exposure of the Mexican brand in the US.

At this time, we have to take into account changes toward cleaner and smarter technologies, but we also have to take into account changes in the mindset of business management. We want to take advantage of young, creative and hardworking people to be able to ask much more assertive and different questions. From Chihuahua Global, it can be expected that every effort will be made so that Chihuahua is among the Top 3 states that attract real foreign investment,

Alfredo Nolasco

not just corporate but the kind of investment that generates an economic spillover.

General Director of Chihuahua Global

Canadian companies looking to do business in Mexico will find ample opportunities in a wide variety of sectors. Particularly noteworthy in 2021 are the advanced technologies and manufacturing, cleantech, agri-food and consumer goods sectors due to their growth and strategic importance to the future economy of Mexico. Mexico’s appetite for advanced technologies is seeing significant growth. The

Jorge Rave Country Head of Export Development Canada (EDC)

rise in digitalization has magnified over the past year as the world adapts to the new reality brought on by the COVID-19 pandemic and this momentum is not expected to slow down.

“Nearshoring practices will continue to strengthen Mexico’s role as an auto parts supplier. Given our location, we can also take advantage of the trade tensions between the US and China. Mexico’s manufacturing quality is world-class and this is in part thanks to access to state-of-the-art technology. Companies from Asia, Europe, and the US continue to invest in the country because they recognize the country’s added

Victor Fuentes Director General of Mitsubishi Electric Automation for Mexico and Latin America

value. In addition to new investments, I also see opportunities to develop local talent. At Mitsubishi Electric, we have invested around US$400,000 per year in local universities so they can access the technology we provide.”

ata is to the 21st century what oil was to the 20th century: an engine of growth and change. Data overflows have originated the building of new information infrastructure, new businesses, new monopolies, new policies and, fundamentally,

new economies. Digital information is different to any previous resource: it’s extracted, refined, priced, bought and sold in different ways. Data changes the rules of markets and demands new approaches from regulators. IDC, a market research firm, predicts that the “digital universe” (the data created and copied each year) will reach 180 zettabytes (180 followed by 21 zeros) by 2025. It would take more than 450 million years to transmit all this information over a broadband internet connection. To assimilate it all, companies are rapidly building data refineries. The quality of data determines whether a company, for example, can predict the product a customer is going to buy in the next week, whether it’s efficient enough at

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understanding what kind of customer it is dealing with, or whether

The Exceptional Value of Data Mario Gamboa Founder and CEO of Intelimétrica

it can gain deep insights about all of its clients or know nothing about them. None of this is a switch that you just turn on, turn off and hit the sweet spot. Data must be structured, worked and deeply understood. Today, data are no longer just bits of digital informatio. The new economy analyzes rapid streams of often unstructured real-time data, which may well be “large streams” of data made up of photos and videos generated by users on social media, the vast amount of information produced by any driver on his/her way to work, or the flood of data from hundreds of sensors installed everywhere, among others. This has been the case of a bank in Mexico with which Intelimétrica has collaborated. One of its main activities is the placement of loans. The bank suspected there were certain stages in the origination process that consumed more time than they should and, therefore, generated a significant bottleneck. These delays led to customer dissatisfaction: the lack of a quick response from the bank caused it to lose 20 percent of the potential clients who initially applied for a loan. The bank took the initiative and openness to centralize all the information that, although already existing, was not available to all areas and was not accessible in real time. To do it the right way, they turned to Intelimétrica. We started working with their data, leveraging machine learning and artificial intelligence, to help them to transform digitally. Our team helped the bank generate a repository of information, they connected the different silos in the organization, understood which stages generated the bottleneck and even determined what reasonable benchmarks look like. With no additional marketing or other efforts, the financial institution adjusted processes, unlocked bottlenecks and got back on track to win back that 20 percent of customers it was losing. It is common that large organizations that aspire to innovate and transform their business by making use of data analysis, artificial intelligence or machine learning face a learning curve

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of processes that are not traditional and to which their teams are not accustomed to, because they do not usually exploit their information. It is important to dare to experiment, to go above and beyond the obvious paths and, most importantly, to be open to learn from failure.

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from the

Q: Adobe’s market value has increased twelvefold in eight years. What were the keys behind this achievement? A: Adobe is a technology company known for its program portfolio that includes Photoshop (PS), Illustrator (AI) and InDesign (ID). The company went through a major transformation in 2010. The digital transformation in industries had not yet begun but the company began to look for ways to grow exponentially, considering the advantage of having a leading product in the market, with loyal customers and few competitors. As a result, we decided to reinvent the company. Many years ago, customers had to visit a brick-and-mortar store to buy Adobe and then install it at home. Even so, customers did not have a close relationship with Adobe, meaning that users did not know when there were updates or any news regarding the programs. That is how the idea of making the business 100 percent digital came about. But it was not just about digitalizing processes. Adobe also extended its product portfolio and began to offer cloud services, which made the Creative Cloud more attractive as new version releases would be more frequent and would not require a reinstallation of the program. Moreover, Adobe’s business changed to a

Douglas Montalvao

subscription model. Customers stopped buying the software and moved to a cheaper monthly subscription program. The high price previously paid was an entry barrier for new users, which also contributed to clients choosing counterfeit

Director General of Adobe Mexico

alternatives. The plan worked and people who did not buy Adobe because they could not afford it began to subscribe. People who used the products illegally started to buy the official software. Also,

Adobe: A Digital Transformation Company

people who thought that Adobe was just for professionals began to explore our portfolio. These efforts helped the company achieve record quarterly revenues of US$3.13 billion in 2Q20, representing 14 percent growth year-on-year. Q: Why did Adobe decide to add digital transformation solutions for businesses to its product portfolio? A: Adobe needed technology for its own digital transformation and began to hire smaller startup technology services. The challenge was to integrate all these technologies from different providers. The company recognized that there was no technology alternative in the market that offered enterprise solutions to help other companies go through their digital transformation process successfully. Once the company saw this area of opportunity, it bought the companies that were its first suppliers and created the Adobe Experience Cloud. Since then, the company has had two businesses: Creative Cloud and Experience Cloud. The latter is the business that has grown the most in recent years. A few months ago, Harvard Business Review published an analysis on the last decade’s digital transformations and

placed Adobe at No. 2, only after Netflix. Likewise, during the first months of the pandemic, The New York Times issued a study on the companies that grew the most during the crisis and Adobe was ranked 17th. We know that the future is digital and evidence of this is that the company recorded its alltime high in terms of revenues during the pandemic. Q: Which industries does the company tackle with its Experience Cloud business? A: Our greatest presence in Mexico is the retail industry, along with airlines and banks. The latter is an interesting industry because it is a sector with a very traditional business model. However, when fintech companies entered the market, they disrupted the sector’s playbook. They demonstrated that it is possible to have more modern, digital and consumerfocused business models. In Brazil, for example, we have Nubank, a neobank that traditional banks underestimated when it first arrived in the market. Today, it is one of the largest banks in that country. Digital transformation is not an overnight occurrence. It is a process that takes years as technology, culture, processes and business models transform. Before the pandemic, companies believed they still had time to start their digital transformation process. However, startups have grown at an accelerated pace and are now the leading players. What traditional companies had planned to do in three years, they had to do in two months. Q: What has been the transformation process for Creative Cloud? A: Adobe’s motto is Creativity for All. The company’s purpose is to democratize the use of technologies so everyone can be creative and tell their own stories. With technologies like Spark Post, Ps Camera or Premiere Rush we want to provide ordinary people with tools they can use to be creative and express themselves. In the past, to be an Adobe user you had to be a photographer or a designer. The world is mobile now and we understand that. The first thing people do before they get out of bed and go to sleep is to check their mobile phones. Creative Cloud’s objective is to migrate our apps to mobile phones. Meanwhile, Experience Cloud makes the mobile experience an integral component of the corporate strategy. In each solution we develop, we take into account that the client has their mobile phone at all times.

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What Is Expected of a Product Manager in the Tech Boom? Maite Muñiz Co-Founder of Truora

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Sustainability is Part of the DNA of Every Decathlonian Louise-Eglantine Guillaume Head of Sustainability, Compliance and Institutional Affairs of Decathlon

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Fintech Challenging traditional banking, neobanks arrived in Latin America to try to change a system that allegedly has failed to meet the demands and needs of the market. As one of the most unbanked regions in the world, the fintech sector has found many opportunities in Latin America. Greater internet access, the Fintech Law and the pandemic are some of the factors that have boosted the fintech ecosystem in Mexico. These companies’ customerfocused, commission-free and fully digital value proposition has captured the affection of digital natives and many who have been rejected or overlooked by the banking system. This, coupled with the hype that other large startups have created in the region, has attracted the attention of investors as well as traditional banks that want to fight back and have embarked on projects that seek to digitize their products and improve customer service. Meanwhile, medium and small banks have sought to focus on market niches or even collaborate with the fintech newcomers. Despite the growth of the fintech sector, the challenges are not over and obstacles such as lack of financial awareness, cash penetration and labor informality still need to be overcome before financial inclusion can become a reality.

Fintech

Analysis Regulation, Disruption … What Trends Will Shape Fintech?

Conference Highlights Trends Transforming the Payment Technologies Market

View From the Top Luis Silva de la Torre | Director General of FinTech Mexico

Expert Contributor Yael Israeli | Co-Founder and CFO of Mozper

Expert Contributor Anabel Pérez | Co-Founder and CEO of Novopayment

Expert Contributor Aitor Chinchetru | Founder & Co-CEO of Fintonic

Conference Highlights Mexico’s Fintech Revolution Is Just Beginning

View From the Top Ricardo Olmos | Country Manager of Ualá Mexico

View From the Top José Carlos del Río | Country Manager of Sonect Mexico

Expert Contributor Juan CarlosCastro | Co-Founder of Briq Fund

Expert Contributor David Arana | CEO of Konfío

Expert Contributor Enrique Marú | Chief Revenue Officer of Sr. Pago

Roundtable How Can Fintech Advance Financial Inclusion?

Content Links

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Regulation, Disruption … What Trends Will Shape Fintech? TABLE 1. FINTECH ECOSYSTEM BY SEGMENT IN MEXICO

The pandemic has changed the way people interact with financial institutions, driving financial technologies as a result. The rise in

Segments

Percentages

Payments and remitances

21.23

Consumer lending

12.26

Enterprise financial management

12.26

Enterprise financial technologies for financial institutions

12.03

Personal financial management

12.03

Insurance

9.20

Business

7.31

Digital bank

4.48

Scaring identity and fraud

4.25

Trading and markets

2.83

Wealth management

2.12

Source: Finnovista (Fintech Radar Mexico 2020)

related apps that make it easier for consumers to do their banking — some for the very first time — is among the factors spurring growth in Mexico and the Latin American region of the fintech ecosystem, including both local and foreign players. According to a report from AppsFlyer, Mexico saw a 20 percent increase in finance apps between 1Q20 and 1Q21. The number of digital banking apps soared by 45 percent. “Mobile apps are playing a critical role in this transformation around the world and especially in large developing markets that prioritize mobile technology,” reads the report. “The charm of these solutions has spread thanks to the benefits that respond to today’s reality. These benefits are no longer simply ‘innovative’, ‘disruptive’ or limited to certain types of users. Today, more Mexicans can request a debit card using their cellphone in real-time and receive it at their home,” Aitor Chinchetru, Founder and Co-CEO of Fintonic, wrote for MBN. Overall, Mexico is the Latin American country with the most participation from foreign fintech companies, followed by Brazil with 67 and Colombia with 50. Despite a large number of companies, a KoreFusion report notes that this is a weakness

GRAPH 1. DIRECT INVESTMENT IN DIRECT INVESTMENT IN MEXICO'S FINTECH SECTOR (IN 2020, BY CATEGORY) MEXICO’S FINTECH SECTOR IN 2020

in the Mexican financial ecosystem because “the high presence of foreign fintechs increases competition between them and dissuades investor interest in local competitors.” The UN Economic Commission for Latin America and the Caribbean (ECLAC), however, is much more positive about fintech developments in Mexico as the country stepped into the regulatory realm of financial technology before others in the region.

35% Payments By May 2021, two new companies had joined the list of fintechs

29% Lending 14% Digital Banking 10% Fintech as a Service 8% Personal Financial Management

authorized by the National Banking and Securities Commission (CNBV): Tu dinero digital and BXL Fintech, which brings the total number of fintechs authorized by the CNBV to nine, according to the Official Journal of the Federation (DOF). Enough for Financial Inclusion? There is still a long way to go in terms of financial inclusion. In Mexico, 53 percent of adults did not have a bank account and seven out of 10 did not have access to credit in 2020, according

Source: FusionKore

to Mexico’s Bank Association (ABM). However, Marcos Sacal, COO of Arcus Financial Intelligence, told MBN the future looks quite promising, with a mix of several factors driving the penetration of financial services. Industry regulation plays a crucial role in driving the industry forward. Digital banking, contactless payments, debt consolidation, financial management and real-time payments have grown since the introduction of the fintech ecosystem and, in 2018, accelerated in Mexico with the introduction of the Fintech Law, which “has played a big role in regulating industry players and has had a huge positive impact on overall consumer confidence, as well,” Sacal said. “As time goes by, more and more companies will apply for a license Read the complete article More about this topic

to operate under the Fintech Law, which will pave the way for a more fluid process and open space for new companies to be born and grow,” he wrote for MBN.

Conference

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Highlights

Trends Transforming the Payment Technologies Market Tory Jackson Head of Business Development and Strategy - LatAm at Galileo Financial Technologies

María Teresa Arnal

igital payment methods have undergone profound changes in a short time. The growing popularity of digital currencies and digital payments, coupled with advances in underlying technologies such as AI and blockchain, will bring

lasting changes to the way people spend and exchange money, said experts at Mexico Business Forum 2021 Virtual Edition. Online payments increased exponentially during 2021, which Miguel Diaz Diaz, General Director of Payment Systems and Market Infrastructures at BANXICO, said is a positive sign, “as it contributes to the healthy development of the financial

Head of LatAm at Stripe

system.” According to Diaz, payment methods like Spei grew

Héctor Cárdenas

by 110 percent. “These types of online payments are essential

CEO & Co-Founder of Conekta

Federico Gómez-Schumacher VP Sales - LatAm Market at PayPal

Miguel Diaz Diaz General Director of Payment Systems and Market Infrastructures at BANXICO

René Salazar Palafox Director Digital Payments & Financial Services at Walmart México

for financial inclusion, which goes beyond having a bank account and withdrawing cash.” Agreeing that online payment growth is positive, María Teresa Arnal, Head of Latin America at Stripe, pointed out that one challenge is the continued risk of fraud. “Mexico is the country in Latin America with most cases of fraud,” said Arnal. René Salazar Palafox, Director Digital Payments and Financial Services at Walmart México, said that to find the balance, companies must invest in talent and tech. “These are complementary as they offer an improved experience through the use of technology and better safety thanks to the human monitoring the operation.” Smaller companies and startups also face drawbacks as they have limited resources to address all fraud charges, said Héctor Cárdenas, CEO and co-Founder of Conekta. “Chargeback regulation was insufficient; therefore, all chargebacks were a loss for the company selling.” Online charges are now safer, said Cárdenas, as “there has been significant progress in terms of data and we can now share information with banks with more confidence, but regulation still needs to improve.” Omnichannel options complement payment platforms, said Federico Gómez-Schumacher, Vice President of Sales for the Latin American Market at PayPal. “This is important because some physical businesses never thought of receiving electronic payments,” said Gómez-Schumacher. “Omnichannel payment methods help the user pay how, where and when they want.” Cash payments, however, may always have a place in Mexico, said Tory Jackson, Head of Business Development and

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Strategy for Latin America at Galileo Financial Technologies. “Cash is king in Mexico, with around 91 percent of sales closing through cash.”

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from the

Q: What is FinTech Mexico and what services does it provide? A: FinTech Mexico was founded at the end of 2015 with two clear objectives. The first was to bring together the fintech companies that are emerging in Mexico to foster spaces of collaboration, to explore opportunities and to create a community. The second objective, which emerged alongside the introduction of the Fintech Law in 2018, was to give direction to three business models that were not regulated by the law. This was crowdfunding, electronic payment funds or wallets and cryptocurrencies. These were in the grey area of the law and it was necessary to offer guidance and work toward legislative certainty for these areas. Between 2016 and 2017, we were actively engaged with regulators in Mexico and helped push the Fintech Law toward the finishing line. Q: How has Mexico’s Fintech Law prepared the ground for development and what needs to be done to see fintech grow in Mexico? A: Most of the companies that are awaiting approvals had followed legal requirements prior to COVID-19 and applied on time. Nevertheless, it is important to understand the timeline of the Fintech Law. The open banking law in Mexico covers not only banks but

Luis Silva de la Torre

the entire financial sector, so we are really talking about open finance. When the law was enacted, the first thing that happened was that collective funding platforms (IFCs) and electronic payment funds (IFPs) were allowed to apply for

Director General of FinTech Mexico

their Financial Technology Institution (IFT) license. In March 2019, the authority allowed companies that had already been operating to request their authorization. The CNBV set the deadline for application for Sept. 25, 2019 and 85 companies successfully applied. Of these, 25 were IFCs and 60 were IFPs.

FinTech Mexico Sees Major Opportunity in Underserved Population

The law provided time to make revisions and corrections to applications. This period ended in March 2020, just before the arrival of COVID-19, and the regulators were given 180 days to issue their decision on each application: authorization or an order to close operations. This process was impacted by COVID-19, since the CNBV had to pause its process for three months. It reconvened in August. It is important to mention that the companies that had been operational were allowed to continue operating during the process because they applied for the Octavo Transitorio amparo, which allowed them to continue operating. Those companies that were not operating before the authorization process began will not be allowed to operate until they receive authorization. In Mexico, open finance means the ability to open an API to access open data, transaction data and incorporated data. The first open data controls for open data have been issued, which means offering access to data like the location of bank ATM machines or bank branches. The legal certainty that the law has brought to fintech

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companies has been extremely welcomed and offers greater security for potential investors. Additionally, it has generated greater levels of trust for end users. Nevertheless, challenges remain, which include cryptocurrencies, crowdfunding and wallets.

oday’s kids are probably the first generation who might never set foot in a physical bank. Just a few years back, this might’ve seemed a drastic statement, but with today’s fintech landscape it seems fairly reasonable. And with youth-targeted banking, they’ll

likely be the most fortunate generation as well, with not only access to convenient and tailored banking, but also to a financial education to give them an edge in their adult life. As CFO of Mozper, a debit card and app for parents and kids in Latin America, I truly believe that education is the key to realizing not only financial inclusion but also a lasting positive impact on society. This is what lies at the heart of youth banking, a relatively new financial subsector that is gaining steam around the world. For many companies (not just banks), kids, because of their limited purchasing power, are perceived as a market segment that is not worth speaking to— a nearsighted view. A focus on younger

Fintech | 68

demographics should be a no-brainer for organizations that seek

Banking Certainly Not Wasted on the Young Yael Israeli Co-Founder and CFO of Mozper

to be relevant in the mid to far future. At a certain point, those kids grow up, the wealth balance tips in their favor and they become the consumer everyone is after. For that reason, a race to be the first to win them over is finally on. This is no secret. According to the latest State of Fintech Report published in March 2021, “emerging challenger banks focus on younger demographics.” There’s now a trend worldwide toward this consumer segment, and not only in banking. There’s a disproportionate amount of marketing dollars by brands targeting the younger generation. Capturing them young also means maximizing their lifetime value as customers (if you can hold onto them, that is). And this, of course, makes enormous sense: Whoever snags this generation today will be the market leader of tomorrow. In the case of youth banking, with the debit card + app combo, the value proposition for both customers — parent and child — is clear: Kids gain independence and flexibility to spend responsibly on the things they want, which are now mostly online, while getting a hands-on financial education appropriate for the digital era they are growing up in. Giving kids the opportunity to manage their own money from an early age, teaching them about saving, spending and borrowing will certainly help them become more experienced and confident about their relationship with money as they grow older. For parents, youth banking is their safe transition from cash to online with their kids spending habits, a shift that has been happening over the course of the pandemic and from which there is no coming back. This, while preparing their kids financially for a better adult life. It is no wonder that Greenlight, the premier pocket-money app for families in the US, reached over 2 million users and a US$1.2 billion valuation in just three years since its launch. And at Mozper, although early, we’re seeing fantastic adoption in our market. The challenge down the road will be to hold onto these kids as

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they grow up and transition to becoming their primary bank into adulthood. Afterall, this generation is notoriously disloyal. Part of the answer, I believe, lies in a new approach to underwriting lending as it becomes relevant in their lives. But we’ll leave that for another article.

exico’s nonbanking financial institutions (NBFIs) are today facing a historic opportunity to leap forward and achieve their purpose through recent changes in the field of financial technology, or fintech. But, opportunities, like waves, come and go and also

can manifest first as challenges. Thanks to a combination of factors, these entities, which are variously known by their associations and acronyms (Sofipo, Sofom and Sapi), find themselves in a relatively favorable position to equip themselves in ways they could have scarcely imagined just a few short years ago. That is because the increased simplification, access and affordability of key financial technologies, which are the foundational blocks to present and future financial services, are within their reach, presenting not only a chance to match the efficiencies and experiences enjoyed by other financial entities around the world, but to ensure their relevance amid an

Fintech | 69

increasingly digital population.

Nonbanking Financial Institutions Face Historic Opportunity Anabel Pérez Co-Founder and CEO of Novopayment

Understanding how NBFIs are different is important, but what’s far more relevant at this moment in time is how they’re similar. The first factor is demographic. Naturally, they operate in the same population. Even before the pandemic, and like the rest of the world, this population had shown a growing affinity for modern digital financial experiences — things that feel less novel by the day, like the ability to pay for goods and services and receive payment through a mobile phone. The second factor, also global in nature, is the disruption of the financial technology industry, spurred by more affordable, secure and compliant cloud-based technologies and a far-reaching and diverse network of investors willing to fund the next great fintech. But, what a lot of people don’t realize about these fintechs is that, unlike those that target end users, a great many of them sell back-end technologies for banks and other financial players that enable those same front-end user experiences. The other thing to note about this trend is just how badly it needs the Sofipos and Sofomes of the world to join it. And the reason is simple: numbers. Software as a Service (SaaS) business, which is the predominant model under which these revolutionary technologies are sold to financial entities, is about paying as you go for what you use as opposed to the old model of building it and owning it yourself. Every day, the innovators in this space are finding ways of making those technologies easier to adopt and deploy and more affordable to Sofipos and Sofomes. However, most Sofipos and Sofomes operate on technologies that are outdated and obsolete. To make matters more pressing, since the pandemic, some newer technologies that one could once have maybe postponed, have now become a requirement of doing business. In recent years, Mexico’s consumer-facing fintechs have demonstrated an ability to grow exponentially and organically, especially among younger populations. All of this strongly suggests that the next generation of customers will experience the range of their financial lives — opening accounts, paying, borrowing, investing — digitally. It also means that the sofipos and

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sofomes have a wave to catch. Like being in the trough between two waves, it may seem to many that the world around them has changed, that the latest wave is leaving them behind, but many will soon realize there is another wave behind it ready to propel them and the country forward.

he COVID-19 pandemic has caused devastation in almost every industry. But there have also been documented benefits from the health crisis. Examples include e-commerce, online education and the fintech sectors.

In the case of fintech companies, how they are revolutionizing banking with their card offer is relevant. The pandemic accelerated the adoption of neobanks, which are those banking entities that use the fintech philosophy. It also accelerated the adoption of digital entities that have a banking license to operate. The charm of these solutions has spread thanks to the benefits that respond to today’s reality. These benefits are no longer simply “innovative,” “disruptive” or limited to certain types of users. Today, more Mexicans can request a debit card using their cellphone in real time and receive it at their home.

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Today, it is also possible to receive up-to-date and accurate

The Fintech Card Revolution in the Middle of the Pandemic Aitor Chinchetru Founder and Co-CEO of Fintonic

information regarding a bank account and to carry out traditional transactions through an app. In a country where the pandemic has severely affected the economy due to restrictions and a slow vaccination rate, not having to go to a bank branch or stand in long lines, but to be able to carry out financial operations through an app and without paying any commissions is not only attractive for customers; it is also a solution for the current context. Beyond the pandemic, those who offer this type of card also contribute to solving problems such as banking. In Mexico, it is a reality that convenience stores compete against traditional banking branches. Today, the new players who issue fintech cards can be at the level of both banks and players from other industries that have found a new business vertical in banking. Today, people can see some needs met remotely and, in some cases, access services that once represented a challenge while safeguarding their safety and health. However, it is necessary to reflect on what the pandemic has shown us: the more we have everything concentrated in one place, the better. The future will be for those entities that offer more than just one financial solution. Currently, some only provide digital cards. Others only provide loans or credit, and still others only help manage personal finances. The pie cannot be incomplete. It is necessary, from now on, not only to provide more solutions and more services to people but also to incorporate a comprehensive, 360-degree vision that can help people have full use of a bank. That is one of the missions of Fintonic: to incorporate in one place the solutions to the financial problems of Mexicans, from an intelligent, personal finance manager to loans and a debit card. 2020 taught us that we depend on the digital world and that it will play a vital role in the control of our finances.

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In these times, making the right decisions in terms of personal finances will be crucial for people’s futures: the fact that more people can have access to debit cards and loans will determine the future of economies by contributing to their dynamism.

Conference

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Highlights

Mexico’s Fintech Revolution Is Just Beginning Iñigo Rumayor Belausteguigoitia Co-CEO at Arcus

Aitor Chinchetru

s one of the least-banked populations in Latin America, Mexico has attracted an increasing number of neobanks ready to challenge traditional banking. With them, the opportunity to reach those underserved by the financial system

has increased but getting there will not be possible without a customer-centric strategy and a long-term vision. “A few years ago, traditional banks dominated the sector. Today, it is clear that fintech is a strong player and it is here to stay,” Iñigo Rumayor Belausteguigoitia, Co-CEO at Arcus, told Mexico Business Forum 2021 Virtual Edition.

Founder & Co-CEO of Fintonic

Cristian Huertas Country Manager of Bnext

Juan Miguel Guerra

In 2019 alone, more than 394 fintechs were registered in Mexico, growing to 441 in 2020, according to Fintech Mexico. In 2020, the five main Latin American markets received a total of US$8 billion in financing for fintechs, of which Mexico attracted US$1.3 billion.

Head of Rappipay Mexico at Rappi

Emilio González General Manager Mexico of Nubank

Pierpaolo Barbieri Founder & CEO of Ualá

Greater internet access, regulation and the opening of digital accounts are some of the factors that have boosted the fintech ecosystem in Mexico, said Cristian Huertas, Country Manager of Bnext. “Also the traction that companies like Rappi or Nubank have generated in Latin America has helped other players in the region to continue raising capital,” he said. “Companies from other countries have arrived because traditional banks have not fulfilled their task here. That is why we have grown as we have done so far.” Brazilian fintech Nubank, which now has over 35 million customers worldwide, approached the Mexican market in 2019 after discovering that many of the elements that made its product a success in its home country were also present in this region. “Mexico is a very profitable region where no new players have been able to enter. It has a population of more than 127 million and a giant economy of more than US$1 trillion,” said Emilio González, General Manager in Mexico of Nubank. “On top of this, there is a poor quality of service in the financial system, both online and in person.” The people who are looking for 100 percent financial services today, said González, are digital natives and they are driving the adoption of these platforms. The opportunity to expand into Mexico was also seized by Argentinian-based fintech Ualá, which brought its product to Mexico in September 2020. “There are more than 70 million people in Mexico who never had access to a digital payment method before,” said Pierpaolo Barbieri, Founder and CEO of Ualá. “These are people who will be left out of the financial system of the future, which will involve more and more

transactions that require fully digital payment methods. The cash-only customer is going to be left out of this change,” he said. At present, Ualá already has more than 100,000 users in Mexico. Moving the Needle The arrival of fintechs in Mexico has not gone unnoticed by traditional banks, which do not want to be left behind. According to Huertas, the impact this transformation has had on traditional players can be seen in the fact that they are collaborating more, while medium-sized banks are trying to compete and small banks are trying to survive or focus on niche markets. “Three years ago, one of the Top 5 banks in Mexico did not have an app. I could not pay all utilities from my bank. That is absurd,” said Huertas, who added that the new landscape has forced traditional banks to improve the services they offer. “We have significantly changed the plans of many financial institutions and governments. We are working to improve the quality of life through access to financial services, including regulatory initiatives.” For Aitor Chinchetru, Founder and Co-CEO of Fintonic, the neobanks ecosystem acts as an accelerator for the traditional banking system. “In the end, the banking system looks at us as an admirer in many ways. We started making contracts digitally in 2015 when no bank in Spain dared to do so. That is how we started to break certain barriers.” Chinchetru added that this has led to banks attempting to replicate many strategies from the fintech sector, while others are not yet able to do so because of their entrenched culture, structure and limited technology. “All the clients that are being rejected by traditional banks are coming to us,” he said. “They (banks) can be very big and powerful institutions but sometimes they have feet of clay.” Both banks and fintechs have known for years that change was coming. “It was already being talked about but these are exponential, non-linear circumstances,” said Juan Miguel Guerra, Head of Rappipay Mexico at Rappi. He added that the current environment of uncertainty has caused consumer credit to tighten. “This is leaving a big gap in the market and fintechs that know how to seize the moment will take advantage of it.” The key, according to Guerra, is young people, who in the long term will attract older people to try these types of services. “Many traditional players may not be concerned about that right now because the fintech market is relatively small and made up of young people who may not be big spenders today. But tomorrow, those young people will grow up, have higher incomes, will be more profitable and will stay with fintechs if they are properly served. They will also attract their friends and family.”

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from the

Q: Ualá recently hit 100,000 users in Mexico. What were the main factors that contributed to this result? A: There were three main factors. The first was the great need for banking penetration in Mexico. Currently, 53 percent of Mexicans have never had a financial product and that is a huge opportunity. Remarkably, 75 percent of all Mexicans have a smartphone and nine out of 10 have an internet connection. While more than half of the country is outside the financial system, more than 70 percent is connected to the internet. This is the perfect breeding ground for a product like Ualá, which is 100 percent free and has no small print and no commissions, to capture a large percentage of this market very quickly and with exponential growth. The second factor is that there is great technology acceptance in Mexico. All applications that engage consumers with a good interface enjoy a great reception. We listen to our customers and take advantage of the way they already consume content from streaming platforms to provide them an experience that is just as intuitive. We allow clients to access their financial life from an app connected to a Mastercard card, which allows them to pay anywhere such cards are accepted. The last factor is Ualá’s value proposition. We brought to the

Ricardo Olmos

Mexican market a value proposition that matched this great opportunity of Mexicans who already had a smartphone and an internet connection. We gave them a value proposition tailored to their needs. The first thing we saw in the market

Country Manager of Ualá Mexico

was that clients needed locations where they could make a deposit free of charge. Today, they have an alternative to be able to grow their financial situation, improve their personal finances and

100,000 Users Just the Beginning for Ualá in Mexico

their lives. In the end, having a 100 percent free proposition allowed us to access a large percentage of the market rapidly. Today, we have more than 100,000 users and we will probably increase that number fivefold in the short term. Q: How will Ualá maintain good customer service as the number of users grows? A: Unlike many other players in the market that may be starting from scratch, we bring a great deal of expertise from Argentina, where in less than three years we reached more than 2 million customers. Maintaining that number of customers is a challenge and allowed us to adjust and grow in a way that guaranteed scalability. It also ensured customers enjoyed a very high level of service. Today, we have the infrastructure and team to scale to millions of customers without any inconvenience and guaranteeing a premium level of customer service. We have a chat where there is a human behind it and not a chatbot. A person understands the problem and knows what the quickest solution is. For us, the customer has always been at the heart

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of our strategy. Our customer service team is one of the largest and most highly trained. At Ualá, our policy is that all our employees experience the customer service channel and have direct contact with the customer to understand their needs.

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from the

Q: Sonect’s goal is to create the largest digital ATM network in Mexico. How will you reach this objective? A: We have three verticals to achieve this. The first is through strategic partnerships with traditional banks. They already have millions of users and a network of corporate clients all over the country. Partnering with a large bank’s app and offering its users this solution puts us in the spotlight as a commissions administrator much faster than starting from scratch. If a user logs into their regular banking app and suddenly sees our logo, they know that they can now withdraw cash at any shop in Sonect’s network. It is a way to make our presence felt without executing more robust engagement strategies. Our second strategy is to build commercial alliances with major brands. Gas station chains are a great example. By creating an alliance with these chains, our users can withdraw cash when they refuel at any of the chain’s stations. The same applies to convenience stores, restaurant chains or any type of business in the country that has an established network of customers. The third vertical is aimed at the general public. We have already started to promote and show users that we are here to support them and that they no longer have to walk 3km to find an ATM or be exposed to the risk of going to a bank to withdraw cash. If a person goes into a restaurant, no one will imagine that they are going to withdraw cash.

José Carlos del Río

Q: What benefits can Sonect offer to its partners? A: Banks have on average five to 8,000 ATMs around the

Country Manager of Sonect Mexico

country. The related cost of maintenance is high and is worst for those ATMs that are not profitable. That said, if a bank partners with Sonect, it can reduce its number of non-profitable ATMs or reduce its monthly maintenance cost with the possibility of generating revenue. This is an extraordinary solution for a bank

Sonect to Make Cash Withdrawals Handy for Everyone

because it allows the company to grow its reach beyond its current coverage. This solution still has to be approved by CNBV. For businesses, there are a number of benefits. First of all, handling so much cash increases the risk of theft, likewise, some companies need to hire a cash deposit service, which implies a hefty extra cost. By partnering with Sonect, clients benefit from being able to bank that money every time a user withdraws cash. They reduce the risk of theft and also generate an extra income as the user could pay MX$15 (US$0.75) fee plus VAT for each transaction. The average fee for cash withdrawals in Mexico is MX$30 (US$1.5) plus VAT at multibank ATMs. In these early stages, we are not looking for a big profit for ourselves. We want our partners to benefit, whether they are banks, retailers or users. Q: What opportunities did Sonect identify in Mexico to believe that its business model would be successful? A: The opportunity is more than huge. Today, the entire financial muscle in Mexico does not serve 100 percent of the adult population. Even those who are banked sometimes

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have to travel very long distances to handle their banking transactions. Right now, we are talking about cash withdrawals but in the future, we are planning to offer additional services. We want to break down the limits on banking infrastructure capacity in the country.

n the fintech world, we started 2021 with the pleasant surprise that the National Banking and Securities Commission (CNBV) had issued its first responses to the ITFs licensing procedures. In the crowdfunding community, we were particularly encouraged by the

news that Doopla, the peer-to-peer platform, had received a positive reply from the authority. For those of us who have been in this for a long time, it is a milestone that took more than five years of work and something that we consider essential for the growth of the industry. But what can we expect from the industry now that regulation is finally in place? Financial crowdfunding was born as a result of the financial crisis of 2008. It is an alternative business model, 100 percent digital, that seeks to disintermediate the financial world and with this allow many people to participate in activities that, before, were only reserved for large financial institutions,

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achieving greater financial inclusion and a more competitive

Crowdfunding Takes a Giant Step Juan Carlos Castro Co-Founder of Briq Fund

and healthy financial system. The evolution of these platforms in the world has attracted attention — The Lending Club and SoFi are recognized pioneers in this business model. In Mexico, the industry was born from the efforts of entrepreneurs who believed in this business model, even when the regulatory framework did not exist. Early on in the first years, AFICO (an association of crowdfunding platforms) was born. This association, which keeps growing today, is entrepreneurial and has been maintained thanks to the efforts and vision of the platforms that were committed to having a serious industry. AFICO had a strategic role in the creation, and is playing a strategic role in the implementation, of the Fintech Law. The birth of this industry has led to the creation of many satellite businesses, such as advisers, lawyers, groups of investors and experts. The ripple effect on the economy goes far beyond investors and applicants on the platforms. Today, 21 platforms have officially filed to obtain licenses. Along the way, we have seen some platforms deciphering their own path, pivoting or even ceasing to exist. Now we will enter a new stage. Regulation raises the level of play and demand. We are at a turning point in the industry and I think that in this new stage we will see three new trends: 1. Adoption. Crowdfunding is still in its infancy. In 2019 alone, AFICO platforms registered 75,000 investor users only. The path to attracting users will be paved by legal recognition, the trust that this brings in investors and the natural reflectors that the pandemic turned to digital channels. 2. Consolidation. Not all platforms have finished validating their business model. Regulatory costs could stress such models and render them economically unprofitable. Driven by the dynamism of user adoption and the existence of a regulatory framework, many new players (new entrepreneurs) and established players in the financial sector will be attracted to participate.

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3. Maturation. The implementation of the law and life as a regulated entity remain unknown terrain for most of the platforms and for the CNBV itself. I would expect to see adjustments to the law and interaction with some key government agencies to define issues that are still not entirely clear today.

he pandemic has not been easy, and much less so for Mexican SMEs. Entrepreneurs have invested great effort and dedication to adapt to the new normal, a global phenomenon that exacerbates and highlights the underlying problems that, as a sector, we have

faced for years: access to credit and financing and adaptation of companies to digital environments. Difficult Access to Credit According to the National Survey of Business Financing (ENAFIN) of 2018, SMEs have a bad perception regarding financing from traditional financial entities. This survey reveals that 76.3 percent of Mexican companies (corresponding to 81.9 percent of micro businesses; 73.3 percent, small; 57.9 percent, medium; and 64 percent, large) chose not to access any type of credit. According to ENAFN 2018, lack of credit history and low payment capacity are the main reasons why a banking institution rejects

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an application. However, the survey also records cases in which

Konfío Evolves to Boost SME Productivity David Arana CEO of Konfío

reasons for denying credit were not even given. SMEs report the number of procedures and requirements, the unclear limits in the contracts and the verification of income as the main reasons for not requesting a loan in banking institutions. Additionally, the report “¿Quién tiene acceso al crédito en México?” (Who has access to credit in Mexico?) of the National Commission against Discrimination (CONAPRED) indicates that a large part of the population remains excluded from financial services. “Despite all the efforts aimed at strengthening the Mexican financial sector, a large part of the population remains unattended today or underserved.” Whether due to a factor of discrimination or the accumulation of obstacles, SME entrepreneurs do not see access to credit as easy, possible and viable for their companies. Adapting to Digital Companies Although for more than a decade the internet has been recognized as the new space for the development of the economy, the pandemic has been the true accelerator for the integration of companies from traditional channels in the digital world. Those of us who are part of the digital entrepreneur communities know that their benefits exceed their limitations. Not only are they a direct sales channel or a space to advertise our goods and services, but there is also a wide range of digital tools and instruments that improve productivity, systematization, accounting and almost any area of interest to us. Despite all the benefits, in Mexico, approximately 70 percent of MSMEs have not made an investment in technological tools of any kind. Entrepreneurs think they will not understand the available tools or that they require specific equipment or high investment. Konfío Evolves to Help You At Konfío, we know that owning an MSME in Mexico implies great satisfaction. Since 2014, we have been allies of entrepreneurs from at least one trench: access to credit. Since then, we have injected working capital into more than 40,000 companies, generating a positive impact on nearly 280,000 families. Our company walks with entrepreneurs and over time has sought to strengthen the SME ecosystem through tools that reduce access gaps. To accompany clients toward the new normal, Konfío offers tools designed to detonate the productivity of the SME sector. This package takes the best of our experience in digital environments and adapts it to the needs of growing companies.

Gestionix Gestionix is an Enterprise Resource Planning (ERP) system. The platform was born and lives in the cloud. It offers financial services, payment tools and business management in the same place. Being 100 percent Mexican, its operation is governed by the guidelines of the Tax Administration System (SAT). Konfío Pay Konfío Pay is a B2B tool to manage payments from other companies in an easy, secure and immediate way. Unlike similar options, it is the only tool in the Mexican market that offers credit options to the end user. Konfío Pay users receive their payments immediately, while their clients pay Konfío in monthly installments, created based on an evaluation of their credit behavior. This tool is kind to our entrepreneurs, as it streamlines cash flow and reduces risks, while offering them the option of enduser financing with credit schemes, Konfío’s hallmark. It emerged as a response to the voice of our clients who have expressed to us the urgency of having an ally that helps to evaluate, give credit and manage their clients, to expand their sale options and capital recovery. Konfío Card and Konfío Credit The ecosystem is completed by the Konfío Card and Konfío Credit options. The first is a new business credit line for our clients. Konfío entrepreneurs can access their Konfío Card online, conveniently and securely. We also are relaunching our original project, Crédito Konfío, a star product since 2014 and which has been the beginning of the dream of thousands of SMEs. The adjustments to this product are a reflection of our concern for the resilience of the entrepreneurial ecosystem, always under the slogan of keeping businesses open. Excited About Change When others say, no! Konfío bets on yes! We want access to credit and digital tools to not be the graves of companies, but their seedbeds. Now more than ever, we have learned that flexibility and adaptability are key to the survival of MSMEs in Mexico and the world. In an unprecedented environment, our company sees transformation and change as the only avenues for evolution. As part of the Mexican entrepreneurial ecosystem, we make our experience available to our clients. Our tools offer the possibility of accessing good administration and operational management of businesses in order to make timely decisions, all at a competitive price, which becomes an investment for your future. At Konfío we are there for you, to grow your company, to organize it, to help you adapt in difficult times.We change with you; we change for you.

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-commerce has undoubtedly helped thousands of companies to put themselves on the map of their consumers. It is difficult to believe that until a few years ago, the main strategy for doing business or advertising a product was focused mostly on the

point of sale. Before we talked about retail strategies, about dressing a store with the colors of our brand and launching it to the market, while the digital element was marginalized. Of course, we were focused on a different audience. Today, we can say that both physical and e-commerce are more than isolated strategies. On the contrary, they are complementary and have their own objectives. While online we seek to get closer to distant customers, it is through traditional commerce that we convince them, by touching their senses. Although e-commerce will not yet surpass its physical equivalent, it can function as a brand extension if it is

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well exploited.

A New Digital Opportunity Enrique Marú Chief Revenue Officer of Sr. Pago

Some companies are oriented toward a type of trade that is established according to their needs and by the world context. We could say that at this time, those who have the vision to bet on an online store may have greater chances of success, since they can equal or exceed the number of sales but with less budget. This is possible thanks to a simple investment: specialized personnel. When we talked about good job opportunities before, we focused on the brick-and-mortar sector, but with the evolution of commerce, the workforce is starting to shift toward the online world through specialized positions such as computer engineering, UX or UI design. The clearest example of this change is digital marketing. While some did not see a future for it, others were pioneers of this practice, and such is its usefulness that digital platforms are already part of the communication strategy of many companies. This has given rise to the creation of jobs that were previously unknown, such as digital content creators, community managers and planners. Great strides have also been made in web development. Today, we can talk about user experience, investing in site architecture, improving shopping flows and even putting special applications at our customers’ fingertips. All of this is thanks to the evolution of commerce, or rather the hybridization of commerce. It is possible that many people who have not yet migrated from the offline world view this as an obstacle in their careers, but one of the advantages of digitalization is that it is easier to get training without requiring a specific education. Through courses and certifications, the same communication platforms open opportunities for all. Rather than seeing digitalization as an obstacle, they should consider it as an opportunity for growth and expansion of knowledge.

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The use of digital resources also does not have to be deployed exclusively for the company’s advertising; it can also be useful for choosing your collaborators, allowing you to develop a more accurate approach in relation to their values, habits, tastes and, most importantly, their way of thinking.

The arrival of neobanks in Mexico represented a small step

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How Can Fintech Advance Financial Inclusion?

forward in the bancarization of the population. However, the road to closing the financial inclusion gap is still long and rocky. Factors such as regulation, financial education and even support to make solutions known across the country are key to making faster progress. Although most leaders agree that it will not be easy or quick to achieve significant bancarization, they are confident that the Fintech Law and the arrival of more competitors in the market will pave the way forward.

In recent years, we have been hearing more about ‘bancarization’ and new forms of payment to break down the barriers that prevent financial inclusion in our country. Generally, when this term is heard, these words come to mind: institution, contracts and perhaps even credit cards. While a part of bancarization works in this way, it has a very complex meaning that we cannot take for granted or at least cannot be simplified. The bancarization that we want to implement in the country goes beyond a financial contract; it is about bringing more and more people closer to obtaining benefits that cash alone does not provide. With this, we seek to help to improve the informal economy of micro and small

Enrique Marú Chief Revenue Officer of Sr. Pago

entrepreneurs. This model gives them access to credit and moneysaving plans and even provides them the opportunity to obtain different financial products that they could not get otherwise.

The pandemic accelerated the adoption of neobanks. In a country where the pandemic has severely affected the economy due to restrictions and a slow vaccination rate, not having to go to a bank branch or stand in long lines, while being able to carry out financial operations through an app and without paying any commissions, is not only attractive for customers but also a solution for the current context. Beyond the pandemic, those who offer this type of card also contribute to solving problems such as banking. In Mexico, it is a reality for convenience stores that compete against traditional banking offices. Today, the new players who issue fintech cards can be at the level of both

Aitor Chinchetru

banks and players from other industries that have found a new business vertical in banking.

Founder and Co-CEO of Fintonic

Nearly half of the entire population in Latin America is unbanked and less than 20 percent of a total population of 625 million are reported to have credit cards. In Mexico, the level of financial inclusion is the worst-performing in the region, relative to the country’s income. However, the future looks very bright, with a mix of several factors boosting the penetration of financial services. The way I see it is that as leaders and as growing companies, we have a huge responsibility to the public, whether they be fellow fintechs, clients or final users, but also to nonfintech users and underbanked people. It is our duty to create alliances with our fellow fintech brothers and sisters, other

Marcos Sacal COO of Arcus Financial Intelligence

companies, associations, government and more, so that the public knows about the various solutions and types of companies that exist within our sector.

2021 Will Be Decisive for Female Empowerment in Fintech Cristina Cacho Chief Revenue Officer of Kueski

Digital Assets in Latin America: Let the Revolution Begin Enrique Suárez Co-Founder of MountX Real Estate Capital

Financial Inclusion Is Empowering Gustavo Rojo CEO of Vexi

Why Is Financial Placing So Slow? Juan Carlos González Founder & Partner of Expediente Azul

The Role of Fintech in Financial Inclusion in Mexico Marcos Sacal COO of Arcus Financial Intelligence

Is a SPAC a Good Investment Opportunity for Mexican Investors? Juan José Cervantes Managing Partner of Trebol Capital

Are Blockchain-Based Governments the Future of the Public Sector? Jesús Cepeda CEO of OS City

GME Shares and Yolo Trades: Great Opportunities for Wealthtechs Victor Hugo Flores Country Manager of Fintual

The Barrier to Digital Wallets in Mexico Bruno Ramos Founder and CEO of Swap

Transparency, Commitment Push ID Finance’s Growth in Mexico Yannick Del Ponte CEo of ID Finance Mexico

Cybersecurity Regardless of size, location or how off the radar a company thinks it is, every business is an attractive target for cybercrime. In 2020, news headlines were replete with stories of cyberattacks on companies from every industry and every part of the world. Mexico itself is the second-most targeted country in Latin America by cybercriminals, according to the Ministry of Security and Citizen Protection. The pandemic created a perfect environment for cybercriminals. With almost everyone working and studying from home, the cyberattack surface expanded, opening up security breaches on every connected computer, mobile phone and public network. This, coupled with a lack of cybersecurity awareness and the mistaken belief that an SME is not subject to a cyberattack, created a perfect storm for cybercrime groups. For cybersecurity providers, meanwhile, it has been an opportunity to prove themselves. As more companies were attacked, demand for cybersecurity services increased, leading to the arrival of leading transnational companies and the emergence of local companies in the country. Although there is still a long way to go to form a culture of prevention and mitigation, awareness of cyberthreats is growing. Every new attack is a wake-up call for businesses and governments.

Cybersecurity

Analysis Cybersecurity Boost Is COVID-19’s Silver Lining

Conference Highlights How the Pandemic Transformed Cyberattacks

View From the Top Alejandro Rivera | Technical Consultant in Cybersecurity Instituto de Ciberseguridad (ICS)

Expert Contributor RicardoLópez Tello | Corporate Sales and Government Director of Intel Mexico

Expert Contributor ClaudioMartinelli | Managing Director for Latin America of Kaspersky

Expert Contributor Alexis Langagne | Managing Director for North Latin America of Prosegur

View From the Top Carlos Ortiz | Country Manager of F5

View From the Top Luis Fornelli | Country Manager of Tenable

View From the Top Franscisco Roldan | CEO of Cyber-T

Roundtable What Is the Best Way to Promote an Integral Cybersecurity Approach?

Conference Highlights The Cloud: Businesses’ Invisible Ally

View From the Top María Briseño | Co-Founder and General Manager of ProtectMe

Content Links

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Cybersecurity Boost Is COVID-19’s Silver Lining GRAPH 1. GROWTH OF RANSOMWARE-ORIENTED RANSOMWARE DATA THEFT ADS IN LATIN AMERICA AND THE CARRIBEAN (PERCENTAGE OFTHE RANSOMWARE DATA THEFT ADS IN LATIN AMERICA AND CARIBBEAN ADVERTISEMENTS IN LAC BY COUNTRY, INCREASE FROM 1Q20 TO 1Q21) BETWEEN 1Q21 AND 1Q20 (PERCENTAGE) Brazil

Mexico

Colombia 9

Chile

Costa Rica

Peru

Jamaica 1

Bolivia

Ecuador

Nicaragua

Puerto Rico

Trinidad and Tobago

cybercriminals, who have been able to take advantage of the growing attack surface, while introducing new challenges for

employees remain home-bound, cybersecurity has become a major concern, not only legally and operationally but also because many businesses have already realized how much they stand to lose if their data is compromised. “A few years ago, the IT department was in charge of this area

Guatemala

businesses find themselves has created a huge opportunity for

As businesses go through their digital transformation and many

Bahamas

cybersecurity around the world. The new environment in which

company security teams.

Argentina

The pandemic has completely changed the landscape of

(cybersecurity) and it was rare for a company to have its own cybersecurity department. Today, many companies have it and that is a reflection of the growing awareness of this risk,” Oswaldo Palacios, Director of Sales Engineering for Mexico and Latam at Guardicore, an Israeli cybersecurity firm, told MBN. “However, 5

35 40

Source: Mandiant

Mexico continues to be the third-most cyberattacked country in Latin America and this means that there is still a long way to go. There are many companies that still do not measure the risk and consequences of an attack,” he added. “The budget a company allocates to cybersecurity is equivalent to the risk it is willing to take. If a company’s customer database costs US$10 million, investing US$100,000 is not a financial sin.” Nobody Is Safe 2020 was proof that no company, whether small, medium or large, is off the radar of cybercriminals. Over the last year, reports of cyberattacks have been increasingly common and crimes are more difficult to track due to new technologies such as blockchain and bitcoin. The most recent large cyberattack took place on May 7. Colonial Pipeline Company, which operates a large artery pipeline for refineries in the Gulf of Mexico to the South and East Coast of the US, was forced to shut down operations after its IT systems fell victim to cybercriminals. Mexican companies have also fallen victim to ransomware attacks. In late-2019, a group of cybercriminals hijacked a series of computers at Mexico’s national oil firm PEMEX and crashed its servers. The hackers asked for 565 bitcoins (US$4.9 million at the time) to liberate the information. The attack on the NOC is just one of probably thousands that have occurred in the country in the last year. Unlike the US, Mexican authorities do not require companies to report when they have been the target of a cyberattack. Ransomware attacks have become more common during the past year and Claudio Martinelli, Managing Director of Latin America at Kaspersky, wrote in an article for MBN that one of the most common risks has been attacks against the protocols used by employees to access corporate resources remotely. He said that as companies continue working remotely, it is necessary to make

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home office assessment and certification a must. “These (risks) can be overcome by taking proactive actions to ensure an organization remains protected,” he wrote for MBN.

Conference

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Highlights

How the Pandemic Transformed Cyberattacks Mario de la Cruz Sarabia President of Innovation & ICTs Committee at American Chamber of Commerce Mexico

ybercrime exploded across the world in 2020, as the pandemic forced companies to go digital like never before, opening new attack surfaces in the process. “If cybercrime were a country, it would be the third-largest economy in the world just behind

the US and China, with US$6 trillion in value,” says Mario de la Cruz Sarabia, President of the Innovation and ICTs Committee at the American Chamber of Commerce Mexico and Senior Director of Public Policy and Government Affairs Latin America at CISCO Mexico.

Felipe García Vivanco

While financial companies have been among the leading targets,

CISO at Scotiabank

the focus for cyber criminals has shifted. “The number of attacks

Claudio Martinelli Managing Director LatAm of Kaspersky

Martin Portillo CISO at Huawei Technologies México

Elvira Sánchez VP CIO at DHL Express México

and new threats grew during the pandemic and the approach is different. Criminals are primarily interested in getting money; 90.2 percent of them are moved by money,” said Claudio Martinelli, Kaspersky’s Managing Director for Latin America. Added Felipe García, CISO of Scotiabank Mexico: “Over the last two years, cyber-attacks have migrated from the financial sectors to the health sector.” Beyond targeting new sectors, threats have also evolved and spread due to new trends such as home office. “Cybersecurity is important as companies were forced to work remotely but domestic networks did not comply with cybersecurity standards,” said Elvira Sanchez, Vice President and CIO of DHL Express Mexico. “This created additional challenges and forced us to get creative on how we approached it.” Reputational Factors Cybersecurity breaches not only have a financial or operational impact, they can also hurt the reputation of the victim. “As a corporate mandate, our cybersecurity schemes and cybersecurity strategies are strongly linked to other business strategies. We call it a matter of trust. Our recommendation is to evaluate how damaged the industry or the company can be when our end-customer loses trust in us. The most important element is reputation and those who placed their trust in us,” said Martin Portillo, CISO of Huawei Technologies Mexico. First Steps To build a robust cybersecurity strategy, companies first need to understand their vulnerable points, said Sánchez. “Preparing emergency response protocols is essential. Moreover, although we are aware immunity does not exist, we need to raise awareness among our employees, customers and suppliers.”

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Over the last few months, attacks to logistic companies have increased considerably, explained Sánchez, adding that logistics might by the third or fourth most-targeted sector.

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from the

Q: Where did the idea to create an educational platform come from? A: While working for other companies, my partners and I recognized that there were not enough skilled people in tech security, which was a problem. Every time we had to contract someone for a particular job, we could not find the person who quite met our needs in terms of both tech skills and a strong knowledge of legal norms. At my previous company, we had an internal training program. Eventually, we created a civil association dedicated to this. At first, we started offering courses on information security. This was done through WordPress and later Google. We offered only paid content but that did not perform as well as we expected, so we decided to start offering free content as well. Part of the issue was that we were too focused on ethical hacking. In 2017, we decided to include new material on advanced defensive security, protection of critical infrastructure and data security. Now, we do free content but if someone wants a certificate, we do charge a fee. The content includes workshops and other activities. Q: How have you adapted to changing demands? A: Last year, we had someone with a background in forensic cybercrime join the team. He helped us focus our program more strongly on the national cybersecurity strategy. We studied

Alejandro Rivera

this and adapted our content. The Olimpia Law, for example, punishes people who share intimate content without permission. We researched the law and created content for prevention. One of the first states that implemented the law, Guanajuato,

Technical Consultant in Cybersecurity Instituto de Ciberseguridad (ICS)

responded to our content and began using it. To date, there have been 261 claims there but only six people have gone to jail. With our research, we have been able to generate more understanding of what issues exist that inhibit the effective application of the law. We continue to add to our content as we learn.

An Institute Dedicated to Cybersecurity

Q: How do your consulting services work? A: Through our free trainings, we realized that we had access to people who were directors, chief information officers and other decision-makers in organizations. They asked us to implement certain things they saw on our platform. This is how our consulting started. Later, they had questions regarding which technology they should acquire. In the beginning, we simply worked with the technology they had. Suppliers then began to seek us out and we built relationships with them. The majority of our suppliers are from Latin America. Q: Why do you work with Latin American tech providers and what advantages does this provide? A: Part of our motivation is that we want to show that Latin America is also capable of designing very good software. At the moment, we have a supplier of a firewall solution from Brazil. We also work with an Argentinean company dedicated to awareness training. Another technology relates to analysis and management of risks and vulnerabilities. It comes from Chile. Apart from

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offering quality technology, there are major benefits in terms of price. This can be affected by exchange rates but Latin American companies can charge half or a third of what others do. A firewall from Sophos or Fortinet can cost over US$800. Our Brazilian partner charges around US$200.

ver a year since the COVID-19 pandemic began, the world continues to face a complex and challenging landscape. These significant changes and disruptions that we have experienced have served as catalysts for the digital transformation

in the operations of companies across all industries. At Intel, we believe that technology has proven to be critical to sustaining and increasing our productivity and unleashing innovation. We can say with certainty that, thanks to technology, in our daily lives we are intrinsically connected to each other and to the environment. Given the importance and magnitude of our digital interactions, in the business environment it is essential to rethink and reinforce the security strategy for information management, which should always start from the PC. Today, more than ever, cybersecurity is a critical factor, as the new normal requires managing an extensive flow of data and confidential information from home, something that probably in pre-pandemic times was almost unthinkable for

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many companies.

Cybersecurity: Should Companies Ponder the Risk of Doing Nothing? Ricardo López Tello Corporate Sales and Government Director of Intel Mexico

Despite the relevance of this topic, many companies still wonder if the transformation in data protection should be considered an expense or an investment. For us, the answer is clear: it is an urgent investment, which, by the way, if not carried out will represent many more expenses in time and resources. From the short to the long term, the importance of maintaining a business policy of extreme protection for data and platforms will allow proper management, while helping to close security gaps and solving the theft of information to which they may be exposed in a digital world. Defending against growing cybersecurity threats requires a proactive and decentralized hardware-based approach. This trusted infrastructure lays the foundation for protecting all digital aspects, from the cloud to the network. The undeniable truth is that attacks against organizations, regardless of their business or industry, are rising at an unprecedented rate and are more sophisticated than ever, which is why chief information security officers (CISOs), chief information officers (CIOs), and other decision-makers need to take a new approach to enterprise security. In recent years, three factors have increased cyber risks for various sectors around the world. First, the attack surface continues to expand, which is partly due to the incipient number of IoT devices — estimated at 30.7 million in 2020. Second, cyber attackers are beginning to circumvent firewalls and security software that used to be effective. And third, fragmented cybersecurity solutions leave loopholes that make data vulnerable. Mexico is not exempt from this situation. According to the Federal Telecommunications Institute (IFT), in the first nine months of 2020, Mexico was the most affected country in Latin America, receiving 22.57 percent of 1,319,260 ransomware attacks (data hijacking to request rescue), to the detriment of 297,000 companies.

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Hardware-enabled security functionalities play a critical role in defending business cybersecurity. You can invest in cuttingedge technology, but if you do not invest in cybersecurity at the same time, everything else is vulnerable.

popular measure for companies to combat the pandemic was to switch to remote work. However, with little time to make the transition, many had no time to enact proper security measures or train employees, leaving them

vulnerable to a number of new security risks. As the first months of 2021 have demonstrated, the home office is and will continue to be the only workspace for millions of employees this year. However, a year after adopting this work model, some companies are still struggling to protect their network and employees against cyber threats. However, there is no need for organizations to panic as a lot can be done on the cybersecurity front even while companies face budget cuts brought on by the pandemic. Considering the main threats targeting countries like Mexico, these are the main trends for companies to monitor as we continue

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working remotely:

From ‘Should’ to ‘Must:’ Overcoming IT Security Challenges Claudio Martinelli Managing Director for Latin America of Kaspersky

+ Protecting the perimeter is no longer enough; home office assessment and certification will become a must. Tools to scan the level of security in a workplace, from the presence of software vulnerabilities to connecting to an unreliable or unprotected Wi-Fi hotspot, will be necessary. This will also require wider adoption of VPNs, privileged access management, multifactor authentication systems, the implementation of stricter monitoring and the updating of existing contingency and emergency plans. + Transition to a service model will enable required levels of IT and IT security with lower investments. According to Kaspersky’s survey, seven in 10 (73 percent) businesses in Latin America said they already plan to use a managed service provider (MSP) or managed security service provider (MSSP) in the next 12 months. This is for good reason as the service model helps to minimize capital investments and transition business costs from CAPEX to OPEX. + Training for internal IT security specialists should incorporate management skills. Often, cybersecurity professions split into very narrow specializations, meaning that hiring staff for each specific role may be too expensive. This is where outsourcing can help plug the gap. However, businesses that outsource key cybersecurity components still need to focus on developing management skills for their in-house teams to handle those outsourced functions. + There will be an increased reliance on cloud services, making dedicated management and protection measures necessary. The survey showed that in 2020, employees in 98 percent of enterprises and 99 percent of SMEs used non-corporate software and cloud services, such as social networks, messengers or other applications. This is unlikely to change when staff return to the office. To ensure that any corporate data is kept under control, better visibility over cloud access will be necessary. IT security managers will need to align themselves with this cloud paradigm and develop skills for cloud management and protection. + Similarly, SMEs and enterprises alike are increasingly storing sensitive personal information in the cloud, often believing the cloud-service provider is responsible for the security of the data, which is not true.

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Cloud providers guarantee the availability, accessibility and physical protection of their service, while data protection still falls under the organization’s responsibility. In fact, it remains much more likely for organizations to suffer a breach due to simple and preventable staff mistakes. From defending themselves against the scourge of social engineering and conventional malware, to preempting targeted attacks, the responsibility lies with organizations to migrate their security solution licences or extend their protection to this environment.

he notion of “integrated solutions” revolves around building comprehensive enterprise security capabilities that combine people, technology and processes in a tightly integrated manner, in a way that allows organizations (corporations or public entities)

to minimize their risk and do it at an optimal— usually lower— total cost of ownership. “Security-as-a-Service” is then offering— and consuming— those integrated solutions in flexible and adaptable ways, such that organizations can “consume” more or less security according to their changing and specific needs. After spending almost 30 years in the information technology (IT) industry, I saw enterprise IT evolving from an in-house operational model to an outsourcing model and then eventually to an “All-as-a-Service” model (the cloud) — where you consume IT based on your specific needs and pay a regular fee based on the overall service you get — without thinking that much about what hardware, software and services are behind it; the only thing

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that matters at the end of the day is that an SLA (Service Level

Security-as-aService: Providing Lower Risk at Optimal Cost Alexis Langagne Managing Director for North Latin America of Prosegur

Agreement) is met. With a little over-simplification, I see the same phenomenon starting to happen in the enterprise security arena. On the one hand, spending on enterprise security tends to be fragmented in organizations, which usually means it is not optimized. On the other hand, the impact of not mitigating risks, whether they are physical or logical, is increasing. The “Security-as-aService” model lowers the risk of the organization and the overall cost as well. As we move to these new normal environments, one key aspect of these integrated enterprise security solutions is that they will need to ensure that working environments are both secure and safe. This was also true in the past but now the level and quantity of safety requirements have increased. Let’s look at how the three components of integrated enterprise security solutions (people, technology, and processes) provide the fundamental building blocks of the security solutions for the new era: + People: such as highly trained security officers (on-site guards, mobile guards, remote guards, monitoring agents, security operations center operators, supervisors), security technology specialists (technical architects, maintenance and support specialists, data analysts, cybersecurity experts, supervisors). + Technology: the so-called electronic security systems (access control systems, thermal CCTV, drones), enterprise security software (applications to monitor and report incidents, remote video storage, remote detection of safety conditions), software integration (to connect access control data to human resources applications), new AI-based capabilities (from face recognition to anticipating incidents based on data analytics), the Security Operations Center (SOC) and with everything now moving more and more to the cloud (usually public or hybrid). + Processes: based on company policies, local regulations and best practices, with an end-to-end approach. Processes need to ensure that the overall operation is not fragmented. For example, guards need to have two-way communications with the SOC, so an AI-based analytics engine may trigger a mobile guard to take preventive action based on the likelihood of an incident.

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As is evident from the descriptions above, an integrated enterprise security solution is not about technology taking over human roles, it is all about enhancing the capabilities of what people, technology and processes can accomplish in a comprehensive and tightly-coupled approach.

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from the

Q: What are the main challenges companies face in adapting to the new reality? A: The first challenge was when companies began sending employees to work from home and they discovered some employees did not have an internet connection or even a computer. Unfortunately, the second challenge was maintaining security while working remotely. Particularly in 2020, many companies acted in a reactive way instead of thinking about the security of their companies. People were connected and then the company realized they had to deal with the issue of security. All of this has led to the acceleration of the digital transformation even though we are still used to a face-to-face work modality. Q: Which technologies have seen an increase in demand following the pandemic? A: Internet service providers started to see increasing demand. People need better connections and better bandwidth but this also meant service providers had to accelerate everything in terms of infrastructure. Today, people are not only working at home; kids are also watching television on the internet or connecting to take classes. The level of connectivity before was enough for the activities of that time. Now, everyone has to be connected to the internet. The quality of the elastic bandwidth,

Carlos Ortiz

even with the improvements made to the infrastructure, has dropped due to saturation. The retail industry has also faced challenges because we all

Country Manager of F5

shop; we all keep ordering from the supermarket. This sector has seen significant growth and unlike many others, it has had to hire more people, just like e-commerce. We are part of a dynamic that is not going to stop. I do not like

Cybersecurity to Face ‘New Reality’ Challenges

the concept of the “new normal” because for me, this is not normal. However, it is the reality we live in and we must respect it if we want to get out of this pandemic well. Q: What differentiates F5’s services from the competition and what key points should companies focus on regarding cybersecurity? A: Cybersecurity has become a crucial issue; it is essential. One of the first things we work on is being proactive and not reactive. While this reality kept us all at home, it also helped us to realize our needs in terms of connectivity and security. A holistic approach in terms of cybersecurity needs to provide full visibility, beginning with the code and going all the way to the application and the delivery of the service. The pandemic has also given us a massive opportunity at F5 to understand customer needs and, subsequently, to grow. Our fiscal year ended in September and our numbers have seen substantial growth. This is due to a strategy that was implemented some years ago that helped us to be prepared for a situation of this type, taking great care of access policies, which go hand in hand with e-commerce and retail. Of course, anti-fraud solutions have made this possible, allowing us to face numerous challenges. Our cloud architecture has allowed us to provide customers with a significant level of

security and connectivity because we cannot leave gaps uncovered. Q: How is the company tailoring its products to the Mexican market? A: The current situation has led technology companies to become tailors; we need to offer tailor-made solutions to our clients, considering the size of their company and their needs. By focusing on particular points, we can ensure the entire architecture is secured horizontally for both large and small companies. There was a time when clients were not interested in security solutions. Now, those same companies are doing all of their tasks and have all their information in the cloud and are turning to our products. Many companies have learned to plan but there are also cases when companies look for a security solution only after being hacked or put in a vulnerable position. Q: What are the main security gaps Mexican companies overlook? A: Companies need to take security more seriously, starting with training. The security perimeter has been brutally expanded and people are not aware of it. Before, having all your people in the same office allowed companies to control the equipment employees were using through specific licensing, accesses and policies that employees could not violate. In 2020, from one day to the next, companies bought 3,000 machines and gave them to their people to work from home, opening the perimeter of the company in a brutal way. Immediately, a need was created because otherwise, the business would immediately shut down. Q: Companies are increasingly migrating to cloud services. What added risks will clients face because of these services? A: The risk now is that every day when opening the computer, the security perimeter is much weaker because it is spread across different homes. We live in the office now and we increased that perimeter; therefore, the risks increased. Even with the machine turned off, someone can compromise the equipment. This is why training and education are crucial. A company’s position in terms of security has changed. There are new definitions for the person responsible for the company’s security but one thing that needs to be clear is that not all businesses require the same security services. When using the cloud, companies need to understand that the service does not include security; this must be added.

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Q: What are some of the lessons Tenable has learned over the past year? A: The pandemic not only forced companies to rethink the way they do business but also brought with it a huge challenge for cybersecurity and information security teams across the board. All the dramatic changes required to address the pandemic were a gateway for cybercriminals. In these months of uncertainty, they had the opportunity to infiltrate the systems of organizations through everyone’s computers and mobile devices. According to Tenable, more than 18,000 new vulnerabilities and common exposures were reported in 2020, representing an increase of just over 6 percent against 2019. However, looking back at the past five years, Tenable Research reveals that from 2015 to 2020, the number of reported vulnerabilities and exposures increased by over 36 percent. That represents a considerable increase. In addition, a recent study conducted by Forrester Consulting and commissioned by Tenable found that 95 percent of leaders surveyed in Mexico experienced at least one cyberattack that impacted their business in the past 12 months. Of that percentage, 47 percent said they suffered five or more attacks. This shows that with the expansion of the attack surface due to the pandemic, vulnerability management takes on a central role in companies’ strategies to combat cybercrime. Vulnerabilities that go unaddressed

Luis Fornelli

leave sensitive data and business systems exposed, representing lucrative and, therefore, attractive opportunities for cybercrime. These vulnerabilities need to be managed according to the needs and priorities of each company so that

Country Manager of Tenable

the most critical are addressed first and most aggressively. Q: How has demand for Tenable’s solutions evolved over the past few months?

Tenable Goes for All-in-One Solution Against Cyberattacks

A: At Tenable, we offer deep expertise to help enterprise cybersecurity teams, executives and boards of directors to prioritize and measure their cyber exposure. Rather than offering one-off solutions that can provide a snapshot of the environment at a fixed point in time, Tenable is focused on helping customers see everything in the network, from IT to OT or cloud, to predict what is most important and critical to protect and help companies act quickly to reduce their cyber risk. Q: What sets Tenable apart from its competitors? A: We recently launched Tenable.ep, which is the industry’s first all-in-one risk-based vulnerability management platform. This platform is designed to scale as enterprise computing requirements change. This solution combines industry-leading products such as Tenable.io for vulnerability management, Tenable.io Web Application Scanning for web app scanning, Tenable.io Container Security and Tenable Lumin. This platform allows our customers to view all their assets and vulnerabilities, as well as metrics on key threats on a single dashboard. Tenable.ep is a single license that gives customers the flexibility

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to take a holistic approach. It is a solution that allows you to look at everything instead of just fragmented pieces of data. The platform also includes local implementation of application scanners at no additional cost. We believe this is a tool that customers can take advantage of.

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Q: What differentiates Cyber-T from other cybersecurity services companies? A: Cyber-T was formally introduced in 2018 with a broad portfolio of information technology and communication services. Since then, we have decided to reduce our number of business lines and focus solely on the combination of cybersecurity and data management. We employ individuals with extensive experience, as well as younger individuals who are still in university. This generates a dynamic environment with many different points of view. We have a security operations center (SOC) and a network operations center (NOC), both located in Mexico City. Furthermore, we have a unit for data storage in Monterrey and presence in Guadalajara, Cuernavaca and Merida. The pandemic really shook up business models. Our advantage is that we can provide services remotely through the cloud. With the exception of just a few activities, such as installing a specific firewall, we do not need to be at our client’s premises to secure the company’s network. We have clients in the restaurant, manufacturing, education, financial services, pharmaceutical, construction and retail sectors. Other clients include casinos, dental clinics, a lighting and a printing company. The clients we work with range from SMEs to very large companies. Q: One of the products you work with is Commvault.

Franscisco Roldan

What benefits does this product offer? A: This is a software solution that manages the complete data cycle of a company. The advantage is that it works with many

CEO of Cyber-T

different brands of hardware and operating systems. It manages the movement of data between the company’s on-premises, a DRP site and the cloud. This can be any cloud, like Alestra, Telmex, Google, AWS or Azure.

A Complete Portfolio for Cybersecurity and Data Management

Recently, some Indian solutions have successfully arrived in Latin America. One of these is Robin, which allows you to install applications through Kubernetes on containers. This makes operations easier and faster because it does not require necessarily virtualization for installation. One advantage is that it allows faster migration of data by Commvault, making the company more secure. Q: You also work with WatchGuard and Panda Security, which merged recently. What benefits do these solutions offer? A: WatchGuard now has a very strong solution for endpoint security and system management for smartphones, computers and x86 servers. Panda Security has a subdivision for large enterprise security, called Cytomic. WatchGuard Solutions target organizations with any number of endpoints, providing multiple technologies such as software patches, email security, disk encryption and a visualizer that builds a report from all the data processes and applications running in endpoints. This allows cybersecurity personnel to oversee threats and act safer and faster. The Aether platform is driven by an automatic detection technology, EDR, including artificial intelligence,

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threat hunting & investigation and zero trust services which means that IT/Security personnel do not have to manually investigate the reach of threats. Together with Bitdefender, WatchGuard and Panda solutions, our company has a complete portfolio for end-to-end protection.

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What Is the Best Way to Promote an Integral Cybersecurity Approach?

More than ever, a holistic cybersecurity approach is essential for all businesses. The pandemic caused the attack surface of companies, regardless of their size, to expand. This created a golden opportunity for cyber criminals to exploit any small security breach. The best way to create a security architecture capable of deterring such attacks is with a culture of cybersecurity among company managers and all employees, full visibility and daily awareness.

The vision of an IT manager is not the same as that of business managers. This causes disconnection and a lack of communication on what is really important to the company. For example, if IT areas are in charge of cybersecurity, it is common to have schemes and links to protect the infrastructure and services that they consider important for the continuity of certain operations. However, for business owners, the priorities are totally different. As we observed this discordance, we

Óscar Rodríguez Director General of Secnesys

realized that there were many efforts that involved money and effort but were protecting something that was not important to the business.

Cybersecurity has become a crucial issue; it is essential. One of the first things we work on is being proactive and not reactive. While this reality kept us all at home, it also helped us to realize our needs in terms of connectivity and security. A holistic approach in terms of cybersecurity needs to provide full visibility, beginning with the code and going all the way to the application and the delivery of the service. The current situation has led technology companies to become tailors; we need to offer tailor-made solutions to our

Carlos Ortiz Country Manager of F5

clients, considering the size of their company and their needs. By focusing on particular points, we can ensure the entire architecture is secured horizontally for both large and small companies.

We work with a multilayered approach based on five zones. The first is the industrial floor. Using AI, we see how the industrial plant operates, including its sensors and measurement tools, and implement a cap to protect it. Zone 1 and zone 2 are based on telecommunications and SCADA networks. We integrate services to protect both privileged and nonprivileged users and their credentials. We use AI to detect any lateral movements of malicious actors. We use

Jorge Alberto Ramírez Leader of Cybersecurity at Apollocom

traps to identify if malware is present in the operational network. Zones 3 and 4 are where the operational network converges with the corporate network.

We work very closely with clients. First, we assess what their posture is against cyberthreats. We then map this against the level of risk and define a medium-term strategy, usually for one year. This generates improvements in cybersecurity levels very quickly. Companies are usually reactive when it comes to cyberthreats. They act after they have suffered an attack, moving resources or investing. We do not think this is the most adequate approach. Our focus is to determine first

David Hernández Director General of Protectia

what their needs are, diagnose the risks and then build an architecture around that.

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Highlights

The Cloud: Businesses’ Invisible Ally Javier Allard Director General of AMITI

Maribel Dos Santos Director General & Senior Vice President at Oracle México

Eduardo Gutiérrez President & CEO of IBM México

Angela Gómez President of SAP México

Abelardo Lara Country Manager at Veeam Software

Julio Velázquez Managing Director of Google Cloud México

Only a few years ago, the cloud was seen as a far-flung tool for companies. Today, driven by technological acceleration, the business community is actively looking for ways to integrate it into daily operations. However, there are still many doubts about its implementation and benefits. “What was once just a storage vehicle is now part of major business processes and developments,” said Javier Allard, Director General of AMITI. Software producer SAP, with more than 27 years in Mexico, has witnessed the evolution of companies in the country and their growing acceptance of cloud services. “Every quarter, we have seen significant advances in the adoption of cloud technology,” said Angela Gomez, President of SAP Mexico. “Over the last year, all companies realized that they not only had customers, they also had to take care of them and understand how to engage with them in order to keep them. When you sell a product or service to the customer, then you have to deliver on the promise,” Gomez said. In 1Q21, Mexico was listed as one of the most dynamic markets for cloud, according to SAP. “That shows that Mexican entrepreneurs are investing in the cloud,” added Gomez. However, she said, one of the biggest challenges remains with growing businesses. “We have identified that 95 percent of SMEs in Mexico do not yet have digital tools to automate their key processes or have real-time information to make better decisions.” The cloud is not only here to improve business processes but also to offer a better user experience. According to Maribel Dos Santos, Director General and Senior Vice President of Oracle Mexico, companies are already seeing real benefits from their transformation and migration to the cloud. “The past year made us much more resilient and pushed the technology acceleration forward by many years. 2021 looks like a year of recovery but it is definitely not a year where we are going to go back to normal as we knew it before,” she said. Dos Santos also mentioned that e-commerce is driving a shift in the adoption of the cloud, which is making companies much more agile and scalable. “The cloud is allowing the management of everything to do with customer logistics to be done in a faster and more efficient way, which creates a better customer experience,” she explained.

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Highlights

More Than Just a Trend In migrating from one location to another, companies often end up operating in hybrid or multi-cloud environments. For Julio Velázquez, Managing Director of Google Cloud Mexico, these have two main opportunities: cost optimization and access to state-of-the-art managed services that “drive the development of business transformation.” Managing these environments, he said, is a challenging task as it involves both public and private clouds. Faced with this challenge, Google Cloud recently launched Anthos, an enterprise hybrid and multicloud platform. According to a study by Forrester Consulting, Anthos reduces infrastructure costs and helps customers design applications to optimize their existing infrastructure, while at the same time efficiently combining it with the cloud infrastructure. “This means you can leverage what you already have but also look for new, more flexible schemes,” said Velázquez. This new tool also helps improve cloud security as the service is “transitioning from traditional perimeter security to an applicationcentric security approach.” In this regard, Eduardo Gutiérrez, President and CEO of IBM Mexico, said that the recent digital transformation of companies has made the hybrid cloud one of the most relevant trends. “The open hybrid cloud platform today is the main ally and enabler that helps companies in the integration and reinvention of their business processes,” he said. “It will redefine the way companies operate but more importantly the value they deliver to their customers.” IBM’s hybrid cloud approach gives companies flexibility to balance workloads as they undergo a digital transformation, said Gutierrez. “It is clear that business models are transforming and this is precisely because of the new reality we are experiencing. We know this requires a complete reinvention of customer experience, organizational culture and business processes,” he said. The five benefits of IBM’s open cloud include security, agility, mobility, flexibility and cost-efficiency, Gutierrez added. Security Is Non-negotiable In all industries and services, security has taken a central and imperative role, to which the cloud is no exception. According to data storage company Seagate, by 2025, there will be 175 zettabytes of data in the global datasphere. That same year, the amount of data generated each day is expected to reach 463 exabytes globally, says the World Economic Forum (WEF). “Not only is data increasing but so are the places where the information is stored. This results in complex data management,” said Abelardo Lara, Country Manager of Veeam Software.

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from the

Q: What factors will drive the adoption of cybersecurity solutions in the coming months? A: In the early months of the pandemic, we went through a phase where companies had to make the transition toward technology and deal with the resulting operational costs and issues related to it. Now that companies are operating with some regularity, they are looking more closely at the need to invest in technology to prevent attacks. Cybercriminals attack anyone and they do so through any gap in which they find a vulnerability. In Mexico, there is a reactive culture and that means companies protect themselves when they have already been attacked. We are trying to promote a culture of prevention. The financial sector is one of the most mature in terms of cybersecurity as it is one of the most regulated industries. Companies are always on the lookout to comply with all protection requirements. As a young company, it is sometimes difficult to penetrate large companies but there are already well-positioned businesses that have been in the market for many years that approach us to work together and make a strategic alliance. At the moment, this is how we are reaching clients in industries such as retail and the financial sector. Q: What cybersecurity solutions does ProtectMe offer? A: Often, users buy a cybersecurity solution and they think it

María Briseño

does not work but the reality is that it is not well implemented or adapted to their needs. ProtectMe has products and solutions in its portfolio to provide a comprehensive approach.

Co-Founder and General Manager of ProtectMe

There will never come a time when a company is 100 percent secure. Cybersecurity is about reducing risk. We focus on mail protection, endpoint, network and information security, the main vehicle through which attacks come. We are also defining a line of business focused on B2C cybersecurity. Several people have come

Tailor-Made Solutions Key for Cybersecurity Success

to us looking for personal protection because they have been attacked. ProtectMe has specialized people capable of addressing the needs of different industries. We have consultants who have had experience in large projects in the financial and many other sectors. That helps us to have a broader picture to support our clients in dealing with any challenge. Q: A growing number of cybersecurity providers are joining the market. What added value does ProtectMe offer to customers? A: Although we are a young company, our team has been involved in large projects and even has worked directly with cybersecurity solution manufacturers. Because of this, we have been able to spot areas of opportunity in the market and develop strategies to fill these gaps. One of the most common is the simple fact of not tailoring solutions to customer needs. A persistent misconception is that cybersecurity is at odds with operational performance. But it should no be that way. This mindset leads companies to ditch their security tools when they should not. The solution is to adapt and optimize that product so operational processes run smoothly without impacting the

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business. A manufacturing client we are working with asked us for help because their endpoint security solution was not letting all the processes run, so they turned off the firewall. That was not the solution and instead, we configured their solution based on their needs.

Success Story: wizlynx group Mexico Erik Villalpando Managing Director of wizlynx group

Cybersecurity Solutions in a New Reality Carolina Ruiz CEO of Brier & Thorn Mexico

Scanning the Dark Web for Cyberthreats Frédéric Costé Managing Director of KIPPEO Technologies

Full Visibility to Halt Cyberattacks Oswaldo Palacios Director of Sales Engineering for Mexico and LATAM at Guardicore

Bringing Israeli Cyberdefense Technology to Mexico Manuel Rivera CEO of Nekt Group

Fighting Cybercrime With Machine Learning Andrés Gueci Director General of Kiara Tech

Disrupting the Status Quo of Cybersecurity Daniela Menendez Country Manager of Palo Alto Networks

Employees Are Essential in Reducing Cyber-Risk Adriana García | Ramón Castillo Director General of Forcepoint Mexico | Sr. Sales Engineer of Forcepoint Mexico

A Full Overview of Cybersecurity Solutions in One Dashboard Alejandra García Country Director of Sophos

Bringing Israeli Cyberdefense Technology to Mexico Manuel Rivera CEO of Nekt Group

Talent The pandemic brought one of the greatest challenges to talent development in recent years. The dynamics of work as we knew them changed after COVID-19 arrived. Remote work, once considered impractical by companies, is now a common practice. Recognizing the economic, environmental and even productivity benefits of this working model, multinational companies have already announced that this new approach will continue indefinitely, giving their employees the option to choose whether or not to come to the office. While this has meant progress that would have taken many more years without the pandemic, it also created challenges that HR departments and company managers had to face practically overnight. In the beginning, finding a way to coordinate a remote team while keeping everyone engaged and in line with the company’s values and purpose was one of the main concerns, which left everyone with no choice but to discover new ways of working. In the months that followed, however, the effects of the pandemic on people’s mental health took center stage in almost every company’s strategy and budget. Although teams and working schemes will continue to change, taking care of employees’ emotional health will be a lingering concern. As the vaccination process advances, opportunities to experiment with a hybrid model of working are many. Innovation, flexibility, culture, mentoring and coaching will play an essential role in driving talent development.

Talent

102 Conference Highlights The Future of Work

103 Expert Contributor Álvaro Villar | General Manager of WeWork

104 Expert Contributor Ernesto de Olazával | CEO and Co-Founder of Comunal Coworking

105 Analysis Bridging Gender Pay Gap Is Everyone’s Job

106 View From the Top Anahí Flores | Campus Manager of IronHack

107 Expert Contributor Gustavo Linares | Founder of TalentHow

108 View From the Top Rocío Van Nierop | Co-Founder and CEO of Latinas in Tech

109 Expert Contributor Courtney McColgane | CEO and Founder of Runa HR

111 Conference Highlights Talent Strategies for Successful Businesses

112 Expert Contributor JorgePonga | Partner at Humanólogo Consulting

113 Roundtable How to Close the Gender Pay Gap in Mexico?

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

116 View From the Top Gabriel Alvarado | VP and General Manager of UKG Latin America

117 Content Links

Conference

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Highlights

The Future of Work Jorge Ponga Partner at Humanologo Consulting

Liliana Mendez Area Director Mexico City at WeWork

Santiago Gutiérrez

he digital industrial revolution has been coming for a long time but the pandemic greatly accelerated this transition. As the world is forced to adopt technology at an ever-faster rate, experts agree that a closer-term focus is just as important as setting long-term goals.

“It is no longer enough to set companies’ goals for the far off future. Now companies need to discuss how their situation might change in a maximum of one year,” said Jorge Ponga, Partner at Humanólogo Consulting. “The biggest challenge we are facing

VP México, Central America & Caribbean at Pearson

has been coming for a long time but it was accelerated by the

Federico Cerdas

pandemic; the digital industrial revolution has brought a more

CEO of Global Businesses Inc.

Alma Rosa García Puig CEO at Great Place to Work

Francisco José Ruiz Martínez Knowledge Management Manager at Tecnatom

agile world.” “There are have been many challenges but those obstacles can be turned into opportunities,” said Liliana Gómez, Area Director at WeWork. To do so, “you have to review relationships within your working life and see how everything is being rethought to know what is expected of workspaces,” said Gómez. Through this transformation, the first challenge is to make employees feel comfortable and not threatened by the digital transformation, explained Santiago Gutierrez, Vice President of Mexico, Central America and the Caribbean at Pearson. “All economic sectors have been forcefully changed by technology, so employees should not feel threatened by the impressive speed at which changes are happening. The opportunities generated are gigantic, starting with the fact that companies can get global talent that was not so viable before.” While most companies agree that human beings are the beginning and the end of every company, this too can be a challenge, said Federico Cerdas, CEO of Global Businesses Inc. “The greatest challenge is helping employees adapt to this reality. Companies have to see how they adapt to working online and how they combine that with life at home. Governments have to ensure that work activities are lawfully adopted and regulated.” The global crisis broke paradigms within companies, starting with the home office, explained Alma Rosa García Puig, CEO of Great Place to Work. “The personal and work spheres came together because the entire office entered your house. The challenge came from trying to find a new balance of work and personal life.” Francisco Ruiz, Knowledge Management Manager at Tecnatom, added that companies are now obliged to adapt. “It is now necessary to live with uncertainty and

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insecurity; there is no adaptation without learning. Learning must be our best competence today and our main concern must be to learn to adapt.”

s the world eagerly waits to get “back to normal,” students may well be among the most desperate to resume life as they knew it before. Students from all levels of education have not only missed out on in-person learning, they’ve also missed out

on the significant connections and personal development that comes with it; a reality our corporate world is no stranger to. Numerous studies have made it clear that the future of work is flexible. The university experience is moving in the same direction: a flexible experience where students will take the best of both, the physical and the virtual world. During the COVID-19 months, we were faced with the challenge of reimagining the way we work, evaluating every piece of the puzzle and asking ourselves what we really valued from an office. The same is happening to students, who are wondering whether or not they should go back to traditional learning or

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explore new ways of learning by combining the best tools they

Back to School: Why Offices and Classrooms Will Never Be the Same Álvaro Villar General Manager of WeWork

have at hand. According to a WeWork and brightspot strategy study, overall student satisfaction has declined by 27 percent, a tremendous drop. We also found that the two most important reasons students value campuses are “in-person classes” and “being together with friends,” areas of the student experience that have seen the greatest decline since the pandemic outbreak. The concept of learning goes far beyond walls and a computer. Learning does not just happen inside the classroom, much less in front of a computer; true learning happens when you take everything you absorb during class and give it an insightful meaning applicable during social and environmental interaction. The way we learn also will be increasingly hybrid. The COVID-19 outbreak accelerated many of the changes we were expecting to see in decades to come. Just like we have experienced with our offices, learning institutions will have to embrace a flexible future and adapt to a world that will demand the best of inperson and remote education. Virtual learning is here to stay: Universities and learning institutions around the world have demonstrated they can deliver remote education in a safe and effective manner. We have also learned we no longer need to be geographically based in the same city as our university. We might as well get a degree from a Chinese or Australian institution; however, studying from home also has its downfalls: inadequate space to really focus, unwelcome distractions and increasingly blurred lines between study and leisure reveals that the ideal solution might very well be something between the two extremes. A whole new world of possibilities opens up for us to explore. The campus experience will be reimagined: Just as companies of all sizes are rethinking the traditional office space right now, learning institutions are reevaluating space needs in and off campus. It is controversial; while major campuses might need

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to rethink their spatial footprint, remote learning institutions might be looking to pivot their strategies and consider providing adequate spaces for their student base. In the end, students truly need a place where they can meaningfully engage and connect. This major shift is already happening.

ollowing the outbreak of COVID-19 in 2020, the way of working has drastically changed and will continue to change. Due to the mandatory or voluntary quarantine governments have imposed, distinct sectors have had to conduct their administrative operations virtually.

Although many teams have demonstrated a great capacity to meet their work goals under this scheme, this is not the case for the majority of teams. It is becoming increasingly difficult for them to fulfill their activities, generating not only financial disadvantages but, most importantly, psychological and workrelated drawbacks. Even though home office has been a necessary measure to contain the spread of COVID-19, we have noticed clear symptoms of exhaustion. This is reflected in several negative aspects, such as the excess of virtual meetings, lack of technological training and employees’ work saturation resulting from non-fixed schedules,

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which must be thoroughly considered by companies to avoid

Coworking Balances Working at Home and From the Office Ernesto de Olazával CEO and Co-Founder of Comunal Coworking

problems in their operational processes. After more than a year, the increasing knowledge and refinement of preventive measures, the lack of motivation and productivity, as well as the need for a suitable working space, has driven many people to want to return to their offices. Consequently, the hybrid work scheme, which combines home office with face-to-face work, is now gaining popularity. To achieve this, companies are opting for flexible working spaces that adjust to this new need and can only be offered by coworking. Along these lines, a recent survey conducted by Comunal Coworking, an expert in the office market and with extensive experience in Peru and Mexico, reveals the consequences of a prolonged home office scheme: 85 percent of those interviewed affirm that they want to alternate between work at home and the office, 83 percent mentioned that they suffer from the lack of a suitable working space, 80 percent stated that their time dedicated to meetings and calls has increased substantially and 65 percent perceive their increased workload as a real issue. Hybrid schemes are our present and future and, thus, co-working will play a more significant role under this job modality. For this reason, Comunal Coworking has been developing different work modules for the coming years and has constantly innovated in its offer to stay in tune with what operations need to continue functioning while recovering from the economic downturn caused by the pandemic. In this context, coworking spaces have become a safe and effective alternative for companies’ work reactivation and productivity because they offer flexible working spaces and a robust infrastructure. Coworking outweighs conventional offices due to its characteristics in the generation of savings, security and flexibility. Companies benefit from co-working because it offers a flexible contract in terms of service and infrastructure, which can be used for days or even hours. Regarding employees, they benefit from coworking’s flexibility of adapting itself to their needs and concerns.

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There is no doubt that coworking has created an appropriate coexistence between physical and remote work under the current context, with safety and health as the top priorities. Companies must ensure the well-being of their employees without getting distracted from their core business.

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Bridging Gender Pay Gap Is Everyone’s Job The pandemic has reversed over 25 years of progress toward greater gender equity, according to the UN in late 2020. The problem is fueled by a bias in salary negotiations, the so-called motherhood penalty and the lack of access to education for women. Industry experts have their own vies on how to tackle the gender pay gap, from better access to education to fostering broader acceptance of paternity leave. Grassroots Issue Between 2017 and the start of the pandemic, women in Mexico earned on average MX$85 (US$3.9) for every MX$100 (US$4.6) earned by men, which means an average wage gap of 15 percent, according to the Mexican Institute for Competitiveness (IMCO). Due to the pandemic, women’s economic participation dropped from 45 percent to 41 percent, the same level as in 2005. The perception among almost half of the women in a Runa HR survey is that the pay gap is wider. The survey among more than 450 women who work for companies in Mexico found that 47.6 percent believe that men earn 26 to 50 percent more than women. Likewise, 66.4 percent believe that the gender pay gap in the country is worse than in the rest of the world. Access and level of education are some of the main factors contributing to the gender pay gap. At the beginning of 2020, women with high school or higher levels of education faced an average wage gap of 15 percent, according to the latest figures from IMCO. Female workers with this level of education earned MX$8,454 (US$393) per month, while male workers earned MX$10,000 (US$465). The Ministry of Finance and Public Credit (SHCP) estimates that if women are provided with more education and training, their incomes can increase by 18 percent. More Than Just a Wage Increase Closing the pay gap and promoting women in leadership positions not only has a positive impact on the fight for gender equality but also on economic performance of companies and countries. According to IMCO, incorporating 8.2 million women into the labor market over the next 10 years would increase Mexico’s GDP by 15 percent. To achieve this, the report states, the government needs to implement actions such as a universal childcare system and encourage the private sector to promote investments and projects that include more women. The lack of women in the workforce in Mexico, especially in leadership positions, limits women’s aspirations, Caroline Merin, COO of Rappi globally, said during Runa HR’s webinar. “When you do not see someone like you in a leading position, you automatically think it is not an option for you and unconsciously limit yourself,” she explained. The key to fostering diversity, Merin added, is to develop internal talent in companies so women can eventually take on more senior positions. “It is not only the job of women to seek to improve the situation but of the whole company,” Merin noted. In addition, she said that the impact of Read the complete article More about this topic

a more diverse team is positive for companies, especially if their product or service is also aimed at women. “If the consumer of your product is diverse, you need your team to be diverse.”

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from the

Q: How is Ironhack taking action to close the IT talent gap in Mexico? A: Ironhack was created to bridge the digital talent gap. The company was born in Spain during the economic crisis that started in 2008. At that time, there were not enough jobs for recent graduates but at the same time there were large companies or startups looking for more technological profiles. We later started to see this phenomenon in other countries like Mexico. At Ironhack, we have four divisions: web development, UX/UI design, data analytics and cybersecurity. The latter is the most recent addition to our courses and a much-needed one at the moment. In 2020, the use of digital products increased, just as the rate of cyberattacks. Our goal is to be able to prepare professionals in a short period of time through intensive programs. We do not compete with universities. Rather, we prepare recent graduates or professionals in specific skills that companies need today. Our training is complementary to any career. We have had students who were nurses, nutritionists and even naval engineers. People looking for entrepreneurship also need a technological foundation. At Ironhack, we know that the economic development of a country is always linked to technological development. The more skilled professionals we have, the more companies will hire

Anahí Flores

their talent in Mexico, which has a positive economic impact. Q: What actions does Ironhack take to attract female talent?

Campus Manager of IronHack

A: We have a global initiative that focuses on partnering with other companies or foundations to reach out to communities. Women represent 30 percent of our student base, which is well below the 50 percent that I would ideally like to see. What we do at Ironhack is form partnerships. We recently partnered

Ironhack Shaping the Workforce of the Future

with a global movement called Women in Tech, which makes global efforts in many cities and with which we organize intensive courses. Role models will always be important. It is vital for women to know that such careers exist and that there are women studying and practicing them. The fact that more women are starting to consider this type of career also contributes to closing the pay gap. Even though it is smaller than in other industries, there is also a pay gap in tech. We are now linking this to our prices. If a woman currently earns less, her product must cost less. Right now, for example, we have certain discounts for certain communities and the discount for women is double. Accessibility is just one of the first steps for women to start taking a bigger role in this industry. On the other hand, during our courses we have an important empowerment focus. For years, the female dropout rate has been higher than the male rate. When we analyzed why, we found no external factors. Then we deduced that it was this lack of role models. That said, we give more attention and support to women and we have seen incredible results with women being top of

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their classes. Within Ironhack, 50 percent of the campus managers are women. You cannot say one thing and do another, so internally we also seek to maintain a gender balance.

ne year ago, Mexicans all over the country experienced something that has never before happened in the nation’s history. On March 9, women from all around the country held a peaceful national strike that sought to

prove the crucial contributions of the female population in the social, economic and political spheres in Mexico, as well as demand solutions to the wave of femicides, harassment, inequalities and abuse against women in private and public spaces throughout the country. Millions of women decided not to go to work, regardless of their profession, for one day, creating a substantial economic impact on many businesses and the country’s GDP. Over MX$200 million was lost that day, which opened the eyes of many politicians, CEOs and business owners nationwide. Women are essential to any country’s economy.

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It is not a secret that the perceived notion that men should

How HR Can Help Eliminate the Gender Gap in Pay Gustavo Linares

earn more than women because they are the “bread winners” and women can depend on their husband’s salary is an unfortunate reality that many people in the world actually believe. According to the International Labor Organization, women earn between 50 percent and 96 percent of men’s wages, depending on the country. This is outrageous. We can all make a difference; we do not have to wait for government regulations to be implemented to change this. We can start creating internal policies and procedures in the HR department to help prevent any salary gap within your company or organization.

Founder of TalentHow Start by setting base compensation for the job, not the gender that is applying. Set a salary range for the position and stick to it. This will not only make your life easier but will level the playing field both in terms of age and gender. What we must do in the HR department is to use technology to our advantage and track all of the salaries being paid, including bonuses and other benefits and compensations. Once all the HR analytics are in place, you can determine whether or not women are being underpaid for the same role as men and do something about it. Another strategy to reduce this gap is to fully train all the hiring managers. Many of them may not know the current market and what their competitors are offering to potential candidates. Work on a plan to match pay directly to market value, which will leave minimal space for negotiation and will help close unfair pay gaps. Regarding fair bonuses and pay increases, this can be solved quickly. Create a Management Committee, which should have the representation of both males and females, where you can all discuss and defend salary increases and bonuses for staff members. This will not only make it transparent and ethical, but it will also help reduce favoritism and help fix the gender pay gap. Read the complete article More about this person More about this company

There are many ways that we as citizens, HR professionals and CEOs can help to eradicate gender pay gaps. We should not wait for the rest of the world and politicians do something about it.

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from the

Q: What specific actions are you taking to provide the resources, opportunities and community that Latin women need to thrive in tech? A: The first is events, which before the pandemic were face-toface conferences. They started out as small events that consisted of half an hour of networking, an hour of content and another half-hour of networking. We held these every month or two. When the pandemic hit, we moved to weekly webinars every Thursday. While this might sound like a disadvantage, the reality is that we can now reach thousands of people through a single event instead of just 100. In less than a year, we went from 11,000 members to 15,000. We also have mixers, which we are organizing to replace the networking that used to take place at face-to-face events. We use this tool so Latin women can get to know each other and build relationships. This also helps recruiters from big companies get to know them. We also have tools on our website where tech companies can see the profiles of our members and chat with them, in addition to a newsletter with job offers from companies. Other programs are more executive in nature. We offer a mentoring program, for example, through which we help to generate business relationships. We believe that for every female mentor we promote, five women can be helped. Mentoring is key and that is why we not only seek out the most senior female Latin mentors but also other allies.

Rocío Van Nierop

Q: What are the main challenges you have identified when empowering women?

Co-Founder and CEO of Latinas in Tech

A: Challenges are everywhere. Tech companies may want to do things right but, unfortunately, nobody has found the formula for success yet. It is all about trial and error. Over the last few years, we have seen companies try and fail and try again. In a market like the US, we struggle to push Latin women forward. But in Latin

Boosting Latina Participation One Step at a Time

American markets like Mexico, the barrier is not being a Latina but simply being a woman. Those countries are far behind in terms of giving women a chance and it is very hard for us to change the macho mentality. There are people, for example, who approach big consulting firms but do not want a woman to advise them. They do not trust her because of her gender. That kind of thinking is incredibly backward, although it is no longer as prevalent in the US. We have to learned to deal with these situations to encourage systemic and personal change. Q: What prevents women from joining the tech sector? A: I like to look at this in two ways. The first is what you can control as a woman, such as personal stigmas or the impostor syndrome. On the other hand, there are the systemic things that are not in our power to control, like the stigmas perceived by others; how they react to the fact that you are a Latin woman, which is also linked to the gender pay gap and what companies are doing to stop this from happening. That said, we are struggling right now to create change; progress will be slow. We probably will not see reality change during our working lives. However, where we do have an immediate impact

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is within ourselves. We help Latinas see that they can transform themselves to accelerate their growth. At the same time, we work with businesses and governments to try to enact changes in the system. The latter can change but it will be in the medium to long term, while personal development is short term.

n the 21st century, in an age where knowledge, science and human rights have reached their highest expression, women continue to be treated less fairly than men. Women have fewer career opportunities, face more obstacles to gainful employment, suffer from higher levels of harassment

and earn notably less than men. Less than half of Mexican women of working age participate in the labor market, the fourth-lowest percentage in the world. Almost 60 percent of the women who do work have informal jobs, with low social protection, high insecurity and low pay. Those working in the formal economy are under-represented and underpaid. Women make up just 35 percent of entry-level positions, 10 percent of executive positions and 8 percent of board seats. They earn on average 18.8 percent less than men and up to 22 percent less at the executive level. Seven in 10 women think companies in Mexico are not doing enough to fix

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the problem.

The Gender Pay Gap in Mexico and How Your Company Can Stop It Courtney McColgane CEO and Founder of Runa HR

In a recent Runa study, we spoke with more than 450 women who work for companies in Mexico, including Accenture, Amazon, Ben & Frank, BBVA/Bancomer, Bitso, Citibanamex, Clip and many others. Here are their Top 5 recommendations on what their companies should be doing to close the gender wage gap in Mexico: 1. Annual salary audits. Only 15.6 percent of women said their companies conduct annual salary audits to check for gender bias. It is no secret that men ask for more salary raises, promotions and career opportunities. Therefore, it should be no surprise that they receive those benefits more often than women. Awareness is the first step to solving the problem. When you analyze compensation by gender and race, you can see and address pay gaps. You can also be explicit about how your organization determines compensation so that employees do not have to guess what factors are driving their pay. 2. Implementing quantitative performance reviews. 49.1 percent of women said their companies have clear, quantitative processes around promotions, salary increases and bonuses. Why is that important? Performance reviews are partly, if not mostly, subjective — focused more on what your boss thinks about your work rather than on the numbers or quality you produce. That opens the door for gender bias. How do you eliminate gender bias? Include a large sample size, up to five people per review cycle. Complete performance reviews more frequently, quarterly versus once a year. Base reviews on job skills and require quantitative measurement of those skills on a scale of 1 (Inefficient) to 5 (Mastered). Require specific examples to support those quantitative ratings. Your process needs to be transparent to the entire company. Employees need to be clear about what is involved to rise at the company and managers need to understand that their decisions need to be objective and evidence-based. Introducing transparency to promotion, pay and reward processes can reduce pay inequalities. 3. Adopting gender blind recruiting practices. 59.2 percent of women said their companies use a gender-blind recruitment process. What does that mean and why is it important? A gender-blind recruitment process has specific targets for what percent of candidates need to be women. It also requires candidate assessments to be based on skills, not opinion. To achieve this, candidates are required to perform tasks they would be expected to perform in the role they are applying for. It also uses structured interviews, asking exactly the same questions of all candidates in a predetermined

order and format. The grading of those questions is also standardized. This format makes response more comparable and reduces the impact of unconscious bias. 4. The adoption of a flexible work policy. Thanks to COVID-19, 73.3 percent of women said their company has adopted a flex work policy and the majority of those interviewed believe the new changes are here to stay. Seventy-five percent of house and family duties are taken on by women in Mexico. This makes it nearly impossible to manage a career while having a family. By allowing women to work when they want, from where they want, managing both can be a bit easier. The real solution is shifting the family burden from women to both men and women. Companies can help support this by giving equal paternity and maternity leave. Only 5 percent of women in our survey said their companies offer fathers equal-term paternity leave of 12 weeks. 5. Base salaries based on the position, not previous pay. Women on average are paid 18.8 percent less than men in Mexico. If a company, therefore, bases a job on a candidate’s previous salary, they will be perpetuating the gender wage gap. By basing the position on a salary range linked to skill sets, the salary gap decreases. Employers should not ask applicants their previous salary in the recruitment process. Instead, they should set a salary range for the position based on market comparables. Where the candidate falls in that range should be based on the assessment of their job skills for the position on a 1-5 scale. Unfortunately, closing the gender wage gap is not at the top of any company’s agenda in Mexico. Why? Gender and diversity are social issues, not business issues. Until we can prove that gender and diversity mean more profits and better performance, we will never make this a top agenda item. The good news is that the data is coming. A recent McKinsey study found that the economic value added to companies with greater representation of women in management is, on average, 28 percent higher than that of companies without women in their executive committees. Their profit margins and returns on equity are 55 and 47 percent higher, respectively. Similarly, a recent Gartner study found that genderdiverse and inclusive teams outperformed their less inclusive counterparts by 50 percent. In Mexico alone, it is estimated that closing the gender gap would increase Mexico’s GDP by more than 70 percent. How’s that for a business case? Mexico can and must work to eliminate the gender pay gap. It is good for society and it is good for the economy. Companies can be the leaders of this change. If each company could implement just one of the above initiatives this year, imagine how high women in Mexico would rise.

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Conference

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Highlights

Talent Strategies for Successful Businesses Gustavo Linares Head of Human Resources for the International Rescue Committee and Founder of TalentHow

Maite Delgadillo HR Director of Scania

Guido van der Zwet General Manager of iPS Powerful People

Nora Villafuerte Human Resources Vicepresident at Nestlé Mexico Group

Gabriela García SVP Human Resources at PepsiCo

ue to the pandemic, 43 percent of Mexicans feel that their mental and emotional health has deteriorated, reports Ipsos. In this new environment, companies are placing their employees’ emotional well-being at the center

of their business strategies, leading them to embrace new technologies to effectively manage their staff. “We cannot neglect our collaborators’ mental and physical health, especially during these challenging times,” said Nora Villafuerte, Human Resources Vice President of Nestlé Mexico Group. The pandemic introduced changes mainly in three areas: demographics, individuals and technologies. “This forced people to adapt to the new working conditions while learning technological skills and balancing their personal life and feelings,” said Guido van der Zwet, General Manager of iPS Powerful People. During this period, technology plays a key role as it supports human work and even generates more employment opportunities, added Van der Zwet. The transition extends to employees’ families, added Gabriela García, Senior Vice President of Human Resources at PepsiCo. “As we enter the new normal, it is also important to recognize that our employee’s families matter for the person’s integrity, health and well-being,” she said. Maite Delgadillo, HR Director of Scania, agreed that family needs to be prioritized. “Family is indeed a priority and it was the greatest concern for our company during the pandemic,” Delgadillo said. During the pandemic, Mexico was the leading country in cases of depression, said Gustavo Linares, Head of Human Resources for the International Rescue Committee and Founder of TalentHow. The reason for that might be the challenges employees faced to balance home life with work in the same environment, suggested García. “The majority of Mexicans do not have the conditions to work from home because there are many things to take care of at the same time.” Adaptability and flexibility on the side of the company is another necessity in the current circumstances, said van der Zwet. “There is not a single solution for all issues, everyone works at their own time and pace due to their different conditions at home.” He added that companies that wish to be sustainable must have a socially inclusive workplace that enhances the

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feeling of belonging for each employee. “Also, companies need to rethink old working schemes of daily office attendance on a nine to five schedule, which in Mexico is often longer.”

ccording to the OIT, there are more cellphones than humans. There are around 8 billion lines, 103 percent with respect to the world’s population, but there is 50 percent internet access globally. That implies a large access gap

to digital sources in many countries. These numbers lead us to believe that we live in a “liquid world,” a world that moves at a high but uneven speed, alerting us to the big risks that humanity will face in 2021. In the World Economic Forum’s 16th edition of its report, “The Global Risks 2021,” various issues are highlighted that represent challenges that could be faced. In this case, I will focus on two that are key: employability and digital gaps. Both are key to living a life worthy of human beings. In 2Q20, resulting from the COVID-19 pandemic, there was a loss in working hours around the world equal to 495 million

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jobs, which will generate labor inequity, underemployment and

Living in a ‘Liquid World’ Jorge Ponga

unemployment, among other issues. Seventy percent of the female workforce in the nine most powerful economies in the world think their career will stagnate, while 51 percent of young students in 128 countries believe that their educational progress will be halted. Precarious working conditions and lack of social security will aggravate the living conditions of 2 billion workers operating in the world’s informal economy.

Partner at Humanólogo Consulting Not all governments are prepared to face these challenging conditions, not only because of lack of resources but because of capability. This clearly represents a moment of truth for the organizations that take leadership on the subject of social responsibility through innovation and creativity in the generation and preservation of the workforce in all senses. Resources such as home office, the use of technologies and the growth of productivity will be key in the permanence — or lack of it — of the companies that aspire to continue their operations. This leads me to analyze another topic: “digital inclusion” and the opportunities it offers. COVID-19 has accelerated the adoption of the Fourth Industrial Revolution, which is digital. Online education has presented both challenges and big advancements for the educational model and its adoption. E-commerce has consolidated and has become part of the day-to-day life of many people around the world. And in many cases, remote work is here to stay. At the same time these advancements have stretched the digital inequality gap, which, although not new, is larger now. An issue that is closely linked to the digital gap is education. Vulnerable groups are recognized to be seriously affected in terms of the opportunities to access education, which will leave them without the functional skills needed to insert themselves into job sources.

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There is no record of job losses in any of the three previous industrial revolutions; on the contrary, more labor sources were generated. This time, it is estimated that 85 million jobs will be automated in the next five years, which poses a challenge in the generation of new skills in the workforce.

The gender gap is a long-standing global issue. Misconceptions

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How to Close the Gender Pay Gap in Mexico?

about women’s capabilities, balancing home care and work and even the willingness to negotiate fairer pay all work against equal pay. According to the Center of Global Development, closing the gender pay gap will benefit women but may also bolster business performance, strengthening the global economy. Turning the issue around is no easy matter but industry leaders believe that taking action at the highest levels of business, such as wage audits, is a step toward real change.

We can all make a difference; we do not have to wait for government regulations to be implemented. We can start creating internal policies and procedures in the HR department to help prevent any salary gap within your company or organization. Start by setting base compensation for the job, not the gender that is applying. If there are no salary ranges established in your company, that is one of the first steps you need to take to ensure equal pay for all staff members. Another strategy to reduce this gap is to fully train all hiring managers. Many of them may not know the current market and what their competitors are offering to potential candidates. Provide

Gustavo Linares Founder of TalentHow

diversity and inclusion training to hiring managers to make them fully aware that women can do the same job as men and that being on maternity leave is not a disability.

In a recent Runa study, we spoke with more than 450 women who work for companies in Mexico. Their Top 5 recommendations on what their companies should be doing to close the gender wage gap in Mexico include annual salary audits, implementing quantitative performance reviews, adopting gender blind recruiting practices, the adoption of a flexible work policy such as equal paternity and maternity leave, as well as base salaries on the position, not previous pay. Mexico can and must work to eliminate the gender pay gap. It is good for society and it is good for the economy. Companies can be the leaders of this change. If each company

Courtney McColgan

could implement just one of the above initiatives this year, imagine how high women in Mexico would rise.

CEO and Founder of Runa HR

Women are mostly employed in the commercial sector; 4.8 million men were employed in the sector at the end of September, compared to 5.1 million women. Most women in this sector (70 percent of the total economically active) live in total uncertainty or, in other words, live day to day. Access to credit is only one of many obstacles that women entrepreneurs experience daily in our country. Without a doubt, it is necessary to analyze in detail the current scenario in terms of gender equity to propose real solutions that allow men and women to develop under equal opportunities. It has been demonstrated that women tend to have stronger

David Arana CEO of Konfio

businesses, tend to use financing more wisely and even have projects with a greater vision for the future.

hy is 2020 the most bipolar year we have lived? A few days ago, I spoke with a famous offline brand selected by Endeavor in 2004. The past year has been very hard for his business because its shops and workshops

have been closed for many months and people are unable to work. For this business and many others with the same characteristics, the role as a leader is more complex now than ever. We are trying to help them on cash flow strategy and the protection of their employees but lately, I would say the accompaniment is more for encouragement, support and mental health. Then again, we are celebrating an amazing round of investments, acquisitions and exponential growth for digital-native companies selected in the last eight months by Endeavor. Digital native businesses are bursting and those resources will help them grow even more. That is how disparate 2020 was for the Mexican business sector. For certain industries, the crisis has affected

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operations and value chains, while for others, it was the year

Lessons From the Most Bipolar Year of Our Lives

when opportunities, exponential growth and positive numbers exploded. Sadly, the highest proportion of entrepreneurs falls into the first group, which has led to a rise in unemployment never seen before, low or no profits and a dramatic closure of companies, which ultimately has had a very negative impact on the country’s economy. Our report, “Entrepreneurial Ecosystem Reshuffle: Challenges

Vincent Speranza

& Opportunities in the Post-COVID-19 World,” revealed the

Managing Director and Latam Regional Adviser for Endeavor Mexico

decline on record. Every hour, seven companies shut down

seriousness of the situation. Mexico’s GDP contracted by 18.9 percent in the second quarter compared to 2019, the sharpest permanently and 1,366 people enter poverty. If we add to that the human losses and vulnerability that we all experience, the future looks very complicated. That is why I believe that, in this tragic scenario, it is worth highlighting the lessons from this pandemic to remind us that, even in the worst moments, resilience and adaptability are the abilities that will help us to get ahead. Five Reflections on Life and Business in a Pandemic Here are five lessons that I have reflected on in these months of confinement, in one of the craziest years of my life. 1. Living through this crisis has forced us all to reinvent. We had to pause and we were given the opportunity for introspection. We moved away from routines and changed our work dynamics. And now, we think much more about our physical, emotional and spiritual well-being and about taking time for ourselves and our family. From a humanity point of view, this is something very positive. 2. We also became more aware of caring for the planet, because we realized what happens when we let the world take a break.Companies also had a moment of thought: they went back to their roots to remember their true purpose and they have strived to put the customer at the center of their actions again. This is very powerful for the market. We will not return to how it was before. Today more than ever, digital is here to stay. Certain sectors were reluctant to make the transition. But COVID-19 and the restrictive measures to contain it put the digital transformation on steroids as the change was necessary to survive. Our report revealed that six out of 10 SMEs today sell their products via the internet, 94.6 percent more than in 2019. Aside from the advantages of the tech entrepreneurial scene, I consider that the fact that they have taken us out of our comfort zone is a very positive thing. Because when you get used to a way of doing things and nobody challenges you, you get stuck and you are unable to grow.

3. Our habits were also transformed, which impacted businesses and their collateral value chains. For example, the fact that more people are making online purchases also means more digital transactions; that is, more cards processed and delivered and a greater banking penetration. Also, an increase in delivery services and the phenomenon of the sharing economy. Another example: public transportation means a health risk due to crowds. The alternative: acquire a car, if not new, then a used one. This explains the exponential growth of the Endeavor company Kavak, an online platform that sells second-hand cars, which had exponential growth in 2020. The graph is amazing, it does not show a curve but a vertical increment. 4. The way we work also evolved during 2020. Although we lack many things when working remotely, especially in terms of social contact, in the end, the scheme works for many sectors. This will lead us to completely rethink how we live in the future. We will no longer waste time in traffic because many of us will be able to connect to do our work or we will not have to go to an office every day (Endeavor itself will have a different work cycle now). I see decongested streets, activities will no longer be centralized in large cities because it will be possible to work from anywhere and that will increase the level of well-being for everyone. The post-COVID-19 world is going to be very different. There will be a period of adaptation but, without a doubt, it will change a lot. 5. Unicorns are no longer mythology for the entrepreneurial scene in Mexico because in October 2020, we saw the birth of the first local unicorn startup: Kavak. Endeavor was a first-rate witness, as its three founders are Endeavor Entrepreneurs. This confirms that companies born digitally and leveraged on technology, designed for the customer or even obsessed with serving them and that are always in search of new and better proposals for the changing conditions, are the ones that are having a lot of success and relevance in this new world. The Biggest Lesson: There Is No Better Time Than Now In March of last year, entrepreneurs entered survival mode. They were defensive, took precautions, cut expenses and rethought their goals. But in 2021, many went into attack mode. They already understood that the change was not momentary but permanent. Now they must determine how to land their strategies and efforts for this new reality, to take advantage of the fact that dominant players are slower to assimilate changes and make decisions. They also acquired great talent that other companies left behind. Investment funds got it very well. They said, “Hey entrepreneur, your thesis is valid, your answer is correct, your value proposition is congruent.” This explains all the investment rounds that came out in the last quarter of the year. And the best thing is that right now, there is a great deployment of resources. All this leads me to think that everything is ready. Entrepreneurs are formatted again. The consumer is willing. The market is about to take off. Technology has already proven that it solves many problems. And the talent is back in action. Then, let’s go! I am very optimistic. Amazing things are coming in the post-COVID-19 world. And it will be a much better world, as long as we do not forget the lessons learned from the craziest year of our lives.

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from the

Q: How does UKG help companies manage their workforce and which industries are you focused on? A: Kronos has evolved into UKG. This is our new venture but our focus remains on people, offering end-to-end workforce management solutions. We are really proud of our evolution. We are now a US$3 billion company with more than 12,000 employees. During our fiscal year that ended in October 2020, we reported double-digit growth and in Latin America, we reported more than 15 percent growth even though the scenario worldwide seemed particularly difficult. We have a strong focus on manufacturing activities, retail, logistics and last-mile deliveries, airlines and telecommunication services. When lockdown measures were enforced in April and May, we knew our solutions could help our customers resume their operations in this new reality. Our challenge was to address both the health of employees and the growth of the companies economically. Q: As workforce management experts, how did you embrace the pandemic’s effects? A: I am aware of everyone’s commitment to the company but shifting totally to a remote working scheme was still challenging. We enabled communication channels to maintain personal

Gabriel Alvarado

interactions. On a personal note, I organized a virtual coffee chat with every one to talk about their lives. We even created virtual integration activities like sushi nights where a professional chef guided us through the process. Interaction is key for motivation

VP and General Manager of UKG Latin America

and by getting creative and close to each other, we not only became a stronger team but also promoted mental health. For us and our business, the most important element is people. Human capital must always be committed and motivated. Our engagement rate among our employees, evaluated by external

UKG: Human Capital Management in the COVID-19 Era

consultants, is around 98 percent. We are also ranked first by Great Place to Work. We took a proactive approach to replicate our internal strategies with our customers. At the end of the day, we are human. We invited clients and suppliers for a virtual coffee chat to touch the human fibers we all share. This has helped our relationships to grow from a business relationship into one based on mutual trust. Q: What are the challenges introduced by recent labor reforms and how do they impact your solutions? A: Our systems are really flexible and we can incorporate new rules into our system. We meet 99 percent of labor standards in the world. We have 50 years of experience doing this. Any specific element demanded in a country can be replicated in another. Our system evolves constantly and we can adapt to any changes to legal reforms and common practices from country to country. The automotive industry in particular is facing labor content value rules (LVC) established in USMCA. We can monitor that in real-time. Our solutions include monitoring employees’ real-time

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activities, income, productivity and quality. Thus, defining LVC is really easy for us since we collect that data automatically. By performing simple analytics, companies can have all the data they need, by country, state, region and facility, which helps them to make faster and more informed decisions.

Mentorship in the 21st Century Jonah Greenberger CEO of Bright

The Road to Equal Protection for Domestic Workers Valeria Uribe Director in Mexico of the Pan American Development Foundation (PADF)

Singularity and Longevity Byron Amores Co-Founder of Habits.ai

The Future of Work is Hybrid Martin Haiek CEO & Co-Founder of Around

The Right Time to Optimize Gabriel Manjarrez CEO of Lumbrera

Pearson and the Road to the Democratization of Education Santiago Gutiérrez Vice President for Mexico, Central America and Caribbean of Pearson PLC

A Collective Higher Education Patricio Bichara CEO of Collective Academy

The Importance of Cleaners Melina Cruz CEO & Co-Founder of Homely

La Pieza Eliminating Bias in Recruitment Processes Pol Morral Dauvergne CEO of La Pieza

My Professional Digital Image: Should I Observe or Participate? Oscar Harada Senior Relationship Manager for LATAM of LinkedIn

Logistics The past year has put logistics chains around the world to the test. The pandemic, the USChina trade war, USMCA and the blockage of the Suez Canal have been among the challenges companies have had to navigate. Regionalizing and optimizing supply chains have become crucial goals for companies to remain competitive in a market with an increasing number of players. In this context, Mexico holds a privileged position that has attracted the attention of companies seeking to target the North American market. With the entry of the new federal administration, Mexico’s southeast became a priority for logistics and infrastructure projects in an attempt to diversify the region’s economic dependence on tourism and attract more investment. Other states including Guadalajara and Nuevo Leon have also attracted the spotlight, stealing attention from the logistics-centric Bajio region. The potential of the country’s ports, roads, labor force and strategic geographical position are just some of the benefits that have been noted by investors. However, saturated infrastructure, insecurity and legal uncertainty are aspects that have not gone unnoticed. If one thing is certain, it is that logistics companies will have to figure out how to best adapt to the new expectations of clients that have already made this once neglected sector the center of their strategies.

Logistics

121 Analysis How the Pandemic Disrupted Logistics Chains

122 View From the Top Getulio Centanaro | Product Management Director for Mexico and Middle America of Maersk

123 Expert Contributor Deepak Chhugani | Founder and CEO Nuvocargo

124 Expert Contributor Alfonso De Los Ríos | Founder & CEO of nowports

125 View From the Top Jose Ferreira | Business Development Manager of Yinson

126 Conference Highlights Logistics, Infrastructure Essential to Economic Recovery

128 Conference Highlights Last-Mile Deliveries are Customer-Centric, Data-Driven

129 Expert Contributor Ingo Babrikowski | CEO at Estafeta

130 View From the Top Iván Ariza | CEO of Cargamos

131 View From the Top Christophe Milhères | Managing Director of Lalamove Mexico

132 Roundtable How Has Technology Helped Logistics Companies Boost Efficiency?

133 View From the Top Juan José Salas | Managing Partner at NetLogistiK

135 Spotlight Self-storage a solution for individuals and businesses

136 Content Links

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How the Pandemic Disrupted Logistics Chains COVID-19 exposed the fragility of global supply chains and accelerated the trend toward regionalization, or nearshoring, industry leaders say. As companies pursue economic recovery, technological innovation is also helping to optimize operations via data analysis capabilities. “Digital is reshaping the transportation and logistics industry in ways that will have a dramatic impact on the flow of people and goods around the world,” states Boston Consulting Group in a thought leadership piece. Nearshoring Nearshoring became a buzzword after the COVID-19 pandemic shook global supply chains. CBRE suggests that Mexico’s northern region is in a key position to capture investment and companies interested in operating in North America, as companies are relocating production closer to where large consumer markets are by taking advantage of the opportunities that neighboring developing economies present. “We want to reinforce nearshoring among Western companies established in Asia and then we will look to the rest of the world. This is where we see the possibility of success in integrating value chains,” Alfredo Nolasco, General Manager of Chihuahua Global, one of the main logistics players in the northern part of the country, told MBN. Connectivity and AI Connectivity in logistics operations did not emerge because of the pandemic but it was significantly accelerated. BCG pointed out in 2018 that ports were already getting smarter and more digital. It added that opportunities remained. “Despite the improvements, aspects of port operations remain firmly anchored in the past, dependent on manual and paper-based systems,” wrote the firm. That being said, the company was confident that technology would drive innovation. “Startups, suppliers and even customers are using digital technologies to develop a variety of innovative business models that will dramatically improve the customer experience.” Self-Storage Boost The pandemic considerably accelerated the digitalization of the digital economy in Mexico, as well. The market value of e-commerce in Mexico spiked to estimates of MX$864 billion (US$42.8 million) in market value in 2020, a 36 percent increase against 2019, according to Statista. Now, e-commerce is not only about Amazon, Mercado Libre and other large digital marketplaces. SMEs have also ramped up their digital business. Environmental Concerns Logistics players also are dealing with a longer list of requirements from clients to eliminate any potential threat to the environment. “We began overseeing all aspects of the containers’ logistical cycle, from their use on platforms to their transportation to onshore waste treatment facilities,” says Emmanuel Montaño, Director General of Consorcio EMCRO. Alejandro López, Director General of Grupo TM, agrees: “Safety and care for the environment are definitely trends and needs in the industry. Read the complete article More about this topic

Now, clients make sure that the (logistics) company complies with all regulations and that it has a structured Corporate Social Responsibility (CSR) policy.”

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from the

Q: Maersk is moving from offering a short-term transactional solution to becoming long-term value-based. How has this impacted your service with clients in Mexico? A: Changing from a short-term to a long-term vision has proven to be highly positive for our business and for clients. There are multiple positive impacts for our customers, who need predictable and reliable services worldwide at fixed long-term contract prices during challenging times, like that which we have been experiencing. As a part of this, we also continue to expand our land logistics, offering services from last-mile to customs house brokerage, warehousing, depot, finance and other supply chain management solutions. In the digital sphere, we are ramping up our offering of products and giving big companies the opportunity to have real-time information, which allows them to make betterinformed decisions, mitigate impacts on deliveries and boost performance. Using artificial intelligence, our NeoNav solution helps companies to reduce inventory by up to 30 percent, increase revenue by 1 percent, lower costs of goods sold by up to 2 percent and cut costs by up to US$30 per container. This is a big deal if you are a company moving more than 50,000 containers a year. We are talking about multimilliondollar savings; the bigger the volumes, the bigger the benefits and savings.

Getulio Centanaro

Q: What were the best practices that helped Maersk to weather the pandemic and what lessons did you learn from it?

Product Management Director for Mexico and Middle America of Maersk

A: We are always guided by our values and goals in everything that we do. Mexican trade has its challenges but we are adding value by increasing our land logistics services. The pandemic has accelerated this transformation of providing

Predictability in Logistics Is Maersk’s New Integrated Offering

more land logistics services. Becoming an integrated logistics company provides more predictability and stability for our clients at a challenging time for world supply chains. The one-stop-shop solution is what customers want. They want us to enable trade and they want trade to be simplified. Therefore, we are offering our expertise through services such as global supply chain management, for example, as well as providing digital tools such as NeoNav, Maersk Spot, Hamburg Süd Instant and Captain Peter. Digital is really making a difference in providing transparency and boosting reliability for clients too. Q: What is your outlook for the market this year? A: For Maersk, we see 5 percent to 7 percent total trade growth worldwide. Export volumes growth out of China to the US are expected to drive global trade in 2021. Mexico is going to benefit from such growth. For this year, we see total trade volume expanding 3 percent, aligned with the growth of the market. Never has logistics had such an important role in society as it does now. The transport of goods cannot stop in these challenging times. The current exceptional market

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situation is expected to continue until the end of the year as consumers affected by the pandemic are choosing to buy more goods than before as opposed to spending time and money on services such as eating out in a restaurant or tourism.

020 was a monumental year for trade relations between Mexico and the US, strengthening an already booming ecosystem with anywhere from 7 million to 11 million truckloads of goods crossing the border each year. In fact, according to the Office of the US Trade

Representative, as of 2019, Mexico became the US’ largest goods trading partner with US$614.5 billion in total goods traded. This trend is expected to continue for years to come as experts name tension with China, new trade agreements, and the effects of the COVID-19 pandemic as key factors for companies pushed to rethink their supply chains. As such, Mexico stands out as the natural alternative to reduce costs and logistical constraints. Even before the pandemic hit, consulting firm Gartner found that 33 percent of global supply-chain leaders had either shifted sourcing and manufacturing activities out of China, or planned to do so in the next three years. Mainly driven by increasing tariffs accentuated during the Trump administration, supply chain leaders

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were forced to question the effectiveness of heavily outsourced

US-Mexico Trade: What to Expect in the Post-Pandemic World Deepak Chhugani Founder and CEO Nuvocargo

networks so far from the final consumer. The pandemic then reinforced the need for more resilient processes with the agility to shift around sourcing, manufacturing and distribution activities quickly. And so, the rise of the regional supply chain began to gain traction, with Mexico positioned as the lead alternative to ease delays and shortages in times of uncertainty. On top of already shaky ground for US-China relations, Mexico’s position benefited from the signing of USMCA, replacing the old NAFTA. The new agreement aims to bring manufacturing back to North America by decreasing or eliminating tariffs to reduce costs of production and trade, leading to lower prices for the final consumer and more profit for companies. The move south of the border also means stricter labor, environmental, and privacy regulations, faster and more accurate shipping times, and an array of logistical efficiencies linked not only to Mexico’s privileged geographical position, but also to a more familiar cultural landscape. Digitalization, meanwhile, has been a long-standing trend across industries but there is no denying that the pandemic helped surpass even the most ambitious forecasts. This shift toward a more digital ecosystem is also reflected in the logistics industry. Only 12 years ago, around 90 percent of shippers refused to accept PODs (proof of delivery) in digital format. Today, as a result of COVID-19 and the proliferation of remote work, we’ve seen that 98 percent of our clients prefer this format. And documentation is only the beginning of a long road to optimizing supply chain processes. On the political front, current operations indicate that the USMCA and trade will not be affected by the Biden administration, as it is pinned to bring more stability and predictability to trade relationships. Although the treaty was signed during a Republican presidency, the Democratic government led by Biden is expected to promote commercial relationships with Mexico and Canada in order to maintain and strengthen ties with neighboring countries.

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After a year full of challenges and rapid changes, excitement is mounting around the endless opportunities surrounding USMexico trade. We expect 2021 to be a marquee year for Mexican industries, as companies of all sizes expand their reliance on Mexican production by bringing their supply chains closer to home.

s we live through our second year of the pandemic, things look different. We expected the logistics situation to stabilize as soon as governments distributed the vaccines. However, we continue to suffer from last year’s closures and sanitary

restrictions, and recent disruptions. We have a reduced number of containers to ship globally. The situation has improved after the Chinese New Year but the accidental blocking of the Suez Canal was a setback. Since we will experience more disruptive events for logistics, we can modify processes to have the flexibility needed to respond to the unexpected. Among the temporary disruptions, the lack of containers to meet global shipping needs stands out. Shipping companies assign their containers to higher profit routes, from China via the transatlantic and to Europe. Countries like India, Turkey, and Chile need to manage their cargo on less equipment,

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so they cannot respond to market demand. The import rate from

Temporary, Permanent Changes in Logistics Alfonso De Los Ríos Founder and CEO of nowports

China to Latin American countries rose up to 3.2 times from September to October 2020 and has not dropped significantly since then. For many distributors, import costs are no longer a sustainable business model. Costs do not just translate into money; delays can also cause damage. In addition to the cancellations of shipments (Blank Sailings), rollovers, when the shipping company postpones an already scheduled load in a shipment, occur up to twice as often. Shipping companies reported 37 percent rollovers globally last year. For large companies, these delays call into question trends such as the just-in-time approach, which consists of reducing warehousing costs by having only the amount of merchandise and parts needed. Factories remain delayed because they do not have raw materials or spare parts for their machinery. At some point, the balance between supply and demand will stabilize. There will no longer be frequent freight rollovers, rates will be lower, but they will not return to their original levels in which the shipping companies were losing. The wave of consequences from the Suez Canal blockage will die down, but some lessons and changes will remain for the long run. One of the most notable changes in everyday routines has been the transition to remote work in an industry accustomed to visits and follow-ups in person. We recognize the value of these meetings and believe that they will continue to be the norm, but some use of video calls to reach agreements will continue. Without the in-person monitoring of managers, the culture of continuous improvement becomes more critical. Each one of our employees has Key Performance Indicators (KPIs) and a daily objective, with twice-a-day follow-ups. We also have a clear communication channel for messaging, phone calls, emails, or video calls. The contingency highlighted the importance of having reaction plans defined and updated in advance, with leaders assigned for internal and external communication and confidential directories of our entire chain. This plan includes logistical alternatives to

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border closures. Regardless of all the changes, the most important element is still the people involved. At nowports, we manage contingencies by providing up-to-date information to our clients and offering tools that make their logistics teams’ operations more manageable and accessible.

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from the

Q: What projects and opportunities originally attracted Yinson to Mexico’s oil and gas industry? A: We became interested in Mexico after the enactment of the Energy Reform in 2014. The enormously wealthy blocks that had been offered in the Gulf of Mexico immediately sparked our interest to become a prominent provider of FPSOs for operators. Yinson understood from the very start that FPSOs represented a great and cost-effective solution for many of the logistical issues that operators would face when dealing with Mexico’s existing offshore infrastructure. However, we did not get involved until we saw companies such as ENI, Shell and Equinor begin to invest great sums of money into the procurement and development of these blocks. In 2017, we entered a bidding tender for the supply of an FPSO for ENI’s shallow water blocks in Mexico. We came in second place after MODEC, whose vessel is in the final construction stages and will likely begin operations in Mexico during the second half of 2021 or the beginning of 2022. Throughout that process, we acquired experience working in Mexico’s local market. Q: What were some of the most important items on your agenda when you joined Yinson a few months ago?

Jose Ferreira

A: I joined Yinson because the company is aware that in all Latin American markets, despite COVID-19, you need a person on-site who can meet with clients and regulators to oversee the company’s agenda. This was at the top of my to-do list: Ensure

Business Development Manager of Yinson

Yinson gained a greater physical presence in Mexico. It also led us to secondary conversations with other customers and clients regarding the need for FPSOs in two to three years. Some of these clients are already working on exploration permits granted by CNH.

The Moment Is Right For FPSOs In Mexico

Q: What are the advantages of FPSOs? A: The events of 2020 have forced companies like Yinson to diversify their commercial strategies. This means we now offer more attractive long-term leasing contracts to our clients, sharing responsibilities, risks and penalties with private companies in order to work more as a team. This has allowed us to provide our clients with some reassurance, both from a technical and from a commercial standpoint. This modality seeks to create long-term relationships between us and our clients and, in the process, make FPSOs more attractive as an option. We also feel that the Mexican oil and gas industry has become increasingly receptive to the way in which we have presented the advantages of FPSOs: They eliminate the need for costly long-distance oil pipelines to an onshore terminal; the FPSO concept is often the preferred solution in remote and deepwater areas, because it is more cost-efficient than a platform plus FSO or platform plus pipeline concept; in areas prone to heavy weather, such as hurricanes and cyclones, FPSOs can

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be designed with the ability to disconnect from the subsea infrastructure, sail away from the storm’s path and reconnect when the storm has passed, increasing safety but also limiting downtime; finally, upon field depletion, FPSOs can be relocated. These are all great advantages over fixed installations.

Conference

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Highlights

Logistics, Infrastructure Essential to Economic Recovery Héctor González CEO of SafeLink

Salvador Rivas Principal and Director at HKS, Inc

Ricardo Dueñas CEO of OMA

Jorge Monzalvo Customer Experience Director at Maersk

Héctor Castellanos President and Director of Grupo Casgo

Carlos Godinez VP of Sales and Marketing at Transplace

he promotion, development and investment in infrastructure and logistics projects represent an opportunity for economic recovery in Mexico. The country could also greatly benefit from trends such as nearshoring, e-commerce and the pipeline of projects

in the north and southeast. “We are at a time when the need for transformation and decentralization is being recognized,” said Hector Gonzalez, CEO of SafeLink and moderator of the panel. The current administration’s flagship infrastructure projects, such as the Mayan Train and the Dos Bocas refinery, have taken the spotlight in recent years. However, projects that were on hold for decades have also been dusted off, such as the Interoceanic Corridor (also known as the Tehuantepec Isthmus rail corridor) connecting Oaxaca and Veracruz, González added. This project could be inaugurated by the end of 2023. “In addition to seeking logistical solutions in the region and more efficient energy supply, the corridor also projects a spillover of benefits for real estate development and the quality of life in one of the poorest regions of the country,” he added. The region’s attractiveness has increased considerably and, by the end of 2020 alone, the Yucatan government had announced a private investment of over MX$4.5 billion (US$226 million) in real estate and tourism. Despite these achievements, certainty is still a pending issue in the country, added Carlos Godinez, Vice President of Sales and Marketing of Transplace. “Rule of law and a legal framework are essential for more investment to come in and accelerate economic recovery and job creation. It is necessary that what is established is respected by all parties,” he said. According to Godinez, the logistics sector has seen a significant recovery, mainly in Nuevo Leon and Jalisco, which is a good sign for industries such as automotive, electricity and consumer goods. As a result of the pandemic, “companies became conservative and stopped ordering goods from their suppliers in Asia or Europe,” said Customer Experience Director of Maersk Jorge Monzalvo. The adjustment in demand and consumption and the uncertainty generated during 2Q20 due to the imposition of lockdowns made companies more fiscally conservative, Monzalvo said. On the other hand, people stopped spending on services such as restaurants and started spending on e-commerce, which generated a reactivation in demand and highlighted the need for transport. This led industries to look for strategies to boost their supply chains. “One component they relied on was real estate infrastructure to store their products in warehouses close to ports

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or to their factories,” Monzalvo said. “This triggered a particular dynamic that will help determine how real estate investments should be diverted going forward.” Monzalvo also mentioned that the e-commerce boom generated by the pandemic forced companies to ask themselves whether to invest in combined warehouse strategies (wholesale and retail) or separate sets of warehousing to serve their customers with a more efficient approach. In this regard, Salvador Rivas, Principal and Director of international design firm HKS, said that one of the areas in which HKS has been working the most in Mexico is the hospitality and sports sector. “Those were sectors that initially had a certain slowdown but we have seen an upturn lately. There is a lot of interest from investors in future planning,” Rivas said. “It is important to take these initiatives and not wait for things to happen. An important part of the sector’s recovery is innovation as we adapt to the changes that have taken place.” One of these changes, remarked González, has been the trend sparked by remote working as people now consider investing in out-of-town property for living and not just holidaying. Southeast Mexico, Catalyst for Economic Recovery? Infrastructure development in the southeast of the country has been a pending task throughout Mexico’s history, said Godinez. “If there is one region of the country that lacks infrastructure, it is the southeast. It is needed more than ever to allow better communication and to become more competitive,” he added. Likewise, Maersk’s Monzalvo said that as Mexicans, “it is our duty to ensure that there is even growth in the country.” For HKS’s Rivas, one of the main keys to boosting this region is diversification. “Currently, the Riviera Maya is completely focused on tourism development. An opposite example is Merida, Yucatan, which has attracted many businessmen from the center of the country to live or develop different projects. This means that it is not so dependent on a single activity and when another crisis like the one we are experiencing arrives, the impact will be minor,” he said. During this crisis, the private sector in Mexico has shown its strength, said President and Director of Grupo Casgo Héctor Castellanos. “Today, 90 percent of the investment in Mexico’s construction industry comes from the private sector,” he said. “This is reflected in the so-called micro-economies of the southeast where we have not stopped building, so vertical construction continues at an accelerated pace.” According to Castellanos, the cancellation of Mexico’s New International Airport (NAIM) has provided opportunities to other airport groups in Cancun and Guadalajara to become attractive targets for private investment, as well. “It would be really important for public investment to continue to bet on growth because a lot of the rail, road and port infrastructure has to be driven by them.” Read the complete article More about this topic

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Highlights

Last-Mile Deliveries are CustomerCentric, Data-Driven Diego Ysita CEO of U-Storage

Christophe Milheres

exico has a great opportunity to benefit from the boom in e-commerce but it continues to lag behind behemoths like the US and China, despite a huge domestic advance for the sector during the pandemic. “We saw e-commerce grow about

80 percent in Mexico. But to put this number in perspective it is necessary to consider that when in Mexico 2 billion deliveries are made, 17 billion are made in the US and 70 billion in China,” said Iván Ariza, CEO of Cargamos. Last-mile logistics said their mission is to meet the expectations

Managing Director México at Lalamove

of e-commerce platforms so the end-customer’s experience

Iñaqui de la Peña

can be as smooth as possible. To that end, communication is

Country Manager of Dostavista

Ivan Ariza CEO of Cargamos

Eduardo Medeiros Chief Digital Officer at Office Depot México

essential. “Communication between logistics and e-commerce players remains key. Different customers have different priorities. Some want to deliver cheaper, others faster and others both. Communication is necessary to bring the experience for the endcustomer to the next level,” said Christophe Milheres, Managing Director Mexico at LalaMove. Eduardo Medeiros, Chief Digital Officer at Office Depot Mexico agreed: “For the end-customer it is not about the logistics companies; it is about the company that he’s buying from.” “The assignment of the last-mile delivery is one of the most important elements to offer the end-customer a good experience,” said Iñaqui de la Peña, Country Manager of Dostavista. “If we provide on-demand pick-up for same-day deliveries, we are placing orders en route to generate a good experience. This strengthens the relationship between the logistics service and the customer. The relationships that we build with each location is important so that we can offer the end-customer a successful delivery,” he said. Building a close relationship with partners is integral to delivering a top-notch service. “Logistics is really broad and we are taking a last-mile delivery approach. We need to understand what would be the best relationship and for whom,” said Ariza. Technological Integration “Far from just being logistics suppliers, we are the technological partner that can help improve overall processes. There is a need to map all kinds of processes. Often, logistics is not about fast delivery but about delivering at the right moment,” said de la Peña. In this regard, even emerging business niches such as self-storage play an important role. “We democratize the storage space so that

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different users can take advantage of it and compete against larger players,” said Diego Ysita, CEO of U-Storage, the country’s leading self-storage company.

n cities like Mexico, hundreds of thousands of people invest no less than four hours a day commuting to their workplaces. I think it is obligatory for management teams to seriously assess the possibility of maintaining distance work schemes post-pandemic. Establishing models with

the home office as a basis, with the necessary tools and objectives, an appropriate balance of workload, physical and mental healthcare and programs to connect to the company, could generate a significant change in the lifestyle of millions of people. The growth of e-commerce, meanwhile, has accelerated by at least three years, and Mexico is the Latin American country with the greatest increase in activity, according to Kantar Worldpanel. Companies that adopted online sales were able to see their profits grow firsthand. This practice has also given us an important reference point to be able to choose, in the postpandemic period, between a family afternoon strolling in a

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park or a grueling day of shopping. As a result, the level of

Moving Goods Faster but Also Intelligently Ingo Babrikowski CEO at Estafeta

demand for logistics services has increased exponentially. We have had to adjust the way we operate. In a short time, we have installed smaller distribution centers within large cities to get closer to the consumer and that allow us to make more agile connections. Technology is the main protagonist. of course. Thanks to technology, we can generate the necessary solutions, the redesign of routes, calculate the demand levels of our customers and generate the services they require. Today logistics companies are information companies as well. We can effectively move faster and faster. However, logistical effectiveness involves not only delivering faster, but achieving a balance between the environmental impact generated by that delivery and cost. It is precisely the combination of resources and variables involved in delivery that defines the effectiveness of an operation. That is what our value offer is all about. It is very important that online shoppers consider participating in “responsible deliveries,” although delivery time has positioned itself as a key factor in the purchase decision, it is necessary that as consumers we evaluate how real the urgency is. Having a higher rank in the last mile will allow us to potentialize the social benefit that e-commerce represents. Not having to transport ourselves to purchase the products we need represents fewer vehicles on the streets and more time to do other things. According to the consultancy Deloitte, in urban centers at certain times, the activity of delivery vehicles can exceed by 70 percent the offer of available parking spaces. This creates a significant impact on urban congestion and loss of efficiency for goods distribution and for transport companies. Proper management of loading and unloading zones would significantly help improve delivery dynamics.

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I believe that all social actors should try to find new ways to do things after the COVID-19 pandemic has passed. It is important not to lose sight of the call for analysis and collaboration with which we can undoubtedly generate a new normality that favors, above all, sustainability.

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from the

Q: What is Cargamos’ business model and how does it work? A: Cargamos is a logistics platform that aims to shorten the distance between e-commerce brands and the end customer. It works with urban last-mile warehouses. Our mission is to be able to connect the digital world with the street around your house. An essential point that was missing was that there was no connection between the brands and the last-mile networks that were on the streets, like motorbikes, cars and the collaborative economy network that already exists. Something was needed to bridge this gap. Cargamos does this with digitally prepared warehouses to ensure fast deliveries. Another problem we noticed was that brands’ warehouses were not prepared to deliver packages to players in the collaboration economy. That is why we established on-demand warehouses at strategic urban areas. We participate in the supermarket, fashion and technology industries. Our goal is to be as close as possible to the end-user and we have found opportunities to use unoccupied space at companies’ offices, parking lots and shopping centers to accomplish this. There are already many companies that focus on optimizing these spaces. Cargamos does the same. It seeks to make the dead spaces in shopping centers, car parks or warehouses profitable through alliances with the owners. Q: You say your distribution centers are digitally

Iván Ariza

prepared. What do you mean by this? A: When a huge company has sales through e-commerce, it faces big challenges. Although it has warehouses available, these are

CEO of Cargamos

usually on the outskirts of cities. This complicates logistics because if this company wants to make same-day deliveries, it has to connect with different players in the city. Warehouses are prepared to make only one large delivery to shipping companies and not several during the day. If suddenly 300 or 500 small vehicles

Last-Mile Deliveries Accessible to New E-Commerce Adopters

started arriving to pick up small packages, warehouses would collapse as their processes and software is very complex. What we do is provide them with digitally prepared warehouses, meaning that we connect with both last-mile companies and the brands that need to use these resources and spaces to deliver quickly. We have the software, the established processes and a special layout to turn those small locations into dispatch centers. Once a vehicle arrives for a package, riders have it in their hands in less than 3 minutes. This is known as the automated trade match, which is one of the missing links in logistics today. Q: What sets Cargamos apart from other companies in the last-mile logistics industry? A: We do not know of any companies that do anything like this. We know companies that have motorbikes or vehicles to make lastmile deliveries and we also know large companies in the game but we do not compete with either. Q: How do you adapt to different company budgets?

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A: The focus of our company is on medium and large companies. We do not yet serve individual users as our business is focused on large volumes. This does not mean that a small company that wants to deliver a certain number of products cannot do so through us. We have the capacity but they are not our main focus.

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from the

Q: What are the benefits for companies that decide to entrust their logistics to Lalamove? A: Lalamove is an Asian company that has been operating in Mexico for just over a year. We launched the platform here just before the pandemic started. Globally, we have been in the market for more than seven years, while in Latin America we ventured into Brazil two years ago. In the US, we have a number of solutions that mainly focus on last-mile deliveries, either same-day or next-day deliveries to support SMEs. For SMEs, Lalamove is a good option because many of them do not have the budget, knowledge or time to oversee their own logistics. This is where we come in, providing them with a platform that can deliver products immediately and economically. More than a company, we are a platform that connects users who need to deliver products with driving partners who have the vehicles to make those deliveries. We offer a great deal of flexibility within the platform. Users can choose from a motorbike, SUV, sedan or cargo truck. Through our app, users can deliver almost anything with ease, whether it is a document via a motorbike or construction material via a cargo truck. We have a much more B2B approach than B2C. Q: What have been the biggest challenges Lalamove faced setting up its operation in Mexico City in the midst of the pandemic?

Christophe Milhères

A: Lalamove came to Mexico from Brazil in December 2019 to get to know the market. We realized that this was a market where we could bring a lot to the table and decided to officially

Managing Director of Lalamove Mexico

launch in March 2020. Of course, it was a challenge, starting with the fact that more than 80 percent of our team has been hired remotely. Due to the pandemic, many companies had to rethink the way they sell and distribute their products and that helped us a lot as well. At the same time, this was a challenge because

Lalamove: Revolutionizing OnDemand Logistics

we did not plan to grow so fast and we had to accelerate many projects. In summer last year, for instance, we launched our food and beverage delivery option. This led many restaurants to our platform because we do not charge them fees for the product itself. If a taqueria wants to sell a MX$100 (US$5) dish, we do not touch a penny of that; other marketplaces or fooddelivery apps do. In December we also launched an API that allows the Lalamove platform to be integrated into an e-commerce platform or website to accommodate automatically scheduled deliveries. All these solutions were introduced to the market after listening to our customers. It was a year of learning for us. Q: What is the logistics landscape among traditional retailers? A: Last year, large and well-known retail companies in Mexico experienced many logistics problems. Many people started buying online and the companies did not have a developed e-commerce platform or defined delivery processes. If these failures happened to large companies, imagine the impact on smaller companies. Companies have now recognized that it

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is necessary to adopt an omnichannel strategy in order to be competitive. Many of our clients have realized that by opening their business to other markets through e-commerce they have opened the door to customers who would never have come to their physical shop.

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How Has Technology Helped Logistics Companies Boost Efficiency?

In the pursuit of safety and efficiency and amid an ongoing pandemic, logistics operations have relied strongly on technological innovation. From pharmaceutical to aerospace and energy, logistics operators, brokers and providers are putting their trust in greater degrees of digitalization to reduce costs, increase efficiency and avoid supply chain disruptions, say leading executives from logistics giants.

We believe it is crucial to always allocate funds for investment in technology. Our team has been working on different projects that will make us the most advanced company in terms of efficiency and digitalization of all warehouses in Mexico. A key approach is to secure better communication with our clients throughout the cargo process, with real-time visibility and better tracking systems. We are constantly assessing how to use new digital tools to reduce time, errors and costs and above all to enhance the customer experience by making sure cargo and goods are delivered on time and in optimal condition.

Getulio Centanaro Vice President of Sales of Aeroméxico Cargo

GNKL has developed a software system called Administration and Logistics System for the Health Sector (SIALSS). This system has been in development for 15 years. SIALSS is installed at hospital warehouses, regardless of whether they are located in large cities or rural communities. It allows us to measure the real consumption of the facility. This has given the authorities real-time information that allows them to create accurate consumption plans for future purchases. SIALSS also allows the possibility to measure expiration dates, oversupply, stock with relation to consumption behaviors and also the profile of the patient consuming the supplies.

Javier Calero Vice President Commercial of GNK Logística

Technological innovation and the development of systems within the organization are key. Although there are very robust platforms like Oracle that companies can buy, it is always important that the IT area of the company is involved in the development of applications around Radical Precision Engineering (RPE) or other interfaces to connect with customers. If a transport and logistics company does not have an IT area, it cannot participate in high-value chains nor can it participate in foreign trade with countries like the US or Canada. It is extremely costly and complex to delegate this responsibility to a third party and not have it within

Alejandro López Director General of Grupo TM

the company.

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from the

Q: What is NetLogistik’s story in Mexico and what would you say is its biggest success? A: NetLogistik has been around for 20 years and operates in Colombia, Mexico and the US. We have around 340 employees. We started out as a transportation management system (TMS) company. Originally, our vision was to become the Uber for transportation but the market was not ready for that two decades ago; companies were unprepared and we did not have the smartphones, systems and internet that we have today. Instead, we began offering services as a TMS. Later, we created a portfolio that included best-of-breed solutions like Blue Yonder and Vocollect. About eight years ago, we started developing our own solutions for SMEs. Today, we want our customers to see us as a one-stop-shop for supply chain solutions. We want to help clients implement solutions ranging from hardware such as RF voice devices to software services, support and many others. Therefore, we not only offer TMS but warehousing solutions, demand planning, points of sale and omnichannel solutions. Our slogan is, “Your digital supply chain in our hands.” This defines us quite well. Q: What sets Netlogistik apart from its competition?

Juan José Salas

A: The idea of the one-stop-shop is one of our main differentiators. However, we are also unique in terms of the breadth of our portfolio, which covers most aspects of the supply chain, and that we can assist companies of all sizes.

Managing Partner at NetLogistiK

Another big differentiator is our integration with Blue Yonder, which as a partner represents around 55 percent of what we do. We own one of the biggest global practices of Blue Yonder, outside of their own. We have more than 120 consultants scattered in our three offices, half of them have already been

Tech to Help Retailers Amplify Online Demand

accredited directly by Blue Yonder. Furthermore, we have 20 years of experience of implementing solutions for more than 150 clients. We are present in approximately 450 warehouses in more than 20 countries in Latin America, Europe, Asia and Canada. I think there are only a few competitors than can match this experience and worldwide coverage. Finally, the company invests in its own people. We have training plans that exceed more than 25,000 hours, covering both internal and external training related to soft and hard skills and certifications, including MBAs. Our solutions provide four added values for our customers: we help increase productivity in warehouse and transportation processes, decrease operating costs, help increase the level of service and finally, we look for a return on investment from our implementations. During the sales process, we help our customers understand what a solution will cost and when they can expect an ROI. Q: What main challenges and changes in demand did NetLogistik encounter in the sector in 2020? A: We were fortunate to close 2020 with revenue very similar to 2019. The company also was able to continue working on over 100 projects. Other projects were canceled because some companies struggled with the pandemic. Thanks to the emergence of various COVID-19 vaccines, the world´s

economy, including in Mexico, is beginning to turn around. Companies are gaining confidence to invest in their business again. The pandemic also increased demand for omnichannel solutions at an unexpected rate. Omnichannel relates to different ways in which you can receive an order, such as through a call center or an app. You then need to decide how this order will be filled, for which there are different options, from warehouses to stores or suppliers. Finally, the question is how to deliver the order, whether through a courier or other means. It was clear that during the pandemic, many companies faced this challenge since the only way to get products out was via online shopping. We worked with customers to implement these e-commerce solutions, especially by increasing warehouse capacity. Some customers told us they sold up to 10 percent more through e-commerce in 2020. For clients that were not involved in e-commerce, it was a challenging situation. The companies that had solutions already in place responded better to the pandemic. We also saw a trend in implementing routing solutions as companies contemplated delivery issues for an increase in orders. Omnitracs, a solution from our partner, helps our customers to decide how to send their orders by using specific routes and transportation types. Furthermore, companies needed greater proof of delivery. We offer solutions that allow the carrier to update its status. We expect these trends to continue in the months to come. Q: What are your near-term plans and expectations? A: This year has made everyone understand the importance of logistics, which are more crucial than ever. For many customers, their supply chain became the only option to reach their customers. All different aspects of the supply chain, including planning, warehousing, transportation, proof of delivery and e-commerce became highly important. I believe we will see this trend develop. Companies will continue to invest in their supply chains, which is good for our industry. We also think that the digitalization of this supply chain will evolve quickly. Many players were not able to invest in 2020 but as soon as the economy recovers, they will move to digitalize their supply chain and invest more than ever. As a result, we expect to grow between 15 and 25 percent once the economic recession ends. Order management systems will grow in popularity, as they help retailers to manage omnichannel challenges via their inventories and shipments. Customers today want to know how much product is left and when they will receive it once they purchase it. We think this will be an important trend.

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SPOTLIGHT

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Self-storage a solution for individuals and businesses The space you need, for as long as you need it, with 24/7 access. That is the basis of self-storage solutions for both individuals and businesses looking for valuable extra space within large cities. According to Mordor Intelligence, the self-storage market is expected to reach a value of US$115.62 billion by 2025. This market is mostly driven by the increasing urbanization and the cost of living in big cities. In Mexico, U-Storage is the market leader of this segment with more than 11,500 customers, 74 percent of which are individuals or families, while 26 percent are businesses related to logistics, lastmile deliveries, e-commerce and shared-economy, among others. “We are democratizing storage spaces to make them accessible to any customer. Our added value comes from our strategic location within major cities close to high-demand and highconsumption areas for e-commerce platforms and individuals looking for additional storage space,” says Diego Ysita, CEO of U-Storage. Available spaces in U-Storage can go from 2 to 200m2 that can be leased through flexible monthly contracts. Users can book their storage space remotely, choosing as much space as they need and signing the contract at the chosen facility. There is still room to grow for the self-storage market, however. According to the Mexican Association of Self-Storage (AMDAAC), in 2019, the national self-storage industry counted almost 200 locations, and more than 25 percent of them located Read the complete article More about this company

in the Mexico City metropolitan area. Mexico has only 260,000m2 of self-storage space available, while in the US there are 158.8 million m2.

Exact Storage Control Systems to Prevent Product Loss Javier Calero Vice President Commercial, GNK Logística

Keeping Mexican and Regional Supply Chains Alive Getulio Centanaro Vice President of Sales, Aeroméxico Cargo

Drilling Service Providers Close Waste Management Loops Emmanuel Montaño Director General, Consorcio EMCRO

Balancing Realities with Possibilities in the Offshore Sector Rodolfo Alfonso Esquivel Director General, Grupo Roales

Transtek: Long-Term Vision For Sustained Growth Antonio Flores Founder and CEO, Transtek

COVID-19 and USMCA: Automotive Industry’s Perfect Storm Alexis Enciso CEO, Corporativo Enciso

Livingston International: a Partner to Comply with Trade Rules Rody Camacho Director of Trade Consulting, Livingston International

Logistics Services Act as an Extension of the Client Alejandro López Director General, Grupo TM

U-Storage: from Pioneer to SelfStorage Market Leader Analysis 12/09/2020

Artificial Intelligence: Key Tool for Logistics Players Article 04/28/2021

Health Reinvention is the current task of the healthcare industry. New alliances, investment and innovation are seen as the way forward after dealing with insufficient care systems and distanced providers. A year into a global pandemic has set, a new path for the industry has been set and its leaders have been actively responding to the challenge. From the accelerated development of technology to the establishment of innovative, inclusive financing models to broaden access, the sector is moving at a high speed to meet everyday needs with long-lasting sustainable solutions. Mexico has also been carrying a heavy burden of chronic diseases that it hopes to tackle with preventive and personalized approaches. Technology integration creates an opportunity for the sector to build an entire medtech ecosystem that can later grow into a unified health system to end with Mexico’s highly fragmented nature in healthcare. Providers in the sector are taking advantage of growing opportunities in R&D, multisectoral alliances and new markets to improve patients’ lives.

Health

140 Analysis Medical Devices, Pharmaceutical Production Pillars for Recovery

141 Conference Highlights Healthcare Industry: Lessons Learnt from the Pandemic

142 View From the Top Fernando Cruz | Country President and Head of CA and Comms. at Novartis Group Mexico

143 View From the Top Sandra Ramírez | General Manager of Bristol Myers Squibb Mexico and Colombia

144 View From the Top Leticia Zermeño | Director of Grupo CPQ

145 View From the Top Efrén Ocampo | President of Grupo Neolpharma

147 View From the Top Ana Riquelme | Executive Director of AMID

148 View From the Top Héctor Barillas | Director General of bioMérieux

149 Analysis Addressing Financial Hardship Through Tailored Plans

150 View From the Top Eduardo Lara | Vice President, Head of Health Latin America of RGA

151 View From the Top Alessio Hagen | Director of Digital Cities for Latin America of Dell Technologies

152 View From the Top Ricardo Moguel | Country Manager of Doctoralia

154 Content Links

Health | 140

Medical Devices, Pharmaceutical Production Pillars for Recovery As its vaccination campaign moves forward, Mexico is crafting its recovery strategies to help the economy get back on track. Many industries will contribute, including healthcare, which is set to have a significant role, according to insiders interviewed by MBN. In particular, medical devices and pharmaceutical production will help push the country toward the new normal. According to AMID, medical devices production in Mexico exceeds US$15.22 billion in value and generates more than 130,000 jobs. It also represents 0.3 percent of total GDP and 1.5 percent of manufacturing GDP. According to CANIFARMA, the pharmaceutical industry represents an average of 1.2 percent of national GDP and 7.2 percent of manufacturing GDP. Industry Strengths The relevance of these sectors points to their role in Mexico’s post-COVID-19 economic recovery. According to North American Production Sharing, the country’s position as the third-largest medical devices exporter, Mexico’s leadership in FDA, CE & ISO 13485-certified manufacturing processes and the high percentage (70 percent) of plants operating in controlled environments — most having class 10,000 or class 100,000 clean rooms — are among the country’s main advantages in terms of production. The Mexican pharmaceutical industry is also becoming increasingly specialized. Learning key lessons about critical processes in manufacturing and supply, while also designing key pharmaco-vigilance standards has been critical in this sector, said Deyanira Chiñas, Commercial Director of T5DC, during Mexico Health Summit 2021. The country is making important advances in personalized treatment and medication for personalized health conditions, she highlighted. Opportunities, Challenges The medical devices sector has two clear growth axes: increasing local consumption of medical devices and strengthening the country’s already established relationship with the US. “AMID wants to attract more investment to Mexico to continue manufacturing for foreign companies. We want to pour that investment into local medical devices companies,” said Ana Riquelme, Executive Director of AMID. Growth in the pharmaceutical industry, on the other hand, is conditioned by the highly uncertain environment the government has created around medicine purchases. Patrick Devlyn, President of the Health Commission at CCE, highlighted what the private sector sees as a major setback for growth: the government’s enacted changes to the LAASSP that opened the door to acquiring medicines through UNOPS, which generated a great deal of uncertainty among suppliers that could no longer plan their inventory, investment or time of production. Authorized third parties have also been limited in Read the complete article More about this topic

their functions, which has led to delays in COFEPRIS’ approval times. Finally, many projects under a public-private partnership scheme have been canceled.

Conference

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Highlights

Healthcare Industry: Lessons Learned from the Pandemic Graciela Teruel Director of EQUIDE at Universidad Iberoamericana

Bertha Mancilla Director of the Immuno-Oncology Business Unit of Bristol Myers Squibb (BMS) Mexico

Jorge Valdez Dean of Tecnológico de Monterrey School of Medicine and Health Sciences (TecSalud)

David Barros Sierra Chief of Operational Division at the Direction of Economic and Social Benefits of IMSS

Juana Ramírez CEO of Grupo SOHIN

aking the pandemic as a learning experience is key to address its impact and to strengthen the industry for future challenges. “Billions of pesos have been invested in global R&D. However, Mexico has not followed the example of other countries,” said Sonia

Pérez, Executive Director of UDIBI-IPN. “The pandemic did serve us to determine our needs from a scientific standpoint and to realize Mexico’s 100 percent dependency on foreign technology.” According to Pérez, lack of investment is what stops the country from moving from manufacturing to technology development. Graciela Teruel, Director of EQUIDE at Universidad Iberoamericana, addressed the topic of turning research projects into actual products. Pérez said Mexico has the needed infrastructure, professionals and regulatory entities to participate in product development. However, there needs to be an intermediary that is ready to commercialize products. “Regulation also has to adapt to respond to advances in product development” said Bertha Mancilla, Director of the Immuno-Oncology Business Unit of Bristol Myers Squibb (BMS) Mexico. “Innovation needs not just investment but working with local industries to be able to land it and transform it into solutions.” Mancilla highlighted BMS has collaborations with local institutions and other private companies in projects that enables R&D seeds to bloom. However, these should no longer be isolated efforts, she said. About collaboration, Jorge Valdez, Dean of Tecnológico de Monterrey School of Medicine and Health Sciences (TecSalud), explained that one effective way to begin is through local and state projects. “That way, you can easily measure the impact and therefore, be able to set the ground to scale the projects to a federal level.” This scheme was used in COVID-19 vaccine developments, for instance by Curevac and the University of Oxford and AstraZeneca. “We need to let go of the absurd idea that we are two different entities. In Mexico, the public and private sector are heavily divided, regardless of the industry, which has been proven to be absurd.” David Barros Sierra, Chief of Operational Division at the Direction of Economic and Social Benefits of IMSS, said Mexico’s dependency on foreign markets was evidenced in every aspect of healthcare, from supply to technology development following the pandemic. “However, it also made everyone reflect and look at the strengths of our local industry,” he said. Public-private financing is

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a catalyst for innovation and research projects. However, Mexico has a fragmented system that creates a barrier in terms of data delivery, which reflects heavily in transparency.

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from the

Q: Novartis recently announced an alliance with IMSS to support digital patient care. How will this support patients and doctors? A: Novartis has been exploring the benefits of telemedicine and how it contributes to the work and education of health professionals. The purpose of our IMSS alliance is to enable this institution with digital tools, such as telemedicine, to properly reach patients, especially at this challenging time when it is difficult to arrange presential visits to the doctor’s office. Through this alliance, we are offering a telemedicine platform called Consultorio Móvil, which enables doctors to host remote consultations with patients without mobility complications or COVID-19 contagion risk. Q: Novartis is also collaborating with the National Cardiology Institute (INC) in its heart failure research. What is the importance of investing in local research? A: Cardiovascular diseases are a matter of public health due to their prominence in the country. Through INC, Novartis acts as a facilitator for its research goals. Investment in this type of clinical research is essential because, within health economics, this activity is one of the highest investment multipliers. For every dollar invested, the economic trickle down is above US$3.5, which is above the ratio of manufacturing plants. Another benefit is that it generates a virtuous circle for Mexican scientists participating in clinical protocols with state-of-the art technology and first-

Fernando Cruz

generation information that allows information exchange. A third advantage is the potential that the country has to become a world-class reference for pharmaceutical R&D. Novartis invests

Country President and Head of CA and Comms. at Novartis Group Mexico

around US$8-9 billion per year in R&D and we bring to Mexico around US$6-10 million per year. This low number is associated to the approval processes for clinical protocols in Mexico, which could be significantly improved. If these were accelerated, Mexico could create the ideal environment for R&D as we have one of

Medicine Is Only Effective When Accessible: Novartis

the largest public health institutes in IMSS, a decent number of qualified medical professionals and a wide number of patients in need of solutions. Collaborative work with the authorities to create a regulatory framework that responds to R&D needs would transform this potential to real opportunity. Novartis is interested in building a virtuous circle, hoping it will encourage other actors in the industry to invest and ask for this regulatory framework. Q: Novartis is working with CureVac to produce a COVID-19 vaccine. What is Novartis’ role in this alliance? A: This is part of our effort to be a part of the solution to the COVID-19 pandemic. Since last year, part of these efforts focused on a coalition of 15 companies supported by the Bill and Melinda Gates Foundation and a British investment fund through which we all contributed from our fronts with what we knew best. In our case, this meant research. Novartis has heavily invested in researching COVID-19 therapies or treatments as, by nature, the virus is here to stay, just as viruses like influenza have. Therefore, finding a treatment is an essential part of this fight. Novartis is holding clinical trials for a number of drugs to find a treatment. On the vaccine front, Novartis wanted to support vaccine

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production to accelerate global vaccination campaigns. We just entered an agreement with CureVac to assign our manufacturing plant in Austria to the production of up to 150 million vaccines and contribute to the collaborative global effort of achieving immunization against COVID-19.

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Q: Bristol Myers Squibb (BMS) is one of the top pharmaceutical companies investing in R&D globally. How has this translated into better treatments for Mexicans? A: R&D is one of our fundamental pillars to benefit patients. At BMS, we are pioneers in the introduction of immunotherapy in Mexico, which opens a whole spectrum of treatment opportunities for cancer patients. We are one of the leading R&D pharmaceutical companies in Mexico. In the last five years, we have invested over US$60 million in this area, which is reflected in the more than 40 clinical trials we have in the country. Oncology, immunology, hematology and multiple sclerosis are some of the areas we target, the latter being one of our global priorities. Q: How has the acquisition of Celgene strengthened BMS’ leadership in science and innovation? A: This acquisition was completed last year and turned us into a leading biopharmaceutical company with more structure, a wider science focus and an even more robust product portfolio. BMS is now positioned among the Top 5 pharmaceutical companies globally. Q: How did BMS ensure treatment continuity for non-COVID-19 patients during the pandemic and how did the pandemic impact the company?

Sandra Ramírez

A: The personal and professional changes resulting from COVID-19 across the entire world were significant. For health systems, it created greater awareness to improve health provision. However,

General Manager of Bristol Myers Squibb Mexico and Colombia

it also made us realize that health is a privilege not all can access, despite being a right for everyone. The pandemic also accelerated the digital transformation of the sector. For BMS, it was a year of intense learning to ensure treatment for all our patients, which we successfully achieved but not until we created strategies for them

Equality Promotion Spurs Innovation

to easily access medicines in a timely way. Internally, we prioritized protection of our employees and partners and to ensure their health and, therefore, the health of our patients. During the first month of the pandemic, our R&D team was not able to access the institutions where the clinical trials were taking place and this made us significantly change the way BMS operates. We decided to integrate technology across the entire value chain. We strengthened our approach with medical professionals via digital tools and we also changed our training programs to online modalities. Internally, we began improving our data platforms and supply chains. The entire BMS team faced this challenge with resilience and we have learned to overcome crises while growing and delivering solutions for our patients. Q: What initiatives is the company integrating to follow up on therapy adherence? A: We have an innovative project called Vamos Contigo, which is an assistance and patient education program to ensure access to therapies through complementary assets. This program was especially valuable during the pandemic to make sure

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patients had support from the company to ensure adherence to treatments and also for medicine supply continuity. BMS has a specialized team that makes sure to respect all legal and data protection clauses to guarantee a respectful relationship with the patient and treatment continuity.

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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 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 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, keep efficient deliveries and guarantee the quality of our products.

Leticia Zermeño

Q: How is Grupo CPQ integrating technology into its internal performance? A: Grupo CPQ integrates technology into our warehouse

Director of Grupo CPQ

processes and inventory to deliver the best distribution results and avoid disruptions. Moreover, 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

Creating Shared Value in the Mexican Pharma Industry

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: How is Grupo CPQ innovating its product portfolio or service offering to respond to industry needs? A: Pharma has been our core business over the last couple of years; however, after COVID-19, we see great potential in prevention medicine. We have been proposing innovative ingredients to contribute to our clients’ efforts to expand their lines of preventive healthcare portfolio. Products related to the immune system and to prevention have been booming in the market. To meet the demand Grupo CPQ is introducing a triple action ingredient, ResistAid® supports and improves the immune system. It is an antioxidant and prebiotic. The ingredient is a botanical extract that combined with a proper diet can reduce the incidence of colds as it improves the immune

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system. Vitamin D3 and Zinc are other ingredients in our portfolio for Immune Health that in synergy are very effective. Recently, we began distributing the Lipofoods® portfolio by Lubrizol, which includes encapsulated minerals and botanicals extracts with technology that improves their bioavailability and absorption.

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Q: What are the goals for Grupo Neolpharma’s new injectables plant? A: This plant will produce injectables that have been in high demand during the current COVID-19 pandemic. It will produce norepinephrine, midazolam and other anti-inflammatory medicines. This plant will also pack COVID-19 vaccines in large quantities of about 150 million vials a year. This would be the equivalent of a vial for every Mexican. The new plant is now finished and has received COFEPRIS’ manufacturing authorization. But before we are able to begin production, we need to obtain the Good Manufacturing Practices certificate, which is being processed. The COVID-19 pandemic did delay the plant’s outfitting as many foreign experts were unable to travel to Mexico, which was necessary to install state-of-the art equipment. We expect to be able to inaugurate the plant in April 2021 thanks to the hard work of all our collaborators. One of the main challenges of an injectables plant is training its operators as hygiene and safety protocols are much stricter than in a solids plant. Q: How will the new plant allow the company to expand its presence in the Mexican and foreign markets?

Efrén Ocampo

A: When the plant is fully operational, we will first focus on the Central America and Mexican markets. Our current injectables plant is at overcapacity, which led to this investment. From the

President of Grupo Neolpharma

design stage, we conceived that this plant would eventually manufacture products for the US. While this will not be an immediate outcome, we spent the entirety of last year training over 50 employees in the intricacies of manufacturing for the US market. This will ensure that our local production meets the

Local Production to Boost National Self-Reliance

needs of that market. As we have one plant in the US, we are fully aware of the processes required to produce in accordance with the FDA. Q: How is Grupo Neolpharma helping to fight the COVID-19 outbreak in Mexico? A: We have made several medicines readily available to Mexicans, such as azithromycin, paracetamol and others used by the government to fight the COVID-19 pandemic. Grupo Neolpharma has also worked with researchers and universities in the development of a COVID-19 vaccine, including UNAM and a university in Queretaro. Our biotechnology plant is able to manufacture the proteins necessary to produce COVID-19 vaccine. At this point, we have created enough doses for pre-clinical studies in animals to determine safety and effectiveness. We are ready to support Phase 1 and 2 clinical trials. However, Mexico’s government offers little support for medical research into vaccines. One doctor working on the project told me that local universities have invested about US$1.5 million in the development of a COVID-19 vaccine. In comparison, the US government gave a single pharmaceutical company over US$1 billion in grants. While there is little support in the project from local authorities, we are sure to finish our Phase 1 and 2 clinical trials.

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Q: How were Grupo Neolpharma’s API production capabilities affected by COVID-19? A: Mexico is dependent on APIs from China, India and increasingly from the EU. COVID-19 had a significant impact on the global production and supply of APIs. For example, India, a large manufacturer, saw its exports affected. Due to the increased attention to medications, India’s government had to issue a new approval process for the export of APIs, which affected our manufacturing operations. These circumstances helped us recognize that there are significant opportunities to manufacture APIs in Mexico and eliminate our reliance on foreign countries. Minister of Economy Tatiana Clouthier is strongly supporting the local manufacturing of APIs as it is becoming increasingly apparent that countries should be more autonomous in their API production. This has benefited Grupo Neolpharma and we are now tripling API production at one plant. Moreover, USMCA requires that North America increases its regional API manufacturing and supply capabilities, so we are exploring the construction of a new, larger manufacturing plant. For the construction of this plant, we are finalizing a loan agreement with the World Bank’s International Finance Corporation (IFC). To determine which APIs to manufacture at this plant, we are studying consumer habits in Latin America. We Read the complete article More about this person More about this company

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are considering medications in cardio-metabolic, obesity, central immune system, skeletal muscle and other specialties that have grown in prevalence during the pandemic. Before making a decision, we also need to consider changes to the current administrations’ healthcare policies.

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Q: The medical devices manufacturing industry is expected to grow 6.1 percent, globally. How will this increase reflect in Mexico? A: This growth has been driven by the manufacturing of personal protection equipment. These are high-tech supplies that Mexico is capable of manufacturing, such as specialized face masks. To complement our efforts and boost our manufacturing capacities, AMID has requested a meeting with the minister of economy to attract more final assembly processes to Mexico. To achieve this, Mexico would need to increase is medical devices consumption, as the final assembly is commonly done at the product’s point of sale to avoid damaging the device. One example is ventilators, which are 80 percent manufactured in Mexico. However, the final assembly takes place where the device is sold. Mexico needs to improve its 43rd ranking in medical devices consumption versus it eighth place standing in production. The solution to this is simple: the government needs to understand the benefits of medical devices and allocate more budget to these solutions. The execution is difficult, however, and AMID has been working on this for several years. Q: With COVID-19 vaccination campaigns, how has demand for syringes increased? A: Traditionally, the acquisition of healing materials, including

Ana Riquelme

different types of syringes, was through public tenders that included around 4,500 SKUs the government required. Demand remained quite stable around that number. However, we were surprised to see that the SKUs posted for the latest UNOPS

Executive Director of AMID

acquisition process totaled only 600. We communicated our concern regarding the drastic decrease from 4,500 to 600 SKUs. Also, we asked how the remaining codes would be covered but we have not received an answer. Prior to this situation, UNOPS hosted a meeting, which was very encouraging. However, there were

Domestic Medical Devices Consumption Propels Health, Investment

many subjects left unsolved and unclear, such as the planning of the tenders, which they explained was done through INSABI, while UNOPS was only in charge of fulfilling the request. Usually, there is a trend in the number of syringes requested by the government through the centralized purchase scheme, which we estimate should have increased at least by 35 percent this year, considering the current vaccination program for COVID-19. With this number, we wanted to be very conservative, but with the missing 3,900 SKUs and the lack of answers from the public sector, this forecast seems to have turned around. We are still waiting for the information of an alternative acquisition or an explanation for this missing supply of syringes that will certainly be needed this year. We need this information to begin redirecting our efforts in case the acquisition has been covered by the government. If that is the case, we would begin exporting the syringes we have because the national demand would be covered. Many AMID members are multinational companies, so export requests for this device are already on our doorstep. We had the same problem with ventilators last year, when many health systems globally had to respond to the growing peak of

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contagion and severe COVID-19 cases. During this period, we waited for the government to request ventilators but the industry could not wait forever. It was in our best interest to supply the local government first and we did approach officials. However, we received no answer until months after.

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Q: What is the difference between COVID-19 monitoring tests and the diagnostic COVID-19 tests that bioMérieux has developed? A: The main difference relates to the moment when they are necessary. Monitoring tests offer a perspective on the development of a confirmed COVID-19 case, whereas our diagnostic tests, whether PCR or antigen, determine the presence of the virus. Monitoring tests are useful to mandate hospitalization according to factors such as high D-Dimer protein presence. These tests allow doctors to prescribe anticoagulants or autoinflammatory drugs to prevent severe progression. Q: What are bioMérieux’s reinvestment plans following the success of its COVID-19 tests? A: North and South America played an important part in our rapid success. Our global plan targets the antimicrobial resistance awareness fight. Therefore, we will focus our efforts on educating doctors on the necessary use of antibiotics. We are still working to identify areas of opportunity or areas of reinforcement within our bimolecular and immunology portfolio. One strategy to recover sales in our regular market is antimicrobial stewardship programs. Through this, we support governments on the use of antibiotics prescribed by doctors. This will drive our microbiology portfolio to regain a strong

Héctor Barillas

position in the market, which we lost due to the limitations of the pandemic. Microbiology tests are routinary and as lockdowns and restrictions lift, these tests are likely to bounce back in terms of sales.

Director General of bioMérieux

Moreover, our antimicrobial stewardship initiative integrates health systems. We mostly work with hospitals. However, we are also close with pharma companies because they can provide enough medical information on their drugs to support

Bringing Attention Back to Diagnostic Priorities

doctors’ decisions regarding antibiotic prescriptions. This collaborative effort brings the industry closer to value-based healthcare models. bioMérieux’s goal is to improve the patient’s life though useful solutions, which involves having a timely and precise diagnosis. The outcome can only be seen by monitoring treatment adherence. Q: How has bioMérieux ensured the continuity of antimicrobial initiatives with governmental institutions during the pandemic? A: Adding hospitals to our educational strategies was difficult to achieve during the first months of the pandemic. We conducted a study on COVID-19’s impact on antimicrobial resistance in Latin America and the results, unfortunately, were negative. It is understandable that hospitals abandoned certain areas during the pandemic because the workloads were immense and hard to balance. Q: How did bioMérieux overcome global supply chain disruptions during the pandemic? A: This specifically impacted our R&D, especially when we were

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working on COVID-19 diagnostic tests. We were lucky to have contracts that prevented a crisis or significant disruption. Also, our US stock and supply allowed us to continue operating regularly. The main challenge was to ready our supply and stock, but we did not face major disruptions.

Health | 149

Addressing Financial Hardship Through Tailored Plans Healthcare evolves through new care trends, therapies and devices. Habits also transform and adapt to innovative care approaches propelled by technology. With each new evolution and transformation, a third element is also necessary to ensure quality and personal patient care: financing. According to AMIS, the average out-of-pocket expenditure in the country is MX$4,388 (US$183) a year to treat diseases and maintain personal health. The lack of an insurance culture is widely known, as these products are considered a premium service resulting in a private health insurance penetration rate of 8 percent. Mexico offers considerable public health coverage, which is used by 52 percent of the population, while 48 percent pay for any illness, accident or health complication through private insurance or out of pocket. Spending on health (public and private) in Mexico represents 5.8 percent of the national GDP. The country ranks second in private spending on health, only behind the US, which lacks a public healthcare system. Financing in Mexico Despite Mexico’s need for health financing, insurance rates fall short. In an interview with MBN, Eduardo Lara, Vice President, Head of Health Latin America at RGA, said that the success of private health insurers depends on the public health system. Private insurers do not participate in Mexico’s public health system, which is why their participation and penetration is low. According to Lara, beyond designing a product, a crucial point for health insurance is financing. In Mexico, the typical customer is used to having either everything covered or nothing. “We should look at medical insurance as a financial instrument that serves to avoid a financial catastrophe when medical attention is required,” he said. Alejandro Sancen, Director General of MASZ, told MBN that the problem is that private insurance only focuses on accidents and major medical expenses but not on primary conditions. What Are Companies Doing? MASZ, for example, runs an evaluation with cancer patients around their case and the status of their disease to offer a certain level of coverage. When the patient starts showing recovery, the insured sum increases. “If someone has a case of severe diabetes, their coverage sum is going to be very low,” Sancen explains. “But when the patient starts stabilizing their glucose levels and getting better, coverage goes up.” RGA, meanwhile, is adapting its products to what younger generations are looking for, while addressing true health hurdles of the population, like chronic diseases. RGA combined these two ideas and introduced a new digital product for patients with a chronic disease. Lara said that this model builds an ecosystem for the user through ally companies. “Beyond being an insurance product, this is an integral solution for patients with Type 2 Read the complete article More about this topic

diabetes to offer advice, nutritional plans, media guidance, medical appointments and support from different actors interacting on the same platform,” said Lara.

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Q: RGA carried out a global study to measure the potential financial impact of the COVID-19 pandemic. What did you find? A: Thanks to our global support and our local experience we can say that regarding life insurance, we have noticed that, just as with the Spanish flu, COVID-19 will most likely have an impact on the life expectancy of an entire generation. This will couple with the number of deaths and the side effects of the virus among people who overcame the infection. The latter does impact individual life expectancy so we need to consider it. Regarding health insurance, we have mixed findings depending on the region and the type of coverage of the user -always healthcare is local-. Hospital expenditure has a different impact on insurers depending on several factors such as hospital or deductible levels. What we have found more frequently are expenditures under the deductible level, which means expenses are covered by the user. We have seen that in Mexico average costs for a COVID-19 case is around MX$480,000 (US$23,600), whereas the most expensive COVID-19 hospitalization case paid by the insurance industry was around MX$30 million (US$1.5 million). However, the impact of the overall costs of COVID, are more impacted by frequency rather by severity. In fact, the overall result in 2020 for the majority of health insurance companies in Mexico was positive. For 2021, we expect a similar positive scenario but this will depend on how the vaccination campaigns unfold. On the other hand, last year’s

Eduardo Lara

postponed surgeries are expected to occur this year, which will level out insurance claims. Q: What has been RGA’s financial strategy

Vice President, Head of Health Latin America of RGA

for a COVID-19 response? A: As a life and health specialized reinsurer creativity and digitalization have been the core of our strategy. Technology has allowed business continuity and quick responses. Almost all health

Behavioral Data for Predictive Coverage Products

insurance companies are offering telemedicine consultations and digital interaction with users. RGA has been interested in improving our customers’ experience with our services through a digital offering and this has resulted in new product developments that involve digital tools. Users and insurance companies are both seeking innovative coverage plans that also involve technology to enable practical access and usability. Q: RGA introduced in Latin America a new digital product for patients with a chronic disease. How has this product performed? A: The product has been performing extraordinarily. While I am not the leader of this project, I can share that this recently launched model won RGA the Most Innovative Insurer Award. This is a global competition organized by an American company. The project also received a project award from RGA’s headquarters. This model, created by RGA, builds an ecosystem for the user through ally companies. Strategic partners include insurance and tech company, 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, media

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guidance, medical appointments and support from different actors 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.

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Q: How is Dell Technologies making the concept of a digital city a reality for Latin American countries? A: In Latin America, we work according to the digital agenda laid out by public policies. A digital city rests on different pillars, among them health, education and security. The goal is to make these available to every citizen. In health, this would mean universal access. For citizens, apps are the easiest way to access digital services and we need to start mapping cities’ needs to develop key verticals for digitalization. In healthcare, for instance, telemedicine is one of the verticals. This has involved the integration of an additional app to manage patients’ Electronic Clinical Records (ECR) and access digitized studies. With these actions, we are empowering citizens with their own data and also, interconnecting healthcare services from diverse provider entities. Q: How has Dell Technologies worked to implement a digital agenda in Mexico? A: We have worked on the development of hospital interconnection for a Public Health Institutions in Mexico and patient registration. Moreover, we have developed Efficient Consumer Response and worked with state governments to develop diverse projects for public health institutions for projects on telediagnostics, teleradiology and telemedicine.

Alessio Hagen

To build this solutions, Dell Technologies works with different segments of the sector to fit all the puzzle pieces and create the best solutions for the health system in Mexico. In addition, I would highlight that rural zones are also a concern and priority

Director of Digital Cities for Latin America of Dell Technologies

for us. We have worked on projects that drive telemedicine access in different Mexican States. Q: In Mexico, how has Dell Technologies worked to connect the fragmented Mexican health system?

Interconnected Digital Systems Reduce Expenditure, Inequality

A: Dell Technologies has mainly worked with Government Resource Planning (GRP) on projects for a government management system that allows for interoperability among many segments. In Mexico, there has not yet been a project to interconnect the health system. However, we have worked on the management and interconnectivity of different public health institutions. One example of a complete interconnected health system can be seen in our project with the government of the Dominican Republic. We are developing a GRP platform to interconnect the country’s entire health system. We are working with the governments of Brazil and Colombia on similar platforms. Q: How could smart cities be a tool to foresee and prevent threatening events? A: One example is what Dell Technologies is doing with the government of Brazil. When a positive PCR COVID-19 test is registered, we send alerts and recommendations to the user. We can even send out a kit for the person with essential tools to measure vital signs, such as an oximeter and a thermometer. The

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user can register vital signs on the platform if their mobile device is not able to do it by itself. If the user registers low oxygenation levels, an ambulance is sent to the location. This initiative has been of great help in reducing the burden on hospitals by keeping patients at home when possible.

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Q: Previously, you have mentioned that 40 percent of users preferred face-to-face consultations. How has this changed following the pandemic? A: The number of virtual consultations is rising. From April 2020, which is when we initiated online appointments, to January 2021, we registered more than 3 million appointments. Today, people are in the early stage of starting to consume healthcare online, building word of mouth. Also, people see that these consultations are 20 percent more economical, which contributes to their mass adoption. When people realize the advantages and benefits of using the service, they continue using it. Every month, about 4.5 million people book an appointment and they return for another one. Q: How have Doctoralia’s services changed to better address the needs of patients during the pandemic? A: Regarding consultations, we were focusing on our video quality so that it requires very little bandwidth to reproduce a goodquality image. Doctors said, however, that it is key to be able to send prescriptions, otherwise patients cannot purchase their medications. We moved away from video improvements and focused on prescriptions, which has been a great success. Doctors also asked that they be able to share their screen, so we developed this feature that allows them to share videos and figures with the

Ricardo Moguel

patient. We also developed a record-taking function so the doctor can take notes about the patient. After implementing these three changes, the level of usability increased and more users joined. We now have over 10,000 doctors in Mexico from more than 70

Country Manager of Doctoralia

different specialties. Q: What barriers are preventing the broader adoption of telemedicine?

Telemedicine Gains Ground in Mexico

A: The patients themselves are among the barriers because they continue to think that they need to see the doctor face to face or they will not be cured. However, there is a great deal of data that suggests that a visit to the doctor is not always necessary. Telemedicine not only optimizes consultation time but also reduces costs and minimizes the possibility of exposure to infection. In addition, it widens the scope of services, as doctors can reach remote locations while patients have access to more specialists. Due to the issue of mistrust, we validate all doctors’ credentials through a third party that certifies their identity. We need to do a great deal of work on public policy to regulate the use of electronic prescriptions in Mexico, allowing, for example, electronic prescriptions for controlled drugs. There are other countries where online consultations are reimbursed to patients or where the first point of contact is through a digital consultation that results in a first diagnosis. In Mexico, this is not the case yet. Once telemedicine is seen as a valid and regulated option, within a year we might experience a boom as an organization. At the end of the day, it is the patient who wins, which is what we are looking for. Q: How does Doctoralia handle data protection of its patients and doctors? A: As part of a European company, we need to comply with strict data protection guidelines. We use servers in the US and we have many security filters when hiring new partners. Security

has always been a priority for Doctoralia. We do not use patients’ data at any time. Our contracts are exclusive with doctors and we provide them with the tools to store the information. So far, we have not had any issues. Q: What benefits does Docplanner Group offer to doctors? A: We are passionate about changing the world and we really want to bring healthcare to more people. Today, we are the largest group in the world in terms of digital health. We have more than 2 million health specialists working with us and this month we exceeded 50 million users looking for a doctor. We have been operating for three years and in that time, the company has built a team of about 300 people only in Mexico. It would take years for doctors to develop all the tools that we already have. There are 300 developers working with Doctoralia and thinking every day about how we can provide doctors with better tools to make them much more efficient. We have even invested in an artificial intelligence company because we want to help doctors make faster diagnoses and pre-diagnoses. Doctors can be certain that with Doctoralia, they will have access to cutting-edge technology at a very low price. Q: What are Doctoralia’s goals to expand to other countries? A: We are satisfied with our current operations and we do not plan to expand at the moment. There is still so much to do in the market. We still see limited penetration in terms of what we could do, particularly in Mexico. We have opened operations in other countries in Latin America and understanding how health models work in each of these countries has been a challenge. Q: How important is a doctor’s online reputation, today? A: That is something to which we pay a great deal of attention. We screen all comments and the line is very thin between an acceptable and an unacceptable comment. We do not tolerate insults toward doctors on our portal, nor do we accept when patients question certain things about a doctor’s practice because we are neither a judge nor a medical institution that can determine whether he is right or not, so we do not publish those comments. However, we do publish comments that have to do with the doctor being late or prescribing a drug without explaining what it does, for example. An online reputation is everything for a doctor. A doctor with more than 10 favorable ratings has three times more opportunities to attract new patients than a doctor who has none.

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Ventilator Manufacturer Expands into Consumables Market Pablo Bufano Managing Director of Dräger Mexico

Fostering Public-Private Collaboration in Health Patrick Devlyn President of the Health Commission at CCE

Vertical Supply Integration for Continuous Care Provision Américo García Director General of Mexico and Latin America at Apotex

Mayo Clinic: Medical Success Achieved Through Shared Knowledge José Solís-Padilla Senior Administrator for International Business Development at Mayo Clinic

Digital Transformation, Health and Mexico’s Regulatory Framework Christian López-Silva Partner, Head of Healthcare and Life Sciences at Baker McKenzie

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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.

Automotive

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163 View From the Top Martin Toscano President and General Manager of Evonik

165 Analysis Mexican Automotive Industry: SWOT Analysis

166 View From the Top Lourdes Cobos | Operations Manager of Yanfeng Automotive Interiors México

167 View From the Top Ignacio Moreno | CEO of Bocar Group

168 Roundtable What Should Companies Do to Embrace Industry 4.0?

169 View From the Top Miguel Barbeyto | CEO of Mazda de México

171 Expert Contributor Guillermo Prieto | President of AMDA

172 Content Links

Automotive | 158

Aftermath of a Historic Year Industry leaders remain optimistic about the role Mexico will play as a world-class automotive hub. Although auto parts and vehicle production took a hit due to the pandemic and recent semiconductor and natural gas shortages, USMCA is consolidating nearshoring trends in a region where global players from Asia to Europe are setting a strong manufacturing footprint. “Today, we are at a turning point. However, we are pushing to carry on with the commitments we have made so far,” said Fausto Cuevas, Director General of AMIA. Light Vehicles Light-vehicle production remains the cornerstone of the Mexican automotive industry. Over the last 10 years, OEMs ramped up vehicle production mostly to supply the North American market. Kia, Toyota, Audi, Mazda, BMW, JAC and Stellantis — after the merger of FCA and the PSA Groupe — have arrived with a long line of suppliers behind them. Today, 14 companies report production numbers to INEGI and AMIA. Electrification and Green Vehicles As OEMs work decisively toward achieving carbon neutrality, green vehicles are increasingly becoming part of their portfolio. Electric, plug-in hybrid and hybrid light vehicles have consistently increased their share in Mexico’s sales, going from 0.5 percent in 2016 to above 2.5 percent in 2020. Despite the pandemic, plug-in hybrids and EV sales have increased year-on-year, uninterruptedly. As for commercial vehicles, only a few companies produce natural gas, gasoline and electric trucks and buses in the country and 98 percent of these go to the US market. Just two brands are betting on natural gas and hybrid vehicles for the domestic market, which represented 7.6 percent of total commercial vehicle imports in 2020. Supply Chain Evolution Last year, supply chains were forced to demonstrate resilience and adaptability to avoid disruption, securing inventory and guaranteeing logistics continuity. “2020 was a historic year when everyone was forced to innovate,” said Antonio López, President of ARIDRA. The Mexican automotive sector was dependent on Chinese and Southeast Asian imports for specific components, mainly tooling and plastics. With the fragility of global supply chains exposed, industry leaders agreed the pandemic accelerated a trend toward regionalization. Nearshoring is the buzzword to define relocating production operations closer to where consumer markets are. The challenge to balance the economic impact and virus outbreaks forced governments to end lockdowns and companies to operate under strict health standards. Companies implemented social distancing measures and consequently accelerated the implementation of smart manufacturing strategies. Meanwhile, at the global level, automakers announced unprecedented commitments toward carbon neutrality that will also drive suppliers to meet more thorough environmental standards. In short, the sector is witnessing the forging of a safer, smarter and more sustainable supply chain. “We were proactive in the most Read the complete article

challenging situation the automotive market has faced in more than 80 years,” said Guillermo Rosales, Director General of AMDA.

Conference

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Highlights

Disruption Spurs Mobility Transformation Raymundo Cavazos CEO of Volvo Car México

Juan Andrés Panamá CEO of Mexico and Argentina at DiDi

Anasofía Sánchez Director General at Waze LATAM

obility companies have had to get creative regarding their product portfolio, while providing safer services for their users. “This year brought significant opportunities to innovate,” said Juan Andrés Panamá, CEO of Mexico and Argentina at

DiDi, during Mexico Automotive Summit on Thursday, Mar. 25. The world changed during 2020. “In Latin America we thought that we had seen everything. We were wrong,” said Raymundo Cavazos, CEO of Volvo Car México. In its early days, the pandemic brought Mexico to a near standstill as many began to work from home, non-essential businesses closed and people started to avoid leaving their homes to buy food and other necessities out of fear of coming in contact with the virus. This meant a sharp reduction in mobility services. “Demand plummeted last year. In March and April, it fell by 50 percent,” said Panamá. Traffic, one of the main annoyances of daily commuters, was also down. However, traffic is gradually coming back as lockdowns ease and vaccination programs advance. “Although there is less traffic now, do not be fooled. Traffic will return,” said Anasofía Sánchez, Director General at Waze LATAM. She reports that in 2020, Waze saw an 80 percent mobility drop in Mexico City. However, it is slowly picking back up. “To this date we have seen an 80 percent recovery in traffic from its lowest point and we estimate that we are still 20 percent below pre-pandemic levels,” she said. Moreover, lockdowns seen in December did not hit mobility as hard as those in March 2020, Sánchez added. While the world might slowly be going back to normal, the changes the pandemic brought are here to stay. One of these is the reevaluation of car ownership as consumers balance mobility as a service with an increased feeling of safety in their own vehicle. Traditionally, Mexican culture has favored car ownership. “We are one of the countries with less financial incentives for buying new cars but there is significant interest from the general public in acquiring one,” said Sanchez. Before the pandemic, however, mobility apps led younger generations to question whether they truly needed a car of their own. “Ownership relevance is changing as Mexicans are now realizing they just need the service,” argued Cavazos. However, car ownership came into the spotlight again as users of public transportation or mobility apps questioned the safety of those

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services. “Cars are taking a new role during the pandemic as they give an unrivaled sense of security against other mobility options,” said Sánchez.

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Q: How would you evaluate the state of the automotive industry in the country? A: It has been a difficult time for the automotive industry in Mexico due to the COVID-19 pandemic. The sector stopped production and new vehicle sales for over two months. The pandemic also translated to a drop in light-vehicle exports and new vehicle sales of 20 percent and 28 percent, respectively. However, we saw a slight recovery when plants and floor sales opened again in 2H20. At the same time, the increase in demand for semiconductors has affected both production plants and the supply chain due to the role they play in ADAS and other vehicle systems. As part of a perfect storm, the cold wave that hit Texas affected natural gas production and exports. Although brief, the shortage of natural gas forced a technical halt at some facilities in February. That being said, the relationship between Mexico and North America in the automotive industry is essential. The US still demands Mexican vehicles, particularly SUVs and pickups. Mexico is the world’s fourth-largest vehicle exporter and the sixth-largest vehicle producer. More than 80 percent of our exports go to the US and Canada, while the rest go to Europe, Asia and Latin America. The automotive sector generates more than 1 million direct, well-paid jobs and contributes to 3.8 percent of Mexico’s GDP. We should remain competitive, as a country and as a region,

José Zozaya

making the most of the opportunities brought by this pandemic. Q: What are your views on recovery expectations after the pandemic?

President of AMIA

A: Considering that the economic impact was caused by a pandemic rather than an economic crisis, we will see a faster recovery. We are optimistic about 2022 and we expect to return to pre-pandemic levels in 2023 or 2024. The automotive sector

We Need to Take Care of Existing Investments

in Mexico has proven to be flexible by adapting quickly at the upstream and downstream level of the value chain. Mexico has vehicle production overcapacity and should demand in the US increase, as we expect it will, the country is ready to supply those vehicles. Q: What are AMIA’s strategies moving forward? A: We will further strengthen our collaboration with local and federal authorities and work together for the sector to thrive. We need to send the right signals of where the sector is heading to, while addressing the government’s priorities to create a fertile environment for the sector. The role of local governments has become more and more relevant to promote investment in their respective states. Potential investors are now reviewing states on a local basis. We are committed and active with local governments so they can better promote both legal certainty and the right investment conditions. As the new Executive President of AMIA, I am also committed to introducing changes to the association, both internal and external.

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Once all plans are approved by our members, you can expect significant changes in how AMIA engages in relationships and partnerships with the media and the government. AMIA should be a strong representative of the most important sectors of the Mexican economy at this time.

Conference

Highlights Automotive | 161

kio Toyoda, the current President of Toyota Motor Corporation, says the automotive industry is currently going through a transformation process that we will not experience again in the next 100 years. “To put this in perspective, you have to think

that Henry Ford’s Model T, which reinvented the sector and shaped it as we know it today, is more than 110 years old,” said President of Toyota Motor Mexico Luis Lozano during the opening presentation of Mexico Automotive Summit 2021 on Wednesday, Mar. 24. “The world is in a permanent transformation. However, the pandemic has accelerated innovation in industrial processes from all sectors, including the automotive industry, where change was already underway,” said Lozano. In all industries, there are three drivers that can accelerate transformation in a significant way, according to Lozano: 1. New consumer needs 2. Business disruption 3. Abrupt public policy changes with the potential to transform a society’s reality

Toyota Leading the Industry’s Transformation Luis Lozano President of Toyota

In the automotive sector, Lozano explained, the change in consumer needs is quite clear. “In many of the most developed markets in the world, young people no longer want to buy cars. I see it even with my children. When I was old enough to drive, any excuse was good to get my parents to lend me the car. Meanwhile, my children are not interested in driving,” he said. “There are changes in consumers that are more profound than what we can estimate now.” All industries today are threatened by disruption, Lozano added. But crises have been a driver for change at Toyota. “We have grown stronger and learned from them (crises). The most severe crises we have suffered in recent years, such as the Fukushima earthquake, were crucial because they broke many value and supply chains,” he said. “It made us question the way we operated in Japan.” Today, Toyota is also going through a profound transformation, said Lozano. “We want to move from being an automotive company to being a mobility company. When people can move anything is possible,” he continued. The company will focus on developing new products and solutions centered around Connected, Autonomous, Shared, Electrified (CASE) technology. When it comes to electrification, Toyota has high aspirations. By 2025, the company plans to have an electric version of every vehicle in its lineup. By 2030, it aims to generate most of its revenue from EVs. Meeting these goals and achieving this transformation, Lozano said, is not just Toyota’s job. “There are non-traditional partnerships in the automotive industry that are needed to achieve our CASE goals. We have, for example, partnerships with Uber, Microsoft and even a joint venture with an air taxi company.” Annually, Toyota produces 10 million vehicles at 53 manufacturing plants worldwide. Fifteen of them are in North America, 10 in the US, three in Canada and two in Mexico. In addition, Lozano

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highlighted that the brand markets the world’s best-selling car: Corolla. “Toyota has the world’s best-selling electrification technology, embedded in the Prius model.”

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Q: How has the pandemic influenced Alian Plastics’ operations? A: It created a revolution for everyone. We needed to adapt our strategies prioritizing health and safety, while focusing on our staff and sales. In March, most of our automotive customers started to suspend operations. Fortunately, we started a diversification process toward other industries in 2018. Our projects required years to be developed and by starting in that year, we were able to complete our diversification successfully in February, gaining participation in the HVAC niche. Amid the shutdowns mandated by the government, the HVAC industry remained an essential sector, which helped to keep our operations running. At that moment, we were worried about how the automotive sector was going to behave after the lockdown. Our surprise was that companies resumed operations stronger than before. Premium brands we work with, such as Audi, Tesla and BMW, presented stronger demand than before the lockdown. We adapted our staff accordingly while implementing cost reduction strategies to keep the company healthy. Q: You have proven successful in leading through times of crisis. What elements have helped that success? A: Maintaining balance with the help of family and exercise has been essential. At the corporate level, protecting our staff was

Felipe Villareal

our priority. A strong, safe and stable worker will perform well. Even though there were times when I myself felt uncertain about the future, I needed to provide employees certainty.

CEO of Alian Plastics

A second element was home office. We were not sure how remote work would turn out but through KPIs and clear goals, we made it work. The mental health of everyone was really important, too. Q: Given the company’s successful strategy of diversification,

Smart Manufacturing to Attract New Customers

how has Alian Plastics’ portfolio changed? A: The automotive industry continues to be our core business. The second niche we are focusing on is HVAC, which is a demanding industry in terms of quality and delivery times. We are handling a just-in-time delivery every four hours. In the beginning, it meant adapting our day-to-day operations since automotive companies pick up products only two or three times a day. I accepted this challenge gladly because we recognized the potential of our operations. This year, we also entered a new industry: toys. We manufactured pieces for iconic characters, such as Barbie and Batman, and for toy animals. We also invested, despite COVID-19. We bought new machines and robotic end-arms and grippers. Q: The pandemic also drove companies toward greater levels of digitalization. How has Alian Plastics experienced this trend? A: We started our smart manufacturing projects in 2019, collecting data faster and making better decisions in a really short time. 2020 was a year of consolidation and I feel very proud of our IT team. Having all the tools available to perform

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our job remotely and efficiently provides us with the capabilities to diversify our operations. We enabled Industry 4.0 tools for each one of our presses. These tools send us alerts in real-time to identify area to address, whether it is production, quality, materials or maintenance.

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Q: How did the pandemic influence Evonik and its clients’ business? A: When the Covid-19 pandemic started, our top priority was to protect the health and well-being of all our employees, while we focused on securing the value chains we take part in with our chemical specialty products. We adapted our distribution and production operations in the country, following strict safety and health guidelines. From the very beginning of the pandemic, the chemical sector was labeled as essential. However, many of the industries we participate in were not labeled equally at the beginning. In some sectors, our customers were more affected than others. And obviously, priorities changed as companies adapted to the new reality. This resulted in delays for some projects and acceleration for many others. Communication channels changed with our customers since we are used to developing projects, with our products and solutions, on-site. We created a variety of online activities where Evonik makes the most of its global network. We brought experts in different technical and commercial areas closer to our customers in Mexico. This was a leap toward higher quality in the way we interact with our customers. I believe things will not be black and white when it comes to communication channels in the new normal. There will be a mix

Martin Toscano

of on-site communications and virtual meetings. This allows us to make the most of our global footprint by placing experts in front of key stakeholders more efficiently. One of the remaining challenges is implementing strategies to cope with this ongoing

President and General Manager of Evonik

situation. We need to evaluate those elements that are here to stay. B2B companies such as ours have an obligation to think about our role in the future and how disruptions in different sectors will impact our products and technologies. This adds up to a massive advancement of digitalization. In a 12-month period,

Digitalization, Automation, Relocation Are Here to Stay

digitalization grew the equivalent of what we went through over the past 15 years. We remain open and confident we will achieve greater levels of innovation and the development of new technologies along the value chain. Q: Why did Evonik realign its structure to focus on smart materials, specialty additives, and nutrition & care? A: Our company structure is systematically oriented toward our operational business. The engine of our company consists of the five divisions with their business lines: Smart Materials, Specialty Additives, Nutrition & Care, Performance Materials and Technology & Infrastructure. In Mexico, this proved to be the right strategy in 2020 for delivering good results. This is particularly due to the diversity of our product portfolio and it is resilient. And we operate and supply practically to all manufacturing and industrial sectors and markets. To increase the value of the company, we target three strategic focus areas: portfolio, innovation, corporate culture. Q: The pandemic accelerated different trends, among them additive manufacturing. What is Evonik’s focus in this regard? A: This is an area where Evonik continues to invest, particularly in the high-performance polymers business line where we participate actively. In this segment, we bet on the future while actively developing these technologies. We have a clear strategy

that involves investments and acquisitions, as well. We are aware of the promising future this area represents. Q: What business lines were boosted in Mexico due to the pandemic? A: In 2020, compared to 2019, we grew our business in Mexico. Some business lines experienced more challenges than others during the peaks of the pandemic but all businesses have proven to be resilient, among them automotive, agriculture, pharmaceuticals, among others. Depending on the sector, our business lines adapted to market conditions and the general situation. This has been essential to navigate the pandemic. After the announcements made by local authorities in May 2020, automotive, mining and construction were shortly after considered also essential. In 2H20, we started to feel greater levels of recovery. In the automotive industry, a regional effort was made toward industrial recovery involving leaders from Mexico, Canada, and the US. For Mexico, fast recovery in the US is also important due to the role we play in the US auto parts market. Despite the challenges, it has been a really good year for us, full of learning. Although we continue to navigate the storm, teamwork and our close relationship with customers and key stakeholders have been essential, while being flexible in how we adapt to their needs. Our next challenge is to continue growing in a scenario

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where supply chains are relocating to the region, a direct consequence not only of the pandemic but also of USMCA. Without a doubt, there is a clear trend to evaluate value chains that allow relocation of operations to North America. 2020 saw also the update of Mexico’s FTA with the EU, which brings additional opportunities to the table. One of the most outstanding sectors that keeps growing is agribusiness. The country is starting to be a reference for food exports to Europe and Asia, on top of being a key player for US food markets.

With our tailored solutions for automobiles we are your partner in boosting efficiency, creating surfaces, lightweight design and lighting. Learn more at www.evonik.com/automotive Innovate mobility – we provide the chemistry.

Q: What changes are here to stay? A: Process digitalization and automation, the ways we do business and supply chain relocation, mainly from Asia, are trends that are here to stay. Particularly in 2020, the US supply chain relocation created more jobs than FDI. Last year tested all sectors equally. It also allowed us to better understand our capabilities as an organization and team in the country. Without question, human capital continues to be a priority and as organizations, we need to understand what the future is and the kind of profile future business leaders should have based on the challenges we are facing today.

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Automotive | 165

Mexican Automotive Industry: SWOT Analysis The automotive sector has experienced tremendous changes while setting the stage for a new generation of vehicles and industry standards. “The industry will change more in the next five to 10 years than it did in the previous 100 years,” said David Adams, President of Global Automakers Canada, to MBN. After interviewing more than 150 leaders in the sector over the last year, Mexico Business News presents a SWOT analysis of the sector. Strengths and weaknesses refer to internal circumstances, while opportunities and threats deal with external elements influencing the sector directly. Strengths Production capacity of 5.5 million vehicles. IHS Markit estimates the country’s production capacity between 5.5 million and 6 million units. Mexico hits its light vehicle production peak of 3.9 million units in 2017. At the time, neither Toyota nor BMW had started operations, so Mexican production could easily surpass the 4-million-units production mark by 2024. “One of the biggest achievements of the automotive sector over the last decade is Mexico’s emergence as an important pole for development, which represents a unique opportunity for the country to transform itself into a global platform for advanced manufacturing and innovation,” said Alberto Torrijos, Automotive Sector Leader Partner at Deloitte. Weaknesses Idle vehicle production capacity. IHS Markit also reports that there is a lack of production capacity for SUVs and pickups. Much of the installed production capacity is focused on compact and subcompact models, when foreign markets are demanding more SUVs and pickups. “Mexico has a problem of idle capacity. Mexico’s installed production capacity is around 5.5 million units. There is a lack of production capacity for SUVs and pickups,” said Guido Vildozo, Main Partner at IHS Markit. Opportunities USMCA’s rules of origin. Leaders from clusters, associations and major OEMs agree that the enforcement of USMCA’s rules of origin for automotive goods will strengthen the role of vehicle and auto parts manufacturing in North America, a unique opportunity for Mexico. This also means the need for strategies to foster steel and aluminum production in the region. “Without a doubt, USMCA will bring more opportunities for Tier 2s. We will also identify potential suppliers that can increase their production capacity,” said Carmen Hernández, President of Jalisco Automotive Cluster. Threats Government policies to address the impact of the pandemic on suppliers. Among G20 countries, Mexico has the second-lowest support programs for private companies. Mexico has destined just 0.3 percent of its GDP to support companies and individuals, according to the IMF. This is a threat for a sector that is costsensitive. “Only 7.8 percent of surveyed companies confirmed Read the complete article More about this topic

having received some kind of support, while the rest (92.2 percent) did not receive any help whatsoever,” said Guillermo Prieto, Executive President of AMDA.

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Q: How did Yanfeng Automotive Interiors (YFAI) transition from a joint venture to a successful automotive company? A: YFAI was born as a joint venture with Johnson Controls. Five years ago, Johnson Controls sold its interiors division to Yanfeng, mostly based in China. Yanfeng acquired 80 percent of Johnson Controls’ participation in its plants for interiors. In North America, we have 22 active plants, four of them in Mexico and one more to be inaugurated in the near future. One of our biggest achievements is successfully transitioning from one corporate culture to another. Yanfeng is relatively young in North America but we are expanding our presence in the region. In Mexico, all our plants are focused on automotive interiors but soon we will announce an upcoming plant that will manufacture seat components, as well. Q: What are YFAI’s strategies regarding local tech design and engineering? A: In the Queretaro area, our tech design center has 40 Mexican designers who are working on different projects. We are looking forward to doubling our capacity in the coming years. The center is already working on several innovative projects with multiple OEMs, and others. Mexico plays an important role in YFAI’s approach to innovation.

Lourdes Cobos

Q: Which companies have helped YFAI to build its presence in the region? A; We work with multiple OEMs throughout North America. Our

Operations Manager of Yanfeng Automotive Interiors México

plants in Ramos Arizpe produce components for Toyota in the region, as well as BMW. We have room to grow in the local market and that is one of our current strategies, alongside strengthening our technical and design center in Queretaro to attract more local customers. We are pioneers in automating leather cutting

Automotive Interiors Taken to the Next Level

for automotive interiors. This gives us freedom to design our patterns and adapt to our customers’ needs. At our new plant in Ramos Arizpe, Coahuila, we will have our excellence center where customers can view our product portfolio and prototypes. Q: How has the pandemic influenced YFAI’s operations? A: In the automotive industry, adaptability is key. For over two months, our operations were idled, as was the rest of the industry. Naturally, our strategies changed and we adapted to the circumstances by investing time into strategic planning, prototypes, team projects and installing new equipment. I can proudly say that during this period, we did not have to reduce our workforce. Now that we are back, we are stronger, have new projects and, in fact, we are starting our recruitment process for our new plants. Q: What are YFAI’s plans for the future? A; We will continue to innovate in automotive interiors. YFAI is focusing on prototypes for doors, instrument panels and center consoles, remaining flexible to our customers’ needs, including

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textures, colors, designs and shapes, among many other elements. Betting on Mexican talent will be essential to growing not only design operations but also developing a specialized workforce. I see Yanfeng as a strong company in the North American region with a diverse product portfolio.

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Q: What values have allowed Bocar Group to remain a market leader for decades? A: Bocar Group was founded more than 60 years ago by Mr. Federico Baur. Over the years, the company has lived by its core values and principles. People are the company’s main asset and all our employees follow our values as well as our primary concept of discipline, order, and cleanliness. The Baur family continues to play a fundamental role in the company, keeping us on the path of success set by our founder. We have built a successful relationship with our customers and created a diverse customer portfolio based on win-win relationships. Q: How will USMCA’s new rules of origin influence aluminum processes? A: Opportunities are similar due to our diversified portfolio. We supply OEMs in the US, as well as European and Asian companies based in the US. Our main market is in North America, so the fact that USMCA has been signed provides us with certainty about the future of our operations and the future economic growth of the region. Risks remain low as long as we comply with the norms established in the agreement. Q: How did Bocar Group embrace the effects of the pandemic?

Ignacio Moreno

A: In the beginning, the situation was complicated for everyone. In March, the US started to close its borders and at that very moment, we decided that our priority was our employees’ safety and well-being. Fortunately, we prepared ourselves by having

CEO of Bocar Group

enough stock available for our customers, which allowed us to maintain supply even though operations remained suspended. We implemented state-of-the-art sanitary protocols to resume operations and we were among the first companies to be cleared by IMSS to go back to work. We handled the crisis effectively.

Anticipating Customer Needs to Sustain Growth

Bocar Group has the capabilities to endure the peak of the crisis, avoiding supply chain disruptions for us and our customers. Q: How are you participating in the development of CASE vehicles? A: With the incoming US administration, the trend towards electric and hybrid vehicles will increase considerably. Our strategies are also heading in this direction. Most of our customers have announced billions in investments in electric and autonomous vehicles as a standalone or through a partnership. This has driven us to take part in this trend. We are anticipating their requirements and maintaining close contact with their engineering departments during the early stages of the R&D process. CASE vehicles are a reality and they are coming at a fast rate. We take this seriously, not only at our plant in the US but also at our plants in Mexico. Q: What opportunities can the Mexican automotive industry take advantage of this year? A: Engineering and design are great opportunities for the country. We have capable engineers who can support these efforts but

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we have to educate them to embrace engineering. In this way, we could advance from being a country with solely high-quality manufacturing to being a country that also contributes to product development. Tooling development also remains an important opportunity. We must also capitalize on USMCA.

Social-distancing measures made smart manufacturing capabilities the best option to prevent outbreaks and

Automotive | 168

What Should Companies Do to Embrace Industry 4.0?

assure ongoing, efficient operations. Companies, from large manufacturers to small Tier 2 suppliers, are looking for strategies to balance the initial investment of a new technology and cash flow. Leaders from robotics, automation and technology integration solution companies shared their views on the steps companies should consider when embracing Industry 4.0, particularly regarding an adequate ROI analysis.

Typically, Industry 4.0 solutions are complex in hardware and software required to collect, manipulate, store and normalize data. Our solutions are simple, transparent and the initial investment is not that high. We allow customers to get to the same goal in a very clear and secure way. Often, potential customers do not believe that what we are telling them is possible. We usually create a demo solution for the customer to test it. Companies can see the effect that monitoring quality and efficiency can have, representing millions in savings. Once they try the demo, they want more. Demos have helped a great deal

Mauricio Blanc Executive Director Latin America of OMRON

in boosting Industry 4.0 awareness. With USMCA, we expect greater automation levels, higher wages and consequently higher quality for auto parts manufacturing.

The pandemic has highlighted the vulnerabilities of a manufacturing plant that strongly relies on manual labor. Before COVID-19, digitalization was a fashionable topic the industry was aware of but did not really embrace it. Now, it is critical. Although investments are not yet there, companies are getting their budgets ready to implement these solutions. ROI sometimes took a backseat when the priority was to remain in operation. ABB has been a strong player in Industry 4.0 for years. Since 2019, all of our robots are able to connect to Wi-Fi networks. We have also introduced OmniCore, our new

Sergio Bautista Robotics and Discrete Automation Director of ABB México

controller for smaller robots. This is the sixth generation of our platform, which is now slimmer, lighter, more intuitive and more energy efficient. By the end of 2020, we will release a new lineup of collaborative robots.

The first step to advance Industry 4.0 is to take advantage of cloud and SaaS solutions. Cloud solutions “flatten the curve” of the initial investment. That being said, before technology, there need to be processes. Technology is just a tool to be prepared for strict requirements, short times and many other issues automotive suppliers face. The second element is to establish the data that will be required to make the decision, as well as streamlining the data. Once that is in place, we can decide which solution fits best. This applies to all companies throughout the chain, from big global players with clearly defined processes to small companies aiming

Sergio Macías Business Consultant Automotive Industry of Blue Yonder

to break through. My recommendation for Mexican companies is to be open to innovation and to adapt. Openness can change and create processes for the better. It is a balance between a long-term vision and being agile enough to achieve short-term results.

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Q: How has Mazda adapted to the pandemic? A: It has been quite an experience because we were all taken by surprise. Many of my colleagues told me that I was exaggerating when on March 13 we sent everyone to work from home to prevent any contagion. At that time, one of the main objectives was to give the employees peace of mind but also safety. I have always said that companies are made of people and without them, there are no companies. That said, the most challenging thing was to understand what our employees, our distributors, Mazda Corporation and our customers wanted. Achieving a perfect balance between these players was tremendously challenging but also rewarding. We were proactive in implementing actions, strategies and tactics to get around the pandemic. The main focus was always to keep our employees and customers safe while continuing to deliver results. Almost nine months after the pandemic hit, we can proudly say that this strategy has worked. Beyond that, we all learned a great deal, both professionally and personally. We learned that it is not necessary to go to an office to work. We learned to communicate through technology and to live together as a family while working. Despite all the unfortunate things that this crisis has brought, it has also created good opportunities because we learned to value many things that before we likely did not. Most of all, we realized the importance of people

Miguel Barbeyto

and health. Q: What drove Mazda’s results during the pandemic?

CEO of Mazda de México

A: Our performance was a result of our people. At Mazda, in addition to being a team, we are a family. Due to great communication between employees, with our headquarters in Japan and with our clients, we had better results than expected. This may sound like a cliche but it’s true: even if a company has a

Mazda: Pandemic‑Resilient, Forward‑Looking

good product, at a good price with excellent aftersales service, without the team’s enthusiasm to help customers, everything else is worthless. Mazda has been in Mexico for 15 years and we have never achieved results like we did this year. In October, for example, Mazda exported 206.9 percent more units than in the same period last year. Mazda is a brand that, beyond the features and good performance it offers, has a special charm that has made Mexicans fall in love with our products. Q: What role are electric and hybrid vehicles playing in Mazda’s lineup in the country? A: In Mexico, we will soon introduce a mild-hybrid technology in two of our vehicles. The technology helps to decrease pollutant emissions and improves vehicle efficiency. This mild-hybrid system uses a small Integrated Starter Generator (ISG) to capture the energy that is normally wasted during braking and stores it to power the vehicle’s electrical systems, reducing the load on the engine and saving fuel in the process. Q: What strategies is Mazda implementing to increase regional value content (RVC)? A: Mazda is working every day to meet these requirements in Mexico and in the North American region. We are building, for

instance, a US manufacturing plant in Alabama. This is a co-investment with Toyota. The aim of this project is to meet these new requirements without harming the customer. If we do not meet these requirements, we have to pay a fee, which then needs to be reflected in the price. Steel is a very important material for Mazda because of its distinctive design and production. To date, however, there is no steel supplier in the country that can meet our requirements. This is undoubtedly one of the main challenges. Establishing suppliers in the region is not a task that can be accomplished overnight. Research, development, investment and government support are needed. We want to maintain and increase production in Mexico. Partnerships like the one we have with Toyota are an extremely valuable part of our medium-term strategy. One of our objectives through this partnership is to comply with increasingly strict environmental regulations worldwide. Collaboration is necessary and we are sure that it will make us stronger in the future. Q: What efforts is Mazda making in Mexico to address gender inequality in the company? A: At Mazda’s Mexico headquarters, 40 percent of the employees are women. Of the seven directors in the management team, three are women. I am a firm believer in the commitment, dedication and ability of women. At the manufacturing plant, more than 40 percent of the staff working on final assembly is female. We are a company strongly committed to gender equity. We employ people because of their skills and no other reason. The automotive industry, in general, has been dominated by men for many years. Certain stereotypes, as well as misconceptions, still need to be dispelled for us to see more women taking part in the industry. Q: What impact does Mazda anticipate from the pandemic in the long term? A: Recovery will be rather slow. We are forecasting that it will take us until 2024 to reach the industry levels of 2019. There are activities like production and exports that are responding much better. The US market has performed well, although in November, growth slowed down. Because of its production plant in Mexico, this market is a main customer for Mazda, so our efforts are also focused here. To boost recovery, the economic base would have to be much stronger. There should be more support for entrepreneurs and SMEs. By supporting the latter, consumption is generated and those people are the ones who buy a vehicle.

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exico is considered a “megadiverse” country since it forms part of the select group of nations possessing the greatest diversity of animals and plants. Nevertheless, diversity also has an unpleasant side in the differences between

regions in terms of opportunities and development. In the automotive market, which is influenced by the dynamics of the regional economy and the social factors present in a particular field, this diversity is also evident. There were 10 vehicle buyers in Mexico per 1,000 inhabitants at the end of 2019. There are, however, relevant differences in geographical distribution for this indicator: 12 in the Northern Region, nine in the Border Region, 11 in the Central Region and seven in the Southern Region. The behavior of the automotive market in the state of Baja California in 2019, which saw a 5.3 percent increase in vehicle

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sales, while the national total fell by 7.5 percent, is another

Mexican Automotive Market’s Regional Differences Guillermo Prieto President of AMDA

example of regional differences and their connection to economic and political factors. The Tax Incentives Decree for the Northern Border Region, which includes benefits for consumers with a 50 percent reduction in VAT payments (8 percent rate versus 16 percent national rate), was one of the factors that had much to do with this outcome. I consider it important to take into account the contribution of each region to the automotive market according to their contribution to the Gross Domestic Vehicle Market. Northern Region (Chihuahua, Coahuila, Durango, Nuevo Leon, Sinaloa, Sonora, Tamaulipas) contributes with 24.0 percent of national GDP, represents 22.9 percent of the country’s lightvehicle buyers and concentrates 22.5 percent of the total lightvehicle dealerships. The Northern Border and Border Strip Region includes the states of Baja California and Baja California Sur, as well as the border municipalities of Sonora, Coahuila, Chihuahua, Nuevo Leon and Tamaulipas. The Central Region includes the states of Aguascalientes, Mexico City, Colima, Guanajuato, Hidalgo, Jalisco, Mexico, Michoacan, Nayarit, Queretaro, S.L.P. and Zacatecas, which together account for 49.04 percent of Mexico’s GDP, 53.1 percent of the country’s vehicle buyers and 48.3 percent of all light-vehicle distributors. The Southern Region includes Campeche, Chiapas, Guerrero, Morelos, Oaxaca, Puebla, Quintana Roo, Tabasco, Tlaxcala, Veracruz and Yucatan. These regions account for 22.4 percent of the country’s GDP, 20.5 percent of vehicle buyers and 25.1 percent of all light-vehicle dealerships. This description is an illustration of what we can find if we take

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indicators as diverse as access to education, health and per capita income as reference points and place ourselves before the challenge of generating a large national agreement that emphasizes the dilution of inequality between regions due to public and private investment in those less developed places.

How Chihuahua’s Automotive Sector Emerged From The Pandemic Tarsicio Carreon President Chihuahua Automotive Cluster

Jalisco Making the Best of Tech and Automotive Carmen Hernández Director General of the Jalisco Automotive Cluster

Mexican Labor Reform and USMCA Labor Requirements Luis Monsalvo Panelist, USMCA’s facility-specific rapid response labor mechanism between the US and Mexico

Queretaro: From Manufacturing to Mind-Facturing Daniel Hernández

Director General Queretaro Automotive Cluster

Innovation Is a Game-Changer Now More Than Ever Renato Villaseñor President Queretaro Automotive Cluster

Local Consumption Key to Fostering Economic Growth Manuel Montoya President of CLAUT

Cybersecurity in the Automotive Industry Obed Salinas Commercial Director of Wizlynx group

Joe Biden’s Influence on the Mexican Automotive Industry Analysis | 11/19/2020

Mexico’s Automotive Industry is Ready for the Digital Age Karel van Laack President of the Advisory Board at Holland House Mexico

Deloitte: Let’s Not Forget That Crises Are Opportunities Manuel Nieblas / Alberto Torrijos Manufacturing Industry Leader Partner at Deloitte Mexico/ Automotive Sector Leader Partner at Deloitte Mexico

Energy Following three successful long-term electricity auctions, renewable energy seemed all but unstoppable in Mexico. In 2018, however, a new administration came to power, bringing a new vision and political change, and affecting energy industry stakeholders. Nevertheless, the first steps toward achieving Mexico´s climate goals have been taken, and renewable energy is expected to be part of the country’s energy mix for the long run. The largest portion of the renewable projects launched by the electricity auctions are up and running, while others are still in various stages of development. Outside these auctions, renewable energy use is growing in the C&I segment, with a particular focus on distributed generation. Natural gas remains crucial to Mexico’s energy mix, demanding greater strategy regarding its production, transportation and distribution. Furthermore, the stability and reliability of the grid finds itself under close examination. Further investments in the area will be needed, and technological developments will be key to enhancing Mexico’s transmission and distribution network. State of the Industry presents the voices of key industry leaders, who are closely involved in Mexico’s energy development, and paints a clear picture of the current landscape and its opportunities.

Energy

176 Analysis Resilience a Requirement for Energy Transition

177 Expert Contributor Ramón Moreno | CEO of Mitsui & Co. Power Americas

178 View From the Top Bruno Riga | Country Manager of Enel Mexico & Central America

179 View From the Top David Fatzinger | VP and Country Manager Mexico of Invenergy

180 Conference Highlights Mexico’s Power Producers Ready to Support Energy Transition

181 View From the Top Enrique Alba | Director General Iberdrola Mexico

183 Analysis Expanding the Potential of Mexico’s Baseload Fuel

184 View From the Top José García | President of AMGN

185 Conference Highlights Natural Gas to Boost Mexico’s Development

186 View From the Top Alejandro Peón | General Director of Naturgy Mexico

188 Roundtable What Will Make Mexico Truly Competitive in Energy Storage?

189 View From the Top Gustavo Ortega | Director General of Grupo México Energía

190 Spotlight GridSolv Max Storage and Gems Energy Management Systems

191 Content Links

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Resilience a Requirement for Energy Transition From its first day in office, President Andrés Manuel López Obrador’s government has moved to alter the landscape in the energy sector, favoring national companies over the private sphere. The result is an uncertain environment for private companies eyeing investment in the Mexican industry. Those who stay the course, could benefit. Among the first concrete indications that a shift was taking place happened in 2019, when the administration tried to expand clean energy certificates (CELs) to include legacy CFE hydropower plants. CENACE then restricted new renewable interconnections to Mexico’s grid and changed the dispatching of power plants. This was followed by a policy agreement from SENER that proposed altering the roles of CENACE, CRE and CFE. These actions were followed in June 2020 by CFE slapping an 800 percent increase on the wheeling rates for older energy projects operating on legacy contracts. In October 2020, CRE then published a regulation that prevented companies from modifying the end user of their legacy project. Furthermore, regulatory processes slowed down greatly, to the point that permitting became virtually non-existent. These measures were met with amparos that finally saw most of the moves invalidated by Supreme Court rulings. President López Obrador then turned his attention to pushing changes to the Electrical Industry Law (LIE) through Congress, which approved the bill in March 2021. The bill is aimed at strengthening CFE. Previously, auction-based and even full merchant projects gave investors the confidence needed to support long-term power plant plans. Today, players in the energy sector need to reorient themselves in light of the government’s shift that favors CFE. Despite the uncertainty, opportunities in renewables lie in specific areas, such as distributed generation. While the government has moved to strengthen CFE, it also aims to achieve its climate goals, which were reaffirmed in the recent National Electricity System Development Program (PRODESEN). “Mexico still needs 9.6GW to achieve the 2030 target it has set. Mexico currently has around 10GW of solar and wind generation in over 120 projects. To meet these goals, the Mexican government must set clear rules between the public and private sectors in order to drive investment and transmit confidence,” said María José Treviño, Country Manager of Acclaim Energy. Other trends spurring the development of renewables come from outside the country, especially the US, said Salomón Amkie, Director of Banking, Capital Markets and Advisory at Citi. “An overarching question for Mexico is how much will the US attempt to influence its allies and neighbors on climate change? (After) just weeks in office, President Joe Biden signed executive orders that not only brought the US back into the Paris Agreement but created positions, task forces and Read the complete article

processes that put climate at the center of US foreign policy and national security.”

laus Schwab, founder and executive chairman of the World Economic Forum, grabbed headlines in 2016 when he wrote The Fourth Industrial Revolution. The title was overwhelmingly attractive. Being part of history and capturing our time as one of those

inflection points for humanity is certainly impressive. But the essay also created fear due to its transcendental implications. It described a future of nonstop, accelerated change; a long, vertiginous leap for humanity. The prediction that 60 percent of the kids entering primary school would work in jobs that were non-existent at that moment made everyone wonder what the future would be. The power sector is not only part of this revolution but together with data and technology, it is considered one of its important pillars. The main reason is the medium-term threat of climate change, a motivation that is unique and revolutionary in itself: the unprecedented global, communitarian effort to save

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the planet.

Mexico’s Energy Transition: The Time is Now Ramón Moreno CEO of Mitsui & Co. Power Americas

“

The task of stopping (and even reverting) climate change is monumental.”

The task of stopping (and even reverting) climate change is monumental. Predictions are a high-risk bet under this scenario of rapid change. Paths to decarbonization could change as technology evolves, and it is precisely the creative destruction process that makes economies and cultures evolve. Nevertheless, some of those trends are clear in the short and medium term. I would emphasize three, which happen to represent a great opportunity for Mexico: + Gas-fueled power generation will continue as the central block of the energy transition, as it has been for the last 20 years, substituting much dirtier coal and fuel-oil power plants. Utility-scale power plants will be needed as much as other small, on-site or off-site power generation blocks. Hybrid concepts will also become more common, such as microgrids where a conventional power generator is combined with solar or batteries. The difficulty to store electricity for long periods, and the possibility of retrofitting these power generation blocks to consume hydrogen or synthetic fuels will provide the long-term visibility that this capital-intensive infrastructure requires. Regulatory wise, capacity and ancillary services need to provide sufficient cash flow for dispatchable generators. + Solar is considered the king of the electricity sector, the International Energy Agency said last year. With renewable energy meeting 80 percent of the growth in demand by 2030, solar has become the cheapest form of electricity production and its deployment will increase year after year in the next decade. + Digitalization will have an increasing impact on all sectors of the economy. Data and artificial intelligence will change the way we consume energy, enabling further installation of distributed energy resources, from accessible smart thermostats with demand response, to distributed solar panels working together as a virtual power plant. The efficiency gains from a digital economy will also play an important role in how power companies can offer optimized products by reducing their capital investment and operational costs. Mexico cannot miss this train called the Fourth Industrial Revolution. In terms of the energy transition, now may be the right time to do it at an affordable cost. Regardless of the regulatory framework and the discussion

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on who does what, or how private companies can help in this endeavor, the participation in an integrated economy for a country that relies on exports for 40 percent of its GDP makes the energy transition probably the most important challenge for Mexico’s success in the coming years.

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from the

Q: What has allowed the company to break world records in terms of levelized cost of energy? A: When Enel first arrived in Mexico, the combination of its solar and wind potential, the liberalization of the electricity market, along with our business model based on sustainability, creating shared value and the circular economy, allowed us to offer costeffective energy and was key to our growth and investment in the region. The cost of renewable energy in Mexico is one of the most competitive in the world, but for it to directly benefit final consumers, regulation must favor its distribution. Electricity from renewable sources is available only to big companies with large consumption while electricity reaching Mexican households is a mix of other nonrenewable sources with other costs, of which the price is reflected in the consumer’s bill. As more renewable energies enter into this mix, electricity prices will improve for people at home. Innovation is one of Enel’s core values, so we continually seek to develop disruptive technologies in accordance with present and future needs. Power Purchase Agreements (PPAs) enable the construction of new and bigger renewable plants where the energy is sold to different off-takers, reducing the final energy cost thanks to economies of scale. Q: What are the characteristics of Enel’s Magdalena II and

Bruno Riga

Villanueva solar plants, and what are their added benefits? A: Magdalena II is located in the state of Tlaxcala, a territory with large solar resources. It is the first Enel Green Power

Country Manager of Enel Mexico & Central America

plant built with bifacial solar panels, which allows it to take advantage of between 10 and 15 percent more solar radiation. It has an installed capacity of 220MW. Magdalena II is capable of producing 600GWh per year, which is equivalent to the energy consumption of more than 269,000 Mexican households,

Consolidation as ‘Green Enabler’ Comes into View

avoiding the emission of more than 330,000 tons of CO2 into the atmosphere each year. Villanueva is located in the state of Coahuila. With 2.5 million solar panels, it is one of the five largest solar plants in the world and the largest in Latin America. Villanueva has an installed capacity of 828MW and avoids the emission of more than 950,000 tons of CO2 per year. It can produce more than 1,700GWh per year and is Enel’s largest photovoltaic plant in the world. Q: Some of your stated goals are “to consolidate projects in operation and expand the commercial portfolio.” What concrete measures will you implement to achieve these objectives? A: We see opportunities in new businesses such as green hydrogen, electric mobility, grids, and publiclighting. In the long term, once regulation is ready and allows it, we see potential in storage as well. We are also working on new solutions for our clients in terms of sustainability, actions incommunities, the circular economy, responsible consumption and communication

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campaigns. Our goal is to consolidate ourselves as a green enabler for our current and future clients. We are focusing on our current projects and those that are about to start commercial operation.

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from the

Q: How does the company decide which projects are viable? A: It is a mix of viability and what Invenergy wants to drive. We predominantly see ourselves as a clean energy company, which allows us to venture into cogeneration as well. We have been looking into LNG for Central America, for instance. Mexico’s current regulatory environment is making us reevaluate the approach we have used successfully in other markets like the US. There, we have been successful in developing wholesale renewable projects and contracting those through virtual PPAs to industrial clients. It is a model that has worked well for both the C&I sector and renewable developers in the US. With the renewables restrictions we are seeing in Mexico, we have to somewhat rethink this model. Building wholesale renewables projects will likely not be possible in the short term. Therefore, we still want to address industrial clients, focusing on more direct solutions such as cogeneration. We will consider delivering solutions related to renewables as well. Q: How does Invenergy’s work on the Fenicias wind farm for Grupo México factor into the company’s wider strategy? A: The Fenicias Energy Center is still under construction. The objective is to bring the wind farm into operation this year. We believe this goal is achievable even within the current environment marked by slowdowns. We are proud to be working with a mining company that is helping to make the extraction

David Fatzinger

process more sustainable. Renewable energy companies like Invenergy need mined materials for its equipment so we are proud to contribute to the supply chain’s sustainability.

VP and Country Manager Mexico of Invenergy

Developing projects for specific industries is our focus. Once we understand an industry, we can better tailor solutions and help our clients achieve their corporate goals. Rather than looking for a standardized solution, we aim to understand what benefits our clients need the most. Invenergy enters markets looking to solve

Problem Solving at the Heart of Invenergy’s Projects

problems and support the growth of the market we come into. We are here to build infrastructure that allows Mexico to move in a positive direction. Q: What are the characteristics of Invenergy’s solar and storage project in Baja California Sur? A: The La Toba Energy Center, a storage and solar project, is an impressive showcase power plant, it represents an interesting entry of battery storage in the Mexican market. It is more than just a solar park paired up with batteries: the solar predominantly functions to charge the battery and have a more reliable resource for CENACE to support the grid. The intermittency issue and its effect on the grid has gained more attention recently in Mexico, so we want to contribute to solutions rather than generate more problems for the grid. La Toba, therefore, allows us to provide more than just renewable energy by generating a predictable output for the grid. We are hoping to see the project become a key resource for CENACE. Invenergy has also been developing what we call transmission and distribution deferral-type storage projects in the US. With

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a battery, you can help the grid by postponing transmission or substitute it. Through a battery and an inverter, many possibilities can be found, even some that have not been explored yet. In many parts of the world, including Mexico, we believe this has beneficial applications.

Conference

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Highlights

Mexico’s Power Producers Ready to Support Energy Transition Patricia Tatto Vice President America at ATA Renewables

Fernando Tovar CEO and Country Manager of Engie Mexico

Ramón Moreno CEO of Mitsui & Co. Power Americas

Gerardo Pérez Vice-President & Country Manager of EDF Renewables Mexico

Bruno Riga Country Manager of Enel Green Power Mexico

he paradigm shift in the Mexican energy sector was the main topic of discussion during the fourth panel of Mexico Business Forum 2021 on Wednesday, Mar. 10, entitled “Power Producers’ Priorities.” Experts agreed on several topics including the legal framework,

protecting investments, transmission and distribution, the energy transition and new technologies to help drive the sector forward. Moderated by Patricia Tatto, Vice President America of ATA Renewables, the conversation furthermore included Fernando Tovar, CEO and Country Manager of Engie México; Ramón Moreno, CEO of Mitsui & Co. Power Americas; Gerardo Pérez, Vice President and Country Manager of EDF Renewables México and Bruno Riga, Country Manager of Enel Green Power Mexico. Tovar, spearheading the French energy multinational, acknowledged that there is “tremendous uncertainty” in the sector as a result of numerous regulatory changes and measures in recent years. “This poses a risk for existing investments but also for potential new investment,” he said. “CFE is a crucial player in the energy market and will continue to be so. Private companies need to operate in the space that is granted to them,” agreed Moreno. “We will always try to grow further here and position ourselves where possible,” he said, noting that combined cycle and other large-scale power plants are key to Mexico’s future. “We maintain our commitment to Mexico’s energy transition. This includes public and private consumers, as well as communities throughout the countries. Our projects should benefit Mexican families first and foremost,” said Pérez. He noted that EDF Renewables adapts quickly to changes in the sector but that it has also learned to be patient. “Of course, rules can change but they should not be applied retro-actively,” he pointed out. Enel’s newly appointed Country Manager Bruno Riga started his speech by acknowledging Mexico’s great renewable potential. “It is a country in which we want to continue to invest,” he asserted. Despite momentary challenges, Riga concurred that a longterm perspective is crucial for Enel. “We are all lucky to work for companies that have a long-term vision. Problems can always arise in the short term but we need a clear vision of where we want to go.” After all, the advancement of renewable energy can

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no longer be halted. “Renewable energy is not just the future; they are already very much present,” Riga added, pointing out the growing demand for electromobility.

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from the

Q: How has Iberdrola adapted its operation in Mexico as a result of the pandemic? A: At Iberdrola México, our main priority is guaranteeing our employees’ and suppliers’ health and safety. This is why we have increased our security measures in all of our plants and offices to maximize the prevention of possible infections in our facilities. Some of these measures include, to name a few, celebrating weekly meetings with our health committee and installing sanitary filters with temperature-measuring stations at every entrance of our plants. These safety measures are also extended to our contractors and to any other visitor. Also, we have urged most of our collaborators, especially those considered to be population at risk, to work from home. Employees who, by the nature of their duties, must attend to one of our offices or power plants are being constantly tested for COVID-19 and are always required to wear face masks and antibacterial gel. We have also set up a special telephone line to provide 24/7 attention to employees or their relatives diagnosed or suspected of having COVID-19. All these actions are being reinforced through our internal communication channels so that our collaborators can have all the information they need about prevention of infections and what to do in case of testing positive to COVID-19. Q: In what sense has the company adapted its social approach

Enrique Alba

to best meet Mexico’s needs, such as with its support against COVID-19 and the ‘Lights of Hope’ program? A: As a socially responsible company, we know that a very close

Director General Iberdrola Mexico

collaboration with the public health authorities is needed to better face the pandemic. Therefore, we started an ambitious program of donations of medical supplies all over the country, in which we invested MX$60 million. In 2020, we donated two million units of medical materials, such as surgical masks, antibacterial gel,

Spanish Utility Giant Shows Commitment to Mexico

ventilators, and face screens, to hospitals and public institutions in 19 states. We also donated 15,000 care packages with food and hygiene items to some of the most vulnerable families in rural communities in 11 states in Mexico. Another of our most important social programs right now is ‘Lights of Hope’, which consists on installing solar panels in households, schools, and health centers in rural areas that do not have access to electricity. For this project, we have destined an investment of more than MX$60 million to bring electricity to over 6,000 people. The project started in 2019 with the first stage at the Huasteca Potosina, in San Luis Potosi, where we installed solar panels on 48 households and three community centers. The implementation of the second stage of the program in this area will begin this year in March. ‘Lights of Hope’ was so well-received in San Luis Potosi that last year we decided to extend the program to Oaxaca, in the South-Southeast of the country. There we installed 95 panels in benefit of 400 inhabitants. The second stage of this project in Oaxaca will also take place later this year. Q: How is Iberdrola fostering Mexico’s sustainable development by providing the necessary energy behind it? A: Iberdrola is fully aligned with the Paris Agreement, with the commitment to reduce the intensity of CO2 emissions by 50 percent by 2030 and be carbon neutral by 2050. Currently, our photovoltaic and wind farms have 1,163MW of installed

capacity, which represents 11 percent of the company’s total capacity and places us among the leaders in the generation of renewable energy in the country. With the same objective and seeking to satisfy the needs of the industry in Mexico, we developed Smart Solar, an intelligent solution, which aims to help companies have the benefits that photovoltaic systems bring within their facilities, without the need to make heavy investments required for this type of projects. With this solution, Iberdrola México, with its own resources, designs, builds and installs the photovoltaic system on the property of the companies, and the energy generated will be used for self-consumption. In this way, companies ensure the consumption of renewable energy, avoiding the technological and financial risk associated with the implementation of this type of projects, allowing them to continue focused on their business Q: What sets Iberdrola apart for clients in the C&I sector looking for their energy supply, either through PPAs or with the Smart Solar solution? A: Iberdrola Mexico has been supplying electricity to the Mexican industry for more than 20 years. During this time, we have always been focused on offering competitive and environmentally friendly energy solutions, custom designed so that our clients can save on electricity and achieve their sustainability goals. We have an installed capacity of more than 10,500 GW with 26 power plants located in 13 states. We supply energy to more than 3,500 clients in different industries all over the country, always offering personalized attention to adapt our services to our clients’ specific needs. Q: How is the company progressing with the Cuyoaco project in Puebla, and what are its characteristics? A: Cuyoaco is Iberdrola’s third PV power plant in Mexico and its first in the state of Puebla. This project is operative since last December. It has over 720,000 thousand solar panels in an area of more than 703ha, an area equivalent to putting together 390 football stadiums. Cuyoaco has an installed capacity of 200 MW and will help reduce the emission of more than 145,000 tons of CO2 each year. During its construction, this project generated 1,200 jobs, of which almost 40 percent were occupied by people local to this region. As part of our commitment with the wellbeing of all the communities near our facilities, we also set in motion a social action plan to benefit the inhabitants of the area with activities such as the reconstruction and maintenance of roads, the construction and repairing of public spaces and the impartation of workshops to help boost the work skills and education of the population.

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Expanding the Potential of Mexico’s Baseload Fuel Due to the inherent benefits of natural gas, demand from both CFE and private industry continues to rise. Imports reached a record high in 2020, climbing to 5.9 bcf/d on June 10, according S&P Global Platts. Amid the unabated growth in demand, challenges are emerging. In particular, infrastructure is at a tipping point, and therein lies the opportunity. PRODESEN 2020-2034 shows that Mexico relies heavily on natural gas to fuel its power production, with gas-fueled combined cycle plants alone representing 38 percent of installed capacity. How this percentage will grow relative to other energy sources remains to be seen, yet the government’s inclusion of combined cycle power plants in its recent infrastructure packages and development plans guarantees that capacity will continue to expand. SENER also expects that domestic demand for natural gas will increase until at least 2031. Growing demand among industrial consumers poses a further challenge to be met by Mexico’s distribution infrastructure. In the Mexican automotive sector, for instance, companies such as General Motors and Volkswagen use natural gas to provide power to their production facilities. Natural gas can be used as a lever toward development as well, says Tania Ortiz, Director General of infrastructure giant IEnova: “Mexico is an exporting and manufacturing economy. Providing an adequate energy supply is crucial to the country’s growth and hence, the creation of jobs for its citizens.” Importing natural gas has also become easier in the past year, as several pipeline projects were completed successfully. The Wahalajara-system, for example, was finalized with the addition of the 0.89 bcf/d Villa de Reyes-Aguascalientes-Guadalajara (VAG) pipeline, connecting Texas’ Permian Basin production area with Guadalajara. The US Energy Information Administration (EIA) projects that imports will increase further. The Sierrita pipeline expansion is another example of such an expansion, allowing for wider access to natural gas in Mexico’s northwest. In other areas, players like Mirage Energy are planning to expand the San Fernando-Cactus pipeline to the benefit of industrial parks in Puebla. Nevertheless, much work remains to be done. “Mexico will need more physical pipelines to interconnect the main pipelines that already exist in the country,” said Alberto Escofet, Country Manager of Enagás, in an interview with MBN. Whether Mexico should produce its own natural gas has also long been a discussion within the country’s energy sector, where the economic argument for cheaper importation has long prevailed. Yet, several industry experts disagree with this approach. Read the complete article

“Mexico should have been producing its own gas for a while now,” said Escofet.

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from the

Q: What was your mission for AMGN after you became president in late 2020? A: The natural gas industry has always been committed to Mexico. As president of AMGN, my objective is to contribute to the achievement of the country’s goals and to maintain a permanent dialog with the sector’s authorities, as well as to promote investment, bearing in mind that 2020 represented a challenge for all countries due to the COVID-19 pandemic. Economic reactivation in the short and midterm is key. Q: How has AMGN approached social responsibility during the pandemic? A: For our affiliated companies, the focus was to guarantee the safe and continuous gas supply to all Mexican citizens, as well as to ensure the safety and well-being of all our workers, especially under strict sanitary protocols. Since we are an essential activity, it was important that the work did not stop. Similarly, it was a priority to guarantee transport, commercialization, distribution, storage, Vehicular Natural Gas (GNV) and the supply of materials that keep the industry’s infrastructure operating during the contingency for the benefit of homes, commercial and services companies, as well as public transport.

José García

Q: How can AMGN help to prevent natural gas shortages in Mexico?

President of AMGN

A: It is important to point out that the shortage that occurred in Mexico in early 2021 was an extraordinary event for North America. It was the first shortage in over 100 years. Natural gas has positioned itself in Mexico as a lever for development, for industries, small businesses and a growing number of homes. It

Investment, Talks Lead to New President’s Agenda

is important to push storage policies to prevent situations like these from happening. It is also necessary to have a reliable system of pipelines that allows us to bring natural gas into the entire country and generate economic development, investment and employment opportunities. We still have a great deal to do, working together the three levels government and the industry to bring natural gas to the entire country. Q: What role will the private sector play in the development of Mexico’s natural gas market? A: The companies in AMGN are committed to the country, they work together with the authorities to bring natural gas to more people, while boosting economic development across the country. Our priority is to contribute to the use of natural gas because it is a fuel that is eco-friendly, it is very safe and it stimulates competitiveness. Q: What will AMGN’s direct priorities be for 2021?

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A: We will work and invest in Mexico, mainly in projects that will allow us to deliver natural gas to the southeast of Mexico and boost the region’s economic development. In addition, we will continue supporting the areas that already have a natural gas supply.

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Highlights

Natural Gas to Boost Mexico’s Development Diana Piñeda Partner at González Calvillo

Areli Covarrubias Commercial Director at IEnova

Hector Moreira Commissioner at the National Hydrocarbons Commission

José Aparicio CEO of Siemens Energy Mexico

Aldrich Richter Managing Director of MAN Energy Solutions Mexico

Alma Flores Expert in Regulation

atural gas is a transitional resource that is allowing Mexico to go from fossil fuels to renewable energy. However, this transition does not need to move too fast and the country can take advantage of this resource to boost its development. This was one

of the conclusions reached during the panel “From Source to Consumer: Gas Distribution and Infrastructure.” Experts agreed that natural gas is and will be the most important resource for generating energy and that recent blackouts have demonstrated the importance of improving the country’s energy security. The panel was moderated by Diana Piñeda, Partner at González Calvillo. It featured Areli Covarrubias, Commercial Director at IEnova; José Aparicio, CEO of Siemens Energy Mexico; Aldrich Richter, Managing Director of MAN Energy Solutions Mexico; and Alma Monserrat Flores Estrada, Expert in Regulation. Covarrubias explained that in the last 15 years, Mexico has made an important effort to strengthen its infrastructure. “Ten years ago, we had very restricted systems and natural gas could only be used for specific industries and areas. Today, we have a completely different panorama.” Covarrubias said that to increase Mexico’s energy security, the country has to diversify its energy sources and improve the current natural gas infrastructure to meet national demand. Aparicio, emphasized that natural gas remains the main resource for energy generation in Mexico. “If we add energy storage to our power plants, based on combined cycle technology, we can help prevent blackouts by ensuring stable energy around the clock,” he said. Richter highlighted that natural gas is a transition resource from more polluting resources to renewable energy and explained that the Mexican transition could last a long time, which is the perfect opportunity for the country. Many countries have joined the natural gas trend, as renewables have the problem of intermittency. However, these problems can be solved by incorporating a sophisticated operator system that predicts these fluctuations or by having robust storage infrastructure. Flores Estrada emphasized that natural gas is the most important resource for the development of the Mexican economy. There have been many efforts made by the

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government to improve the natural gas supply problem. “However, we need to increase them to meet the demand,” she said.

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Q: What was Naturgy’s experience in 2020 and what are its main objective for 2021? A: Without a doubt, 2020 was a challenging year for people, companies and for all sectors of the economy. We are convinced that in extraordinary situations like that which we are living, having access to natural gas is essential for businesses, homes and industries alike, in terms of competitiveness, as well as comfort and safety. We have always guaranteed continuity in our service, which means the distribution of natural gas to our customers. In 2020, we offered a free supply of natural gas to all public hospitals, which were connected to our distribution networks during the two most complicated months of the pandemic. Naturgy and its collaborators contributed with a donation to the Mexican Red Cross, destined for the purchase of medical supplies. We also offered one year of value-added services to clients who were among the frontline responders against the pandemic, such as doctors, nurses and the police. For 2021, our main focus is to provide our customers a safe and modern service. For this reason, we have made significant investments in technology that allows our clients to use their cellphones to consult and pay their bills conveniently. We are also offering our service to potential users in areas where we

Alejandro Peón

already have a presence to provide them with access to safe, convenient and modern energy. Another of our objectives is to continue promoting

General Director of Naturgy Mexico

vehicular natural gas for state and municipal governments in Monterrey and Mexico City. These efforts will improve the competitiveness of public transportation and improve air quality. In addition, we will continue to promote the supply of energy solutions for companies to optimize their consumption

Gas a Natural Enabler for Mexico’s Development

and energy savings. Q: How did Naturgy adapt its strategy to the unforeseen gas shortages Texas suffered due to extreme weather conditions? A: We collaborated closely with the CENAGAS and with the suppliers of natural gas molecules to manage the situation caused by weather conditions in Texas. We also maintained close communication with the industry’s main consumers to reduce consumption as a preventive measure. This helped guarantee supply to strategic facilities and homes connected to our distribution networks. Q: How will the company’s plan to use five-year bonds on the BMV benefit your future strategy in Mexico? A: These bonds will improve our debt structure with better market conditions, extend its life average and develop distribution network expansion projects in areas where we already have a presence. Q: How do natural gas projects like those Naturgy promotes impact Mexicans? A: We are convinced that natural gas projects can provide a higher quality of life and this is done by reducing inequality through the development of businesses and industrial and

economic development. It has been shown that states with access to natural gas have a stronger development than states that do not have access to this fuel. We are focusing on strengthening our presence in areas where we already have a distribution network. We believe that by connecting more users we will achieve a stronger regional development through the supply of natural gas. Q: What differentiates the social focus of the company in Mexico from its competition? A: Companies in the energy sector, especially natural gas distributors, are aware of the positive impact they can have on all sectors of society. In addition to the intrinsic potential of energy, we have developed action plans to benefit areas where we have distribution networks. These plans cover topics such as proximity to clients, creating opportunities for professionals, economic benefits for local suppliers, improving environmental impacts and identifying energy vulnerability.

“

We believe that by connecting more users we will achieve a stronger regional development through the supply of natural gas”

As part of our Social Responsibility Policy, we help people who have been affected by this global pandemic. In this regard, we carry out actions to support medical personnel who are combatting COVID-19 on a daily basis. First, we donated MX$1 million (US$49,000) to the Red Cross for the purchase of medical equipment. One-third of that was contributed by our collaborators and two-thirds by the company. Second, for two months, we provided our natural gas service for free to more than 60 public hospitals that are connected to our distribution network. Third, we launched the “We take care of your energy” initiative. The initiative grants one free year of our service and maintenance for the frontline responders who happen to be our customers. We are committed to Mexico. Therefore, we want to reach more people and introduce efficient, affordable, environmentally friendly and safe energy to families, shops and industries.

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Storage in its various forms is not a new topic for the global

Energy | 188

What Will Make Mexico Truly Competitive in Energy Storage?

energy sector. In many countries, storage is already being widely implemented. In Mexico, however, there is a lack of a robust regulatory framework and little recognition of the auxiliary services that storage can provide. Yet, a few landmark examples of storage do exist. Small-scale technology is catching up fast as well. Mexico Energy Review asked industry experts where Mexico still needs to make progress in order for storage to break through in the market.

It is exciting for the company to start introducing battery backup systems to our projects in Mexico. One of the key components for batteries is the recognition for capacity, or capacity payments. This is something we do in the US, where it is a straightforward process. In Mexico, battery systems are not yet included in the capacity recognition structure. We will work with CRE and other authorities to make sure that this will be included. The whole issue with renewable energy is that it is intermittent. That has

Mario Pani Regional Manager Latin America at BayWa r.e.

been the main issue driving SENER’s reliability policy. But this issue can be resolved fairly easily. Therefore, we will be aggressively pursuing battery systems in Mexico for largescale solar.

There are two main factors. First, the learning curve on the customer side. They are becoming aware that such solutions exist and how their business could benefit from them. Second, the Mexican regulatory agency CRE has not defined the prices in Mexico’s spot energy market for ancillary services like frequency regulation. Once they define this, then you will have more companies wanting to add storage to their portfolio in order to participate in the market and increase their revenue streams. I would expect the energy storage trend to increase for projects

Arturo Zarate Global Business Development Energy Storage at Dynapower

in Mexico. As prices come down on lithium-ion batteries because of the increased volume of their use in electric vehicles and energy storage projects, it will become more interesting to developers in Mexico as well.

We see potential in implementing hybrid solutions, including storage in Mexico, although it might be some time before we see a deployment of this type of solution in the country. To develop storage solutions, more robust investment in transmission and distribution, along with a robust regulatory framework, are needed. Once this happens, the market can start implementing more complex solutions in the country. Storage is becoming an increasingly viable business in the world.

Jack Weisz Commercial Director Latin America of Onshore Wind of GE Renewable Energy

It will be a key enabler for the deployment and penetration of renewables in Mexico as well. Mexico already has some solar and wind projects that have incorporated battery storage technology.

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Q: How did Grupo México become involved in the country’s energy sector? A: Grupo México got involved for the very first time in the energy sector with the construction of a combined cycle power plant in Sonora. The company began to generate its own energy with a 255MW power plant. During the construction of the first plant Grupo Mexico decided to construct a second plant next to it. Today, we have a combined cycle plant with a total of 500MW. A natural gas pipeline was built to bring the gas in directly from the US to the plant. Fortunately, the project is located close to the border, meaning that a relatively short pipeline of 110km would be enough. Q: How did the company get involved in renewable energy? A: While we were building this power plant, the company goal was to innovate and get involved in renewable energy generation. Clean energy is the future and we wanted to reduce our carbon emissions by supporting our Oaxacan projects with a wind farm. This resulted in the construction of a 74MW wind farm. We also built a small solar system to provide energy to our corporate offices in Hermosillo. It has a capacity of 80KW and it is the first solar system to include heliotrope technology. This means the system follows the sun in two directions. It was an extremely innovative solution at the time, around seven years ago. Soon after,

Gustavo Ortega

the company donated photovoltaic systems to public schools in Sonora and some other places. We are now building a second wind farm in Fenicias, which is located in Nuevo Leon. The farm represents an investment of US$250 million and will have 144MW

Director General of Grupo México Energía

capacity that will be used for our own supply. Q: Where does the company see the best opportunities to generate its own energy?

Self-supply is the Name of the Game for Grupo México

A: I consider that with the changes we have been seeing in the energy regulation and the current uncertainty, identifying opportunities is somewhat limited. Grupo México Energía is still growing but we are focusing on the idea of self-supply. Entering the WEM to sell energy did save us money at the end. However, we would like to see this area more regulated. Currently, our operations continue but they are all under amparos and legal actions. Unfortunately, due to the situation brought on by the pandemic and the regulatory changes, we still have pending matters with CENACE and CRE, whose operations have been affected for several months now. With all the surprises we have faced, uncertainty has taken root in the sector. Q: How has the company been adapting its strategy to the challenging times in the sector? A: We are under the self-supply scheme and, therefore, we mainly consume our energy ourselves. We intend to keep that position. We are not considering to switch to the WEM (Wholesale Electricity Market). We know that other companies in the sector have had success there. Nonetheless, our goal is to be our own energy generator and provider under our own terms. However,

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if there were to be projects in collaboration with CFE, that would allow for some greater clarity regarding investment and we would be inclined to participate. This could be a significantly interesting opportunity in the area of transmission, which requires both new infrastructure and substantial reinforcement.

SPOTLIGHT

Energy | 190

GridSolv Max Storage and Gems Energy Management Systems Renowned technology group Wärtsilä provides energy storage for the 50MW Eolica Coromuel wind farm located in La Paz, Baja California Sur. The system will deliver an output of 10MW and help the wind farm to meet strict grid code requirements, while being maintained and monitored remotely to ensure optimal performance at all times. The storage system comprises the company’s GridSolv Max containerized solution for the core hardware assets of the energy system—batteries, a built-in safety system and air conditioning. The system is able to control the wind farm’s ramp rate, which enhances the site’s energy generation reliability and provides frequency control, as well as further capacity for the grid. The cost-effective GridSolv Max system significantly boosts energy density and enhances energy reliability. Due to its innovative architecture, it is easily installed and integrated for any size or type of storage application. To boost the storage system’s capabilities, Wärtsilä applies its smart energy management system, GEMS, which connects energy assets to electricity markets and adjusts itself based on the market’s conditions through real-time optimization. In addition, GEMS supports the management of fluctuations in energy outputs, which can be caused by the wind’s intermittent circumstances. By directly addressing the customer’s energy needs, energy storage technology ensures that energy assets are future-proof.

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Being Clear About the Path Forward Enrique Ochoa | 25/03/2021 Deputy for Michoacan and Secretary of the Energy Commission in the Chamber of Deputies

Unsteady Rules Put Community Acceptance of Projects at Risk Luis Vera Managing Partner of Vera & Asociados

Keeping a Closer Eye on the Energy Counter-Reform Edmond Grieger Partner at Von Wobeser y Sierra

Oil & Gas The Mexican oil and gas industry was not immune to the various circumstances that have affected the sector globally for the last 12 months. However, it has been shielded from the worst of this situation thanks to its position as a priority for private and public authorities. The Mexican government declared the oil and gas sector an essential economic activity and decreed that its operations were to remain uninterrupted throughout the pandemic. Major operators also made significant commitments to their projects in Mexico despite the necessary delays that their calendars had to absorb for their financial models to remain stable. Many of the sector’s regulators were also able to clear the backlog that shutdowns left, sometimes achieving faster response times with reduced personnel and fewer material resources. Thanks to these and other efforts, Mexico’s oil and gas value chain has remained productive throughout this difficult time. PEMEX has even managed to address the necessary reduction of its debt while stabilizing production levels. The government’s plans for the NOC remain as ambitious as ever and 2020 showed that those plans might be feasible if the company can survive unexpected of setbacks. 2020 proved to be a remarkable feat of resilience and strength for all of the sector’s participants and stakeholders. What remains to be seen is whether or not a complete arc of recovery and renewed growth can be reached.

Oil & Gas

195 Analysis Surviving Multiple Crises, Thriving in the Aftermath

196 View From the Top Warren Levy | CEO of Jaguar E&P

197 View From the Top Andrés Brügmann | Mexico Country Manager of Fieldwood Energy E&P Mexico

198 View From the Top Emry Hisham Yusoff | Mexico Country Head of PC Carigali (PETRONAS)

200 View From the Top Alberto Galvis | CEO of Citla Energy

201 View From the Top José Luis González | Head of the Supervision, Inspection and Industrial Surveillance Unit at ASEA

202 View From the Top Merlin Cochran | Director General of AMEXHI

203 View From the Top Gerardo Clemente Martínez | President of AMGE

204 Spotlight ROC Asset Management’s Place In A New World

205 View From the Top Eckhard Hinrichsen | Mexico Country Manager of DNV

207 View From the Top Verónica Fregoso | PMC Platform Manager of PPG Comex

208 Content Links

Oil & Gas | 195

Surviving Multiple Crises, Thriving in the Aftermath The hydrocarbons sector might have been the only segment to face historically dire circumstances that were not exclusively connected to the pandemic. The drama playing out in the sector was clearly evident when the price of oil turned negative in the spring, led not only by lower demand levels brought by the pandemic but also by a global production crisis that international organizations were still attempting to mediate. The world was privy to the sight of tankers moored near ports all over the world, waiting for a hypothetical future date at which offloading would prove economically feasible, let alone profitable. Mexico’s economy was hit particularly hard by all of these circumstances due to the role that PEMEX plays in its public finances. By the time the production crisis was coming to an end and after a politically contentious negotiation process, the Mexican government had to let Mexico join the list of oilproducing countries agreeing to a decrease in production for the sake of the market’s health, a particularly bitter pill for this government to swallow given that a central aspect of its strategy was based on stabilizing PEMEX’s historic production decrease. Even in the midst of the crisis, however, MBN experts pointed to an imminent recovery. “Everybody is affected by the crisis and it would be unwise for anyone to say they know the outcome. Unquestionably, there is huge competition now to gain a large part of the global energy market. This is happening in response to the impact that the rise of the US shale market had on global prices. What has happened is a direct expression of that competition and what I perceive, compounded by the effects of COVID-19, is a huge market overreaction,” said QRI Chairman and CEO Nansen Saleri in April 2020. According to Saleri, a price below US$20US$30 would be unsustainable in the midterm due to the world’s energy demand of around 95-99MMb/d. “A sustained price in this range would erode the global market’s ability to deliver this required volume. My own view is that the markets will self-correct and prices will return to a number above US$30,” he said. Despite the fact that companies in the industry have been able to restructure their activities to increase their resilience through these difficult times, it is also true that the actual recovery arc of the industry, in terms of market indicators, continues to be slow. “So far, the government has been able to fulfill its price commitment because, after the world oil market crisis of April 2020, demand has not fully recovered and international prices, which were down for several months, are just beginning to recover as the economy recovers too,” stated former PEMEX independent board member and current adviser to the Senate in matters of Energy Fluvio Ruiz Alarcón. 2021 is certain to be defined by the successes of public and private organizations in the industry that had an opportunity to learn many lessons in 2020, according to Cochran. “The last time we had this price drop it was due to increased production from shale producers. When prices dropped, everybody thought that the shale Read the complete article More about this topic

industry was dead. Shale managed to thrive, but it did so within the new reality of oil prices. This is the same for oil: it will thrive but it must reinvent itself.”

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Q: What are the latest updates on Jaguar’s operations in Mexico? A: Last year started with a plan to pick up a rig in March and then a second and a third rig over the course of the year. These plans had to be changed due to COVID-19 and the need to modify operational processes safely. We picked up the first rig in March, just before the shift to remote work began, and kept the rig drilling throughout the year. We did not end up picking up the second rig until November. We were able to complete six wells by the end of the year. Our plans have effectively been delayed by a couple of months. Our original plans remain in place and in 2021 our drilling campaign will ramp up. The results from 2020 were successful. The most important achievement for Jaguar was a complete year LTI-free. We had not drilled with these rigs before and we incorporated all the different and new service providers into our ranks, which was a great feat. We were also able to improve drilling times throughout the year and have seen some promising initial results. Only one is producing and tied in but we are testing others. We have focused more on maximizing production in existing fields. During 2020, we reactivated a number of wells. This allowed us to more than double our production. Given that these fields had legacy infrastructure, we are pleased with the result. Aside from this, we have worked hard to consolidate our position with

Warren Levy

the communities in our project areas, as well as accelerating the work we are doing on the environmental side. 2021 is a key year for Jaguar to deliver exploration results.

CEO of Jaguar E&P

We have also prepared a development program that we are in the process of permitting with the government that mostly encompasses our acreage in the Burgos Basin. The goal is to raise production via development wells and additional facilities.

Jaguar: Pandemic Delays Used to Refine Planning

Q: What will be the company’s next steps with its onshore blocks? A: We have just finished the drilling on Pikit and the VC02 block in Veracruz and are in the process of completing and testing the well. We have three operating areas that are divided by scope. The northern part of the Burgos Basin, which includes Blocks 4, 5, and 7, is well characterized and includes infrastructure. Here, we are doing evaluations and extensions ahead of small incremental investment. Blocks 8 and 9 in southern Tamaulipas are considered highimpact exploration, including new geological play concepts. These blocks are higher risk and higher reward, with potential of reservoirs of 1TCF of gas. We are evaluating results from one well we drilled on these areas last year. In Veracruz on Blocks VC02, VC02 and TM01, we are looking for new play concepts and proven hydrocarbon systems. There are both shallow and very deep prospects. The challenge is assuring that we have evaluated enough of the shallow prospects to justifying taking the depth risk. In Tabasco, we have two blocks in the Sureste Basin with well-known play types. Because of the complexity of accessing

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these two blocks, PEMEX did not look at them. Nevertheless, Jaguar believes the potential is there.

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We want to get one well drilled on every block. This is a priority and will help us workout any pending technical issues in the plan.

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Q: How did Fieldwood adapt to the circumstances of such a difficult year? A: One of the most important lessons that we learned was to improve the adaptability of our operational processes. This includes offshore operations of the two drilling rigs, construction activities taking place at fabrication yards and the construction and installation of subsea pipelines. We concentrated our efforts on protecting the health of our employees and contractors. We went from not knowing anything about the COVID-19 disease to adapting our processes of embarkment, disembarkment and medical evacuation to deal with COVID-19 on a daily basis. We are incorporating new information and updating our procedures in real time. Advances in testing technology were remarkable. The availability of rapid antigen tests in Mexico allowed us to speed up our operations by eliminating quarantine periods for embarkation. Fortunately, we have not stopped operations throughout the entire pandemic. Q: What do you consider to be the most important differences between 2021 and 2020, from an operational viewpoint? A: During the first half of 2021 we will focus on the drilling, construction and installation programs in Pokoch and Ichalkil

Andrés Brügmann

in order to achieve commercial production operations during the second half of 2021. Every day, we work relentlessly toward achieving this goal and to reduce the impact that COVID-19 has on our operations and suppliers. The pandemic

Mexico Country Manager of Fieldwood Energy E&P Mexico

is not over yet and we expect the challenges to continue this year and we must continue to be vigilant and react quickly. Despite vaccination efforts, we expect to see more COVID-19 cases during 2021, therefore, our number one priority, to preserve the health of our employees and contractors, is to

Surviving 2020 to Produce in 2021

ensure that everybody follows strict testing and isolation protocols to prevent contagions. 2021 will represent a historic milestone for the Ichalkil and Pokoch projects. After five years of intense work and significant investments required to appraise and develop these fields, we will start the early production phase of the project. Q: How would you describe your experience throughout the drilling of the Ichakil-4 and Pokoch-2 wells? A: We began drilling these wells just after the pandemic was declared in March 2020. We decided to adapt our drilling operations to that circumstance, instead of stopping and deferring operations altogether. We also modified our financial plans to reflect the incremental costs related to COVID-19. Currently we have completed drilling Ichakil-4 and Pokoch-2 and we started drilling our Ichakil-6 well. In addition to COVID-19 challenges, we also had to face significant challenges characteristic of drilling in deep and high temperature environments with variable pressure regimes. Fortunately, we were able to overcome these issues successfully.

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The structural design of the wells required for our Cretaceous and Jurassic objectives is quite complex. During 2021 we expect to complete four wells (our original two appraisal wells and our two development wells), bring production online and continue drilling Ichalkil-6.

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Q: How is PETRONAS positioned in Mexico? A: PETRONAS is an energy and solutions partner that was established in 1974 with a reputation as a trusted and successful operator across the globe. The company first entered Mexico in 2015, through its Mexican affiliate PC Carigali Mexico Operations (PETRONAS Mexico) and we are now the second-largest acreage holder in the country behind PEMEX, with 10 exploration blocks across Mexico’s three main basins, with a total area of approximately 22,000km2. PETRONAS’ entry into Mexico’s deepwater arena provides a strategic fit for our business growth, focusing on upstream exploration opportunities and portfolio with potential for longterm value. At the same time, it demonstrates our deepwater capabilities. Mexico is very important to us as it forms part of our extensive search for resource addition. Q: What is the makeup of the company’s upstream portfolio in Mexico and how have these positions progressed? A: PETRONAS Mexico has 10 blocks in the country, five as an operator and the other five as a partner. These blocks are within the main three basins in the Gulf of Mexico: one block in the Perdido Basin – Block 4 (with 30 percent participation (PI)); three blocks in the Mexican Ridges – Block 10 (40 percent PI), Block 12

Emry Hisham Yusoff

(60 percent PI) and Block 14 (50 percent PI); and six blocks in the Salina Basin – Block 4 (50 percent PI), Block 5 (30 percent PI), Block 6 (50 percent PI), Block 25 (100 percent PI), Block 26 (100 percent PI) and Block 29 (28.33 percent PI).

Mexico Country Head of PC Carigali (PETRONAS)

PETRONAS Mexico’s entry into Block 4 - Perdido Basin in Mexico’s deepwater provides a strategic fit for our business growth, focusing on upstream exploration opportunities with potential for long-term value. This opportunity allows us to extend our portfolio

IOC Uses International Knowledge to Push Offshore Progress

into the prolific Perdido Basin. Our partnership with CNOOC will bring together our capabilities and expertise for a successful collaboration toward developing this basin. We began the drilling campaign for the Moyote-1 well in Block 6 as per plan together with our partner, ECOPETROL. We successfully spudded the well in mid-November 2020 and the exploration campaign was estimated to last for approximately 90 days. Q: How has PETRONAS invested in Mexico so far? A: PETRONAS Mexico has invested substantially in Mexico as the country holds substantial material opportunities and is largely underexplored. We are pleased to be one of the early movers in this basin and look forward to growing our portfolio here. Currently, PETRONAS Mexico is one of the most active oil and gas companies in the country. To date, PETRONAS Mexico and its partners have completed drilling of five deepwater exploration wells and two more wells will be spudded in the near future. As for future plans, PETRONAS Mexico will focus its investment in the 10 Blocks and will continuously look for opportunities that suit its portfolio, governed by our Statement of Purpose and Sustainability Agenda that are aligned with SDGs 2030. PETRONAS Mexico is the first IOC to establish a drilling base in the port city of Coatzacoalcos, Veracruz. Home to the Pajaritos petrochemical complex, the city’s strategic location and infrastructure will become even more relevant with the Trans-

Isthmus Corridor project that will connect the Gulf of Mexico and the Pacific Ocean. PETRONAS Mexico also operates from Port Pajarito for its first operated deepwater well Yaxchilan Este and continues to operate for the Moyote-1 shallow water well. Mexico is one of PETRONAS’ focus countries and we aspire to drive long-term business value creation through responsible investments here. We hope to continue building our portfolio of resources as well as leveraging emerging opportunities toward supporting and growing together with Mexico in realizing its energy aspirations. Q: How did PETRONAS aid local communities during the pandemic? A: When the pandemic hit Mexico, PETRONAS Mexico contacted the mayor of Coatzacoalcos to seek perspective on the potential problems that the community would face while fighting COVID-19. The mayor expressed two major concerns: the lack of infrastructure to ensure access to clean water to the community and the need for a large quantity of PPE for health personnel in Coatzacoalcos. Guided by our sustainability lens and emphasis on positive social impact, our primary focus was the wellbeing of the Coatzacoalcos community, the area of our operations. In collaboration with Coatzacoalcos city’s Ministry of Economy, PETRONAS Mexico contributed five water pumps to the city, which allow the local government to supply clean water to 80,000 people. With access to clean water, the community can curb the spread of the virus through basic hygiene measures. In addition, we also collaborated with IMSS and contributed 80,000 units of PPE, comprising of facemask, face shield, gloves and coveralls, which were distributed to the Coatzacoalcos health sector, including hospitals, in Coatzacoalcos. We are also involved in various social programs unconnected to the pandemic. PETRONAS Mexico recognizes that students are the future of the community and seeks to enhance the national education agenda to meet the expectations of the job market, in line with our sustainability lens and positive social impact, combined with SDG 4 quality education. For this reason, PETRONAS Mexico aims to support the national education agenda by enhancing the students’ potential, which will help them to meet the current expectations of the working market. On Dec. 17, 2019, PETRONAS Mexico organized an event with stakeholders and students called “PETRONAS: Connecting with Community and Academia in Coatzacoalcos” where a series of presentations showcased PETRONAS’s activities in Mexico, and presented our technical knowledge-sharing on topics addressed to the student community.

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Q: How did the events of 2020 change Citla Energy’s vision regarding growth and development? A: Our strategy focused on building a diversified portfolio in Mexico has remained intact, supported by our investors. We aim at pulling together a set of assets distributed across different stages of maturity, from exploration and appraisal to field development and production. 2020 provided challenges and obstacles to the entire industry, and we have been no exception, but these problems have not changed our strategy. However, our activity plans were adjusted following the initial well results coupled with the effects of COVID-19 and 2020’s extreme oil price environment. Some wells that we expected to drill in 2020/21 were rescheduled. Another relevant change was around the expansion plans of our portfolio. The suspension of new bidding rounds and tenders, including PEMEX’s farm-outs meant that such growth plans had to be equally adjusted. Q: What lessons did you learn from the three wells you drilled in blocks seven and nine? A: We learned a lot from these wells. We modified the ranking of the remaining prospects according to new technical information. Each well drilled in the area helped us to further understand the regional geology in a province where few wells have been drilled, and information available is scarce. Through this process, we

Alberto Galvis

have significantly enriched our knowledge of this basin. Q: What synergies have you created with partners ENI and Cairn?

CEO of Citla Energy

A: We are proud to have formed a partnership with exemplary companies such as ENI and Cairn. They have demonstrated an excellent array of skills and technical competencies in areas such as geological analysis and operations management. All their

Key Operator Reschedules but Does Not Falter

experiences in operations and activities in the world make it back to these blocks in the form of applied expertise. This expertise has played an important role when facing challenges in 2020. Q: What is the drilling strategy for block 14? A: We continue to be very optimistic about block 14. The block already presents a discovery, so our studies are focused on demonstrating the commercial viability of that discovery and identifying additional prospects in this block that could potentially yield additional discoveries. Still a lot of work must be done before reaching a drill decision. Q: To what degree did the events of 2020 determine whether a discovery or prospect is commercially viable or not? A: I would argue that it changed very little. There is always the discussion around future oil prices, but history teaches us that it is always fluctuating, so it is best to plan conservatively. In addition, despite the accelerated energy transition, hydrocarbons will be needed for decades to come. In this sense, we still analyze the commercial viability of discoveries with the same eyes.

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Having said that, one element that has emerged in the south east region is the discovery of several mid-size fields, which creates the opportunity for integrated developments and hubs. Such type of opportunities can help reduce the minimum field size required for commercial viability.

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Q: What role has ASEA played during the pandemic as a regulator for the oil and gas industry? A: We were successful in adapting to an ever-evolving timeline. At the beginning of the pandemic, we were told that all activity would be regularized by May at the latest. We all know normality was not restored by then. However, we began adopting online modalities and receiving all the training necessary to manage them. These efforts allowed us to continue operating, executing evaluations and issuing authorizations. Now, these online modalities are quotidian and, for the most part, we have been able to maintain a reasonable continuity in our operations. During the worst times of the pandemic, we put together protocols that enabled us to open during certain days of the week and receive permit applications for the most demanding subsectors of activity within the hydrocarbons industry. Fortunately, this allowed industry entities to operate with legal certainty. Our regulation, inspection, supervision and surveillance departments were able to support operators throughout the industry’s value chain, from upstream to downstream projects, to make sure no shutdowns of their activities occurred. In that sense, I would say that we were a successful regulator throughout 2020. Q: What are the most important items in your agenda given the changes in leadership that the agency experienced in 2019 and 2020?

José Luis González

A: On March 1, 2021, we celebrated our sixth anniversary. We are considered the youngest regulator in Mexico, so we are experiencing a continuous learning curve. We are on our third

Head of the Supervision, Inspection and Industrial Surveillance Unit at ASEA

administration and on our third executive director. Our director’s agenda is simple: to keep our operations going. His main focus is to increase interdepartmental communications so that more projects can be addressed by the entire agency instead of by individual offices. He is also interested in addressing companies

A Framework to Maintain Industrial Safety Post-COVID-19

that might be experiencing anomalous incidents in their permitting and authorization procedures. In general, he wants us to target regulatory processes that were left inconclusive and that need to be addressed with updated standards and new procedures. Another focus is to broaden our channels of communications with companies and all regulated entities and stakeholders. Q: How was the regulation of the oil and gas sector affected by the federal government’s decision to prioritize its operational continuity as essential throughout the pandemic? A: We understood the centralization of the hydrocarbons sector because there was no other viable industrial engine for the country’s economy. At the same time, this fixation also represented a hard blow to the sector’s regulators. Industry personnel in all segments of its 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 that their 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

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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. Slowing down on one segment created ripples down the road that halted production continuity. This all proved incredibly demanding.

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Q: What were the most positive aspects of 2020 for your members? A: It is important to evaluate the state of our industry at the end of 2020. Regardless the pandemic, overall, the industry achieved important results: US$40 billion of approved investment and US$16 billion of executed investment. Almost US$1 million were invested on National Content. In 2020, the private industry presented six discoveries of resources and reserves have raised 40 percent. In fact, we hosted an event at that time where we talked to government officials, including senators, and explained to them the latest progress that our members have made with their projects and fields. Many people asked us about production levels but we emphasized that approximately 70 percent of our members’ contracts are still in their exploration phase. We chose to highlight metrics that are not only more relevant given the kind of development taking place at these fields but also due to the conditions imposed by the pandemic that affected 2020. Some figures included numbers on employment created by our members’ activities. Surprisingly, job numbers increased in 2020 when compared to 2019. We also have numbers regarding social impact and the benefits that originate from our members’ activities. Oil and gas contracts do not have strict stipulations or requirements when it comes to social engagement and community management, outside of local

Merlin Cochran

content requirements. I say this to illustrate the actions in support of social welfare that our member companies have undertaken are not the result of a need for contractual or regulatory compliance but because they understand that their long-term commitment

Director General of AMEXHI

to Mexico, especially in a year as difficult as 2020, needs to be expressed in meaningful ways. Q: What concerns your members?

The Light and Shadow of a Year Like No Other

A: One major concern was how to operate safely in this new normality brought on by COVID-19. Offshore platforms and vessels present unique environmental and spatial risks when managing personnel operations and activities, especially in regard to anticontagion industrial safety precautions and protocols. 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 in offshore environments, we have partnered with state governments and port APIs. Entities such as SENER, CNH and SE have also played a significant role in doing the work necessary to make this possible. Long-term uncertainty is another prevalent concern. This is not only based on observations of our upstream subsector or exploration and production activities but also, we are seeing rules change in this industry in a manner that is worrying. Many of our members’ contracts carry 30-year terms, some even 50 years. For the most part, operators have some degree of visibility into the future in terms of strategy and decision-making, provided the rules of the game stay the same. The ROI time frames that our members are working with target the long-term, so they are understandably

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concerned about the changing policies and rules happening in Mexico’s energy industry. In this regard, I acknowledge the work of SENER, which has been receptive to addressing these concerns, as well as to our requests for transparency and further information regarding the government’s intentions and plans.

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Q: How did you become involved in AMGE? A: I became a member of the association when I entered PEMEX, which was in January 1987. This means I have been a part of these organizations for the past 34 years. I had no idea what the association was all about when I graduated from college and began my career in the industry. As soon as I joined and became part of its activities, I became very motivated when I heard my colleagues promote the development of knowledge and expertise within our profession. Over the years, I have witnessed periods in which participation in the association’s activities has decreased, particularly in moments of difficulty for the industry in which everybody is looking for a new job or going back to school in between jobs. This is a common occurrence in an industry with a certain degree of volatility, as is the case with hydrocarbons. Q: What is the best way to address those variations in regard to involvement and interest? A: The association’s history goes back to 1958, when it focused on the much larger branch of geophysics. Over time, we became specialized in exploration geophysics, until we reached a point in which 80 to 90 percent of our activities were focused on oil and gas exploration through

Gerardo Clemente

seismic methods. Now that I have become president of the association, I am interested in seeing the association return to its general roots. I believe it is imperative that all of our young geophysicists who have just graduated from college

President of AMGE

have access to a variety of venues through which their talents and education can be applied and developed. We do not want oil and gas exploration, and its volatility related to factors like oil prices and demand, to become a bottleneck that limits the growth of these young professionals. We also

Mapping the Pandemic’s Impact on Industry Associations

have to consider that international trends point toward the eventual diminished of fossil fuels, although we expect the global economy to depend on these resources for quite some time. We also want to establish stronger bonds and networks with other associations and academic organizations to make sure we are providing these young professionals with as many opportunities as possible. We have to keep in mind that the association’s member pool is aging; the average member´s age is above 40. This is why student outreach and the creation of student chapters is so essential. Q: What are the most important items on your agenda as the association’s new president? A: To be honest, our most pressing matter right now is taking care of the association’s financing resources. Our main source of income is the Mexican Petroleum Congress (CMP), whose funds have been heavily affected by the pandemic. We expect finances to return to normal levels in 2022, at the earliest. Another issue that became increasingly relevant for us during the pandemic was the safety of our members. To avoid public gatherings, we have migrated to more digital and remotely

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managed modalities. We are using this time to generate educational material and organize workshops to generate alternative income. We also want to focus on educating young physicists on the value of promoting sustainability at worksites and in the sectors they work in.

SPOTLIGHT

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ROC Asset Management’s Place In A New World In many systems and configurations, ROCs are considered the central nervous system through which operational benefits are made clear to the end user. Before 2020, ROCs were already trending toward higher degrees of technological sophistication and maneuverability, especially as AI and IoT applications opened new possibilities for remote operations. However, after weeks and months of lockdowns to contain the COVID-19 pandemic, ROCs became the most essential tool to help managers maintain operational continuity. Premium service and technology providers with ROCs of their own enjoyed an enormous advantage over their competitors. A perfect example is Fugro’s world-class ROC in Aberdeen. Fugro’s clients could track the status of any service they recently contracted, such as the ongoing progress of inspections and surveys or the real-time status of ROVs on the ocean floor. Remote solutions could be offered through a minimal amount of bandwidth and additional equipment. More remote monitoring and management options translate into fewer onsite inspectors and managers, which became crucial during the pandemic. The remote operation enabled by Fugro’s ROC also has a sizable impact on the company’s carbon footprint, which is now considerably smaller. An increase in remote communication and decisionmaking also means fewer vessels and less travel for experts to specific on-site locations around the world. Alastair McKie, Fugro’s Director of Remote Operations for Europe and Africa, says that, “remote operations and the ROC in Aberdeen bring significant industry benefits in terms of operational efficiency, enhanced safety and the environment.”

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Q: Why did the company change its name from DNV GL to DNV? A: We are simply reverting back to the name we had prior to 2013. The DNV GL name has worked well over the last seven years but we want to simplify matters for our clients and other stakeholders and strengthen our brand. At the same time, we are shifting our outlook. We have a new strategy for 2021-2025 that we have worked on over this past year and will let us move strongly into the energy transition, following our clients along this path. Our oil and gas and energy sectors will be merged under one business line – Energy Systems – reflecting the decarbonization trend taking place in the world. The focus for Energy Systems will be to continue to service the oil and gas industry and the clients we have, as well as working in unison with the energy side of the company in overlapping areas, offshore wind being one example. The wind turbine expertise from energy and offshore expertise from oil and gas perfectly align here. There is a great deal of research going on within the company in relation to the energy transition. Hydrogen is one area where we are concentrating our efforts. We have a large research center in Spadeadam in the UK where we will investigate safety and other aspects of the distribution and

Eckhard Hinrichsen

domestic use of hydrogen. The project is funded in by the UK government and effectively we are building a small city, including streets with houses, where we are researching the use of hydrogen in homes as an alternative to natural

Mexico Country Manager of DNV

gas. Aside from the safety aspect, we are also looking at the impact of hydrogen on the pipe network, gauging embrittlement, and other potential problems. We have set our goals for sustainability within the country

DNV Goes Back to Its Roots, Shifts Outlook

and worldwide and that means that we want to be net carbon positive and power our offices with 100 percent renewable electricity by 2025. Q: What is the significance in carrying out a Frame Contract for different type of risk analysis for PEMEX PEP? A: We have been in Mexico for 25 years and have always offered risk analysis services. For the past 15 years, we have also worked with PEMEX PEP, under different umbrella contracts. However, these contracts covered specific regions and areas. This new contract covers all of PEP’s installations, which include the entire country, onshore and offshore assets. This is a huge scope of PEP installations and will require strong logistics planning. There is a great deal of work to be done here, as risk analyses need to be updated every five years as is required by SEMARNAT. Some installations are coming close to that five-year period so must be reviewed quickly. There are also some ASEA requirements involved, including well design assessments that are needed for their drilling permits. There is a wide variety of work to be done in parallel and that will be quite demanding. When we enter a new geographical region, we automatically look for opportunities within them and try to maximize these contracts whenever possible.

Q: How will DNV carry out classification, verification and independent analysis of BHP’s Trion FPU. A: The Trion farmout is pioneering in what is the first partnership of this kind between PEMEX and a private company, as well as the first deepwater development in Mexico. It made important news when it was signed and now it is coming to fruition. Our involvement comprises classification, verification of the topside systems and independent analysis of the whole unit. This will include revision of the hull, as well as navigation and safety systems. This will be done with colleagues from the maritime business area of the company. Meanwhile, the oil and gas specialists will verify and certify the topside installations and offer independent analysis of the FPU. The hull will be constructed in Asia and a pre-FEED competition is underway at present. This will decide the contractor and construction location. The type of FPU units that will be used are quite new in Mexico so we are excited to learn from the entire process. The main regulator is ASEA and DNV Mexico is approved as a Third Party for these types of project. But then there are various NOMs that will apply, and we will ensure that BHP is compliant. Some of these NOMs are old or even obsolete and they have not been written with deepwater in mind, so this poses a challenge. Our expertise in Mexico will help BHP, which only arrived in the country following the Energy Reform, to be aligned with all regulatory requirements. Q: What trends have you seen since the pandemic started? A: Remote inspections techniques that we developed even before the pandemic started have now been fully accepted by our clients and provided continuity to projects that otherwise would have been severely affected. We expect that this will continue even after the pandemic is over. Risk analysis many times requires multidisciplinary sessions and we are doing those remotely now, using special cameras. We have come a long way in how we go about these projects since the beginning of the pandemic. We suspect that working in the office will be reduced in the future as well, likely employing a hybrid approach, with some days in the office and some days at home. This will offer Mexico City colleagues that have long commutes some rest, which would be welcomed. DNV has some pilot projects underway in Germany and China and we will decide how to best implement this type of working structure before we apply it worldwide.

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Q: What methods does PPG Comex use to attract international companies that are not aware of the brand? A: We have two main strategies to attract customers. One is to leverage our relationships with different companies around the world. With previous clients, we can point toward the relationship we already have abroad and explain how we expertly execute our projects, whether in regard to coatings or painting services. Often previous clients look for us in Mexico because of the service support we offer: technical guidance, a professional service and, most importantly, availability of materials. The other scenario occurs when companies have no prior knowledge of PPG Comex. In this case, we can map out the projects that are happening in Mexico and find out who are the key players, then approach each stakeholder and demonstrate our capabilities, solutions and our technical guidance. All of these will impact our brand and create a very strong value proposition. Q: What is PPG Comex’s role in the Dos Bocas refinery? A: PPG Comex is proud to be the first company to supply specialized coatings for the Dos Bocas refinery. Our main role in the project is to help PEMEX to specify the best material for all areas while complying with national and international

Verónica Fregoso

standards, adding a value offer with technologies with a higher productivity that helps to accomplish with protection, execution and life expectation. Part of our involvement is to deliver training services to workers. These include onsite

PMC Platform Manager of PPG Comex

work, webinars and conferences that help to bring best practices, products and technologies up to the level of the international industry. At Dos Bocas, PEMEX required a company that had an advanced

Total Coatings Coverage Makes PPG Comex the Choice for Dos Bocas

expertise in specialized coatings so that dedicated solutions were used for the new construction. They also needed a company that could offer the local availability of those coating. The refinery is large and the quantity of coatings required is huge. We have seven facilities that are focused on the production of the coatings that will be used in Dos Bocas. We could also provide access to international technologies – not just national technologies – that would help the facility reach the standards they are looking for. PPG Comex is very strong on the technical side and has a deep knowledge of worldwide industries. Q: How did the company train staff last year and what did you teach them? A: Training took a different scope during 2020 because we could not use the traditional onsite methods, given the pandemic. We had to use alternative methods such as webinars, virtual tech, conferences, etc. ISO 12944 is the standard that the global industry requires and that Mexican oil and gas industry facilities must comply with. The challenge today is to use ISO 12944, which is particularly

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large: it has nine separate segments; that sometimes results in a lot of information for our customers. We are able to explain this standard briefly to our customers with the objective of making sure that they can choose appropriately the coating system that best protects their facilities.

Certifying Safe Operations in Unsafe Times Ian Rutherford | Mariene Gutiérrez Vice President of Technical Business Development and Mexico Representative of ModuResources

Refining Giant Steps Across the Border to Put Its Stamp on Mexico Carlos García General Manager of Valero Energy Mexico

An Operator’s Silver Linings From a Difficult Year Yann Kirsch COO of Perseus Energy

Collaborating With Authorities Strengthens Technical Assurance Yolanda Villegas Founder and CEO of Oleum Servicios y Dictaminación Técnica

The Moment Is Right for FPSOs in Mexico Jose Ferreira Business Development Manager of Yinson

Schlumberger: Collaboration Rather Than Service Provision Sonia Castellanos Geomarket Manager of Schlumberger Mexico and Central America

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

Managing Old Risks in New Circumstances Michael Günther Senior Vice President and Executive Director of Marsh JLT Industry Specialty Mexico

Surface Data Leader Sees Future in Remote Operations Centers Pedro E. Regino Mexico Country Manager of Fugro

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.

Mining

209 Analysis No Exploration, No Industry

210 Conference Highlights People, Community, Tools Maximize Operational Potential

211 View From the Top Jorge Ramiro | CEO of Reyna Silver

212 View From the Top Arturo Bonillas | President and CEO of Magna Gold Corp

213 View From the Top Sergio Sáenz | General Manager of Minera Camino Rojo

214 View From the Top Luis Felipe Medina | Director General of Agnico Eagle Mexico

216 Analysis Signs of Recovery

217 View From the Top Faysal Rodríguez | Vice President Mexico of Torex Gold

218 View From the Top Mick Routledge | COO of Coeur Mining

219 View From the Top Jaime González | Digital, Automation Manager Mexico, CenAm and the Caribbean of Sandvik

220 View From the Top Antonia Salvas | Vice President of Operations at Centric Mining Systems

221 View From the Top Kimberly Morrison | Senior Director of Global Tailings Management of Newmont Corporatio

223 Spotlight Newmont: A Leading Example of Responsible Mining

224 Content Links

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No Exploration, No Industry President López Obrador has been adamant about not authorizing new mining concessions to private investors during his administration. While many analysts have interpreted the president’s decision as a bold and favorable move for the nation’s sovereignty, the cost could be higher than most predict. “We have not granted any mining concessions because it is not necessary,” said López Obrador in March, while addressing journalists gathered at his daily press conference. “Our territory has 200 million ha and 120 million ha were granted (for concessions) during the neoliberal mining exploitation period. When will we finish exploiting 120 million hectares?” The president’s address to journalists related to the conflict between companies like First Majestic Silver Corp and Americas Gold and Silver Corporation that have clashed with the government for various reasons. Among the most important has been the president’s claim that miners are “not paying taxes,” despite the sector’s significant contributions to the country’s industrial GDP. “The economic spillover from mining in Mexico is US$9.8 billion,” explains Fernando Alanís, President of CAMIMEX. “This sum includes taxes paid and the purchases that come from approximately 9,600 national suppliers. This is real money that boosts the economy,” said Alanís, who based his viewpoint on an independent audit by PwC. The report says that unlike other mining jurisdictions similar to Mexico, such as Chile or Peru, there will be a tax increase this year. According to Mexico’s Mining Law, concessions are granted for a term of 50 years, with extension options. It is important to consider the amendments to the Mining Law that worry many industry players, since they would allow the Mexican Geological Service to carry out social impact studies on concessions already granted, while the Ministry of Economy could declare exploration and exploitation zones null and void due to negative social impacts. “Although these consultations already exist in other countries, such as Peru, where they came into force in 2012, this measure implies a cost in time, which also increases uncertainty regarding the possible approval of the concession if a satisfactory agreement is not reached between mining companies and the communities,” reported Moody’s in January. In addition to a global economic recession that has affected world economies, the COVID-19 crisis brought an increase in the demand for minerals and metals in industries such as pharmaceuticals, which has turned its eyes to the world’s top mining countries, including Mexico, one of the world’s main producers of gold, silver and copper. During the López Obrador administration, no concessions have been granted. Important lithium reserves have also been discovered in the country and the government now wants to protect the metal. To shield these large deposits, the government intends to keep four concessions so the Mexican Geological Service can evaluate lithium exploration in three states: Puebla, Sonora and Jalisco. “We are evaluating the best options for the use of these mines. Everything will depend on the results of Read the complete article More about this topic

the exploration,” said Francisco Quiroga, former Deputy Minister of Mining in a press conference shortly before López Obrador reaffirmed his decision not to authorize any concessions.

Conference

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Highlights

People, Community, Tools Maximize Operational Potential Jody Kuzenko President and CEO of Torex Gold Resources

Arturo Bonillas CEO of Magna Gold Corp

John McCluskey CEO of Alamos Gold

Steve Holmes

aximizing the potential of a mining operation can filter down to three elements: human resources, technology and community relations. How miners address those factors can dictate the success of a project, particularly in Mexico.

“A company’s staff is always a crucial factor for mining companies that are looking to improve their operations. Without our people, all we have is a rock on the ground,” says Jody Kuzenko, President and CEO of Torex Gold Resources. Because mining is a complex business, people also need to be aligned to the company’s vision. This vision, Kuzenko says, should be clear and informed in regard to culture and value. To this end, Torex utilizes the “systems leadership” theory to foster commitment. Arturo Bonillas, CEO of Magna Gold Corp, agrees with this notion.

COO of First Majestic Silver Corp.

“Alignment is fundamental in any organization. In our case it

Jesus Romero

is absolutely vital,” he says. To keep people aligned with the

Senior Consultant at Golder

company’s vision, Bonillas says setting clear KPIs and focusing on top-down and bottom-up communication and feedback are crucial elements. Furthermore, employees should know what they contribute to the company’s direct results. Sharing a common culture is a particularly interesting challenge for companies that started out small, like Alamos Gold. Its CEO, John McCluskey, scrambled to get the project going with a team of only four people. Now, the company has grown to over 2,000 people and has a market value of US$4 billion. “We had to learn along the way,” explains McCluskey. It is even more important to adhere to a company’s standards after they have been set, especially in an uncertain year marked by a global pandemic, he says. “If you do not see that mining has a purpose that goes far beyond the production of metals, you have missed the point,” says McCluskey. The tools a company uses are equally valuable in maximizing potential. “Our No. 1 tool is cost control,” Bonillas says. Reacting quickly to issues is a must to optimize cash flow. Furthermore, the importance of geological models cannot be understated; after all, a mineral can only be mined once. At First Majestic’s Santa Elena mine, a high-intensity grinding mill provided a competitive advantage in the liberation of gold and silver, says Steve Holmes, COO of First Majestic Silver Corp. But not

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everything needs to be cutting-edge technology. By incorporating “5S” criteria: sort, set in order, shine, standardize and sustain, an efficient workspace can become a reality, Holmes adds.

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Q: What characteristics make Mexico an ideal place for mining exploration, especially in the state of Chihuahua? A: The geology of Mexico is exceptional because it hosts many mining districts, but Mexico itself is a truly exceptional mining jurisdiction. It is a great place to operate because it has a great deal of exploration potential. Another benefit is that for more than 400 years, the Spanish undertook very intense mining activities in Mexico. All that hard work left us with an excellent guide to continue with modern exploration activities. For the most part, Chihuahua is a dry state year-round, which is beneficial because it is very suitable for satellite imagery exploration and prospecting efforts. Q: What makes Reyna Silver’s Guigui a unique and flagship asset? A: Guigui is located at the heart of Mexico’s largest covenant replacement system. It has 500Moz of silver, where the average rate of silver is 310g/t with 15 percent lead-zinc combined with a very high tonnage. What is unique about the Carbonate Replacement Deposit (CDR) system is that only the top part has been found. The

Jorge Ramiro

skarn part of the system usually has the richest mineralization. Peter Megaw, our Chief Technical Adviser, believes that the heart of that skarn sits within our property. Typically, the upper part of these systems, which is a senatorial line in the

CEO of Reyna Silver

bloodstream, produces 500Moz of silver. Therefore, we think that this skarn has at least this amount. Q: What were the main opportunities that the company identified at Batopilas?

Finding Gold in High-Grade Silver Mining Districts

A: Batopilas is a fascinating project. It has about 350Moz of silver, where the average grade of silver is 1.5kg/t. When we took over the project, we wanted to focus on validating its district-scale potential. Therefore, we explored in the north where the historical production was located and obtained some fantastic results. Additionally, through trenching and sampling we discovered two new lanes. We are in the process of finalizing our drilling permits and we expect to announce the start of that 5,000m drill program shortly. Q: The company found high grade gold on its property for the first time. What impact will that have on the company’s plans for Batopilas? A: We were very surprised to find gold – this is the first-time gold has been found there. MAG Silver drilled the project and it did not target gold because in the historical production data there is no record of the mineral. As a result, we have analyzed part of the historical core and some selected areas that are

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close to where gold was discovered. We look forward to analyzing Batopilas over the next several months to understand what this gold discovery represents for our plans.

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Q: What is the history behind Magna Gold Corp and the San Francisco mine? A: We created Magna Gold Corp two years ago. It is a Mexican company with Canadian capital: the top leadership and workforce are Mexican. At the time, we were an exploration company with a project in the Sierra Madre Occidental. It was a new company, with a highly experienced management team in all phases of mining projects in Mexico. We now operate, produce and explore in the country. In 2019, our market cap on the TSXV was about US$12 million. At present, we are nearing the US$100 million mark. To achieve this, we acquired the Mexican subsidiary of a Canadian company, Alio Gold Corp, which used to be Timmins Gold Corp. Part of our management team founded Timmins Gold Corp in 2005 and acquired the San Francisco mine. The mine was abandoned, and Timmins Gold Corp brought it into production in 2010. Magna started a new operation and production results have been strong. We are undertaking an optimization plan for San Francisco to increase reserves. In 2020, we released a prefeasibility technical report that shows a geological resource of 1.43Moz of gold and an eight-year production plan that mines 760,000oz and produces 530,000oz of gold over

Arturo Bonillas

that period. Magna continues to carry out an aggressive drill program and optimization studies to increase mine life and reduce costs.

President and CEO of Magna Gold Corp

Our goal is to have gold and silver reserves totaling 5Moz and for 2023, is to produce 200,000 gold oz per year with several mines in operation. Q: What are the main problems that Magna Gold

Magna Gold: A Growing Gold Producer in Mexico

Corp inherited from San Francisco’s former owners and how are you solving them? A: There were three main issues that needed to be addressed. We needed to consider large tonnage deviations, low metallurgical recoveries and operational disarray. In their laudable intention to optimize the mine, they did not plan correctly for the very short term. The long-term planning was reasonable but open pit mining is about making a series of precise short-term moves. The need to find available ore began to exert pressure on the management team, who decided to focus on areas with exposed mineral outside of the original plan, neglecting other important areas. We have resolved all those issues through new planning and executing with the right people. Q: What are Magna Gold Corp’s exploration plans and how could they impact your production goals? A: The San Francisco purchase agreement included a concession package of around 41,000ha. The concessions

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contain high grade silver in addition to gold. Employing focused exploration to expand our geological and mineable resource is a priority. We are currently carrying out infill and expansion drilling in and around our two operating open pits and expect to add at least 250,000oz by year’s end.

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Q: Orla Mining has increased its gold mineral reserves at Camino Rojo by 54 percent. How is this project progressing? A: We knew we had the additional mineral resources at our property but needed to reach an agreement with our neighbor to have access to their property and reach the deeper mineral within our concession. This was a long and slow process but we were able to reach an agreement that benefited both companies. We are now working on the environmental and regulatory aspects to expand our operation. The great news is that we were able to extend the life of the mine by four years while maintaining the same production rates. It is important to note that the additional mineral is located within our original resources, but we are now able to reach them by stepping out into the neighbor’s property. The additional life added to the current oxide mine plan gives us additional time to conduct studies to explore and test the options to mine the large sulfide mineral resource underneath our current oxides pit footprint, which hosts 7.3Moz of gold in measured and indicated resource categories. Q: What are your production targets and strategy for Camino Rojo? A: Our average annual production for the life of the mine will be 94,000oz of gold and 597,000oz of silver during 10.4 years of production as opposed to 6.8 years of mine life of the previous

Sergio Sáenz

scenario. This additional four years will also give us more flexibility to develop other projects, like the sulfide resource at Camino Rojo, the Cerro Quema in Panama, as well as continuing our exploration programs in both countries. The timeline for

General Manager of Minera Camino Rojo

the construction of Camino Rojo did not change but there were some delays in permitting due to the pandemic. We expect to have the first pour in the latter part of 2021 and complete the ramp up and fine-tuning of the operation in 1Q22.

Camino Rojo Increases Gold Reserves by Over 50 Percent

Q: What are you most proud of as we move into the second half of 2021? A: I would say that I am most proud of the quality of people we were able to attract to our team at Camino Rojo. There is a saying that great projects attract great people and this has certainly been the case for us. Despite 2020 being a very difficult year in general, I believe we succeeded in reaching our goals, obtained the necessary permits and commenced the construction of Camino Rojo. This was only possible because we had a team of dedicated people willing to go the extra mile to achieve our objectives. We are now working on our next goal, which is to build a mine and produce the first metal this year. Q: How is the company’s social responsibility strategy coming along for 2021? A: Our social responsibility strategy is based on the conviction that we are part of the communities where we operate. We strive to make these communities feel part of the process of building a mine and benefit from it, be it through employment or providing services. They cannot be merely spectators watching us go

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to work. We have implanted a very good community relations program, based on open and honest communication between them and the company. As part of the initiatives, we are incorporating members of the communities into our workforce or as providers of goods and services.

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Q: How can stakeholders in Mexico’s mining industry engage in a beneficial dialogue? A: Information is the basis for dialogue and decision-making but it is important that all parties have access to the same information. Many times, we see discrepancies between data that is provided, and the problem is that there is no external organization that evaluates which data corresponds to reality. We need a neutral and authorized entity that creates common ground and offers the opportunity for all stakeholders to engage in dialogue. An independent mining observer, a mining roundtable to encourage dialogue or another thirdparty figure could be good options. Q: What are the main pillars of Agnico Eagle’s exploration strategy in Mexico? A: Our highest priority is to increase the life span of our operations. They are located in jurisdictions that we already know and trust. Where we have mines, we also have a sizeable workforce and all necessary infrastructure set in place. The success of this exploration strategy can be seen at Pinos Altos. According to the feasibility study, this operation was originally expected to be closed in 2019. However, the life of the mine has been extended to 2025 and we are working

Luis Felipe Medina

to extend it to 2027. Our La India operation had 900,000oz when we acquired it. Through systematic exploration, we have increased this figure to 1.5 Moz.

Director General of Agnico Eagle Mexico

Another example is the Creston Mascota project, which began operations in 2011. The life of the mine was originally expected to be four years, adding 40,000oz of gold per year to the larger mine it belongs to. It is now reaching its operational life cycle and has doubled the company’s expectations.

Agnico Eagle: Top Engineering for Enhanced Sustainability

Near Creston Mascota, a deposit was found that we hope to incorporate into our mining plans in 2021, increasing the life of Pinos Altos. In 2017, we acquired Santa Gertrudis, a gold property 180km from Hermosillo. It produced interesting drilling results and in 2020, approximately 20,000m of drilling were developed. The results invite us to continue exploring and when we have a feasibility study, we will decide if we proceed to the next stage. Santa Gertrudis will remain an exploration project for the next few years. Q: What was it like to turn Pinos Altos into an underground mine and how will the experience help Sinter with its own transition to underground mining? A: The transition did not happen all at once. It was in the mine plan from the beginning and we had plenty of time to prepare for it. When the project started, almost 80 percent of the production going to the mill came from the open-pit mine. That has gradually changed. Now, the production from the underground mine contributes more than 90 percent of the total. The success of Pinos Altos’ transition is the result of planning based on a thorough exploration of the deposit. We are deploying the same strategy at Sinter, a new deposit at Pinos

Altos. Sinter’s ore body was not in the original Pinos Altos plan but our exploration team identified its potential and we have incorporated it. Underground mining there will be different from Pinos Altos. The grades are lower and the veins are narrower, but Sinter is strategically attractive because it gives us mining flexibility, which is crucial in underground operations. Mines sometimes get all their production from one body but if there is a problem, an alternative source of ore is needed while the problem is being solved. The key is to have options. Sinter fits that role. Q: What are the main elements of Agnico Eagle’s ESG strategy? A: We base our ESG efforts in Mexico on four pillars. First, respect for co-workers. We need professionals to trust us and choose us as their best option. Second, being environmentally responsible. In 2020, Pinos Altos won an award for excellence in environmental restoration from the Mining Association of Canada. The third pillar is safety, a condition that must be guaranteed for workers. We are responsible for providing training to our workers as part of a safety culture. Furthermore, the person in charge of our tailings facilities has a direct line to the board of directors. That kind of transparency ensures safety in our operations. Fourth, we have to understand our communities and be good neighbors. Even if we bring jobs and development, we must be humble and respect our communities. Community involvement has to be multilateral. Q: How will Agnico Eagle’s new leaching platform in La India strengthen your sustainability strategy? A: La India consists of three leach pads, each with its own life span. Our team was faced with the complexity of building a leach pad on the steep slopes of the mountain range. Looking at options, the idea of building the leach pad extension on a pit that had already served its useful life was born. The complexity level was high, but our engineers were able to build the project. We will reuse an area that has already been part of our mining operations. It is an innovative approach for repurposing construction spaces and optimizing areas. For this project, we consulted external experts with experience in geotechnical engineering who are supporting our team and validating the safety and viability of the team’s ideas. At Pinos Altos, we are doing something similar: the first pit we built is being filled in with tailings, instead of building a new dam elsewhere.

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Sandvik

Mining | 219

Signs of Recovery Mining production in Mexico started showing signs of recovery after 1Q21, following a year marked by an economic recession due to the pandemic. Since June 2010, the mining industry has been considered a strategic industry for the country but in 2020, it was forced to suspend activities in 2Q20, which generated uncertainty among investors. This also opened new windows of opportunity. In times of economic tribulations, precious metals generally are considered a safe haven, a trend that mining companies operating in the country knew how to take advantage of. CAMIMEX reported that the total value of mining production stood at US$11 billion in 2020, 4.5 percent below 2019, when it was valued at US$11.9 billion. The Bank of Mexico reported that by the end of January 2021, the mining sector had started returning to the levels of production it enjoyed before the pandemic. The central bank set the index it uses to measure the country’s total production at 87.27 points, 5 percent above the 77.4 points registered in March 2020. By April 2020, it had dropped 10.6 percent, ending at 69.13 points. Among the causes for the drop in production were the mandatory shutdown enforced by the Mexican government during the second quarter of 2020, as well as the weak performance of the automotive and oil and gas industries and the drop in demand from manufacturing countries in China and Southeast Asia. The high price of precious metals during this time helped buttress the sector’s performance in 2020. In a global economic climate marked by uncertainty, precious metals once again became the solution to the mining equation, especially metals such as gold and silver. As a result, some precious metal companies in Mexico ended 2020 with positive results. Grupo México, the country’s largest mining company, closed 2020 with US$8.5 billion in sales, a 7.5 percent increase over 2019. “It was a record year in copper, molybdenum and silver production,” Grupo México said in a press release. “Due to strict health and safety protocols, we have applied during the pandemic and despite the very complicated environment, we managed to achieve a new copper production record.” Industrias Peñoles, Mexico’s second-largest mining group and a producer of zinc, copper, lead, gold and silver, also performed well in 2020 with over US$4.6 billion in sales, an annual increase of 4.5 percent. Fresnillo, a leading gold producer, also improved its sales performance in 2020, closing with US$2.6 billion in sales, representing 14.8 percent growth. According to Mexico´s Ministry of Economy, mining production in Mexico represents 2.4 percent of the country´s GDP and 8.2 of its industrial GDP. For this reason, production recovery levels will depend on synergies between the public and private sectors. A large part of the industrial activity in the US, Mexico’s main trading partner, depends on its domestic mining industry and its extractive capacity, which is key to industries such as the automotive sector. According to CAMIMEX, fluorspar, graphite and strontium were the three minerals in the US that generated Read the complete article More about this topic

the most demand in 2020, in addition to iron and carbon, essential minerals for the production of chassis, brakes, engines and valves for the automotive industry.

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Q: What are Torex’s main targets for 2021? A: We have a variety of targets for 2021. At Media Luna, we are drilling 44,000m this year to include the results in its feasibility study, which will be released in Q1 of next year. At El Limón Guajes, an exploration investment of US$13 million has been budgeted for this year and we have three main objectives. First, we are looking for opportunities to extend the life of the open pit through a drilling campaign. Second, we will look for a connection between the pit and the underground mine; and third, we are seeking opportunities in the deeper areas of the underground mine through an aggressive campaign. At our regional targets, which are very close to El Limón Guajes, we are doing some prospecting and plan to drill some holes, with a projected expenditure of US$2.5 million. We are confident we will find something to develop after Media Luna, since we have many targets within the 29km 2 that this area covers. Q: How is the company planning to make El Limón Guajes Complex’s underground mine a value driver for Torex and its shareholders in the coming years?

Faysal Rodríguez

A: Both the underground and open pit mines have a very strong operating basis. We will continue with that objective at the underground mine, in addition to the exploration targets that we are drilling to add more resources and

Vice President Mexico of Torex Gold

reserves to the underground mine. Our geologists have very high expectations for these resources and as a result, we are conducting an aggressive drilling campaign there. A key factor that will be significant in the coming years is

2021 Looking Bright for Torex Gold

the construction of Portal 3, which is a new access that we have begun building for our underground mine with the goal of reaching deeper areas. That specific infrastructure will be a key driver for future resources for several reasons. First, it will have a very positive impact on the underground mine holes because we will have shorter haulage distances. Second, opening that access will be key to drilling deeper and searching for targets. Q: What is the company incorporating into its MIA Integral? A: There is a river between our two projects, Media Luna and El Limón Guajes, that is considered one of the main water sources for agricultural areas in Guerrero and Michoacan. We recognized that our regional environmental permitting strategy had to change with the construction of Media Luna, considering SEMARNAT’s rules and regulations. The MIA Integral aims to include both projects in a single permit, including all the environmental conditions and actions that we need to apply to both. This will facilitate the evaluation by the authorities and the compliance with these permits by the company. In that permit, we plan to include new infrastructure for the underground mine in Media Luna

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and some additional infrastructure changes in our process plant, considering the different metallurgy that the Media Luna ore will provide.

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Q: What has Coeur Mining learned from 2020 that it can apply to its business? A: In 2020, COVID-19 took us all by surprise, but we worked hard to put controls in place that allowed us to maintain our business flow. We did face a 45-day government-mandated shutdown at our Palmarejo operation in early 2020. We were happy to restart operations but had to do so under strict COVID-19 health protocols. For us, there is nothing more important than keeping our teams, their families and the communities where we operate safe. The great thing was that our team had the motivation and mindset to get back on track. Despite the downtime, the company had great results. The recovery of Palmarejo has been fantastic. Our third quarter results showed a 92 percent production increase compared to the previous quarter. We plan to use the knowledge we have gained in 2020 to improve our operations in Mexico and abroad through sharing best practices. Even though it was undoubtedly a tough year, it has also been effective in terms of learning how to improve our business. Q: What role does Palmarejo play in Coeur Mining’s results? A: Palmarejo plays a key part. When you look at its

Mick Routledge

contribution both in silver and gold production, it is a significant part of our portfolio. The exploration results we released in August 2020 demonstrated that we continue to seek to expand our Mexican operations, which is a critical

COO of Coeur Mining

piece of our portfolio. We are continuing to invest in Palmarejo. Our overall free cash flow contribution in 3Q20 was approximately US$45 million. It is a good price environment at the moment and the team is

ESG Excellence Key To Success at Palmarejo Mine

working hard and achieving great results. Q: Where do you think are the areas of opportunity to further improve operations at Palmarejo? A: Palmarejo has a healthy business improvement culture. It was an open pit mine, which transitioned to underground operations. The team is doing a fabulous job at innovating, while developing new technologies and techniques to optimize efficiency. When you examine the costs of Palmarejo and compare them to past costs, it is amazing how these costs have been kept down. This includes underground and above-ground operations, where several high-profile business improvement processes have been implemented. Recovery was traditionally difficult in the mine, but the team has greatly improved this process. In 2019, Palmarejo delivered over US$7 million in sustainable additional contributions and benefits from recovery projects through this Business Improvement program. This is just one of the many successful changes implemented in the transition to underground, which has lasted around

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one year. In prior years, the average production was between 4,600 and 5,000 tons per day. Following the temporary shutdown, production increased to 5,300 tons per day while improving the team’s safety and training.

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Q: What questions and concerns regarding technology and automation do you receive from your current and potential clients? A: The key concern for the Mexican mining sector is safety and to ensure constantly improving working conditions. These are major considerations, along with increased profitability and better productivity, when implementing digitalization, electrification, robotics and autonomous or remote operations. Q: How is your business line equipped to address those concerns? A: Sandvik provides scalable solutions according to our customers’ needs and their operations. These solutions include My Sandvik Digital services with connected equipment, OptiMine, which incorporates analytics to optimize mining processes, and AutoMine, our solution for intelligent, tele-remote and autonomous operations. Q: How does Mexico compare to other mining jurisdictions in terms of technological standards and adoption of new technologies? A: Every country has different challenges and are at different

Jaime González

stages regarding the implementation of new technologies. The Mexican market is betting heavily on technology and I expect strong growth in the coming years.

Digital, Automation Manager Mexico, CenAm and the Caribbean of Sandvik

Q: How is Sandvik addressing the challenge of increasing awareness regarding alternative solutions? A: Sandvik has numerous products and technologies that are ready for implementation in the Mexican market. Change

Digital Transformation to Set a New Standard in Mexico

management is a key factor in the implementation of new technologies to create awareness among users and to help them understand how these solutions improve working conditions by creating safer and more profitable operations. Q: A key factor in automated solutions is the reduction in infrastructural changes and interventions. What is the best example of this from Sandvik? A: Electric loading and hauling vehicles equipped with battery swapping systems require less infrastructure on-site and fewer interventions by the operator, providing greater efficiency and continuity in the operation, which translates into higher productivity. Sandvik’s AutoMine solution provides autonomous equipment operations for high-speed production, fewer downtimes and extra productive hours. Q: What added value and significant savings can these solutions generate? A: When using OptiMine and AutoMine, value and savings are achieved in several ways. These include: reduced exposure to

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hazards; mining process optimization; monitor performance versus schedule; fact-based decision-making; optimized operational costs; effective resource utilization; continuous operations; reduced damage and extended life time; and multimachine control.

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Q: How does Centric Mining Systems demonstrate its value to a client? A: Many of the most interesting aspects of our offering revolve around advanced analytics. It is here where we can best demonstrate the solutions’ value and ROI potential. These tools make it easy to calculate exact cost benefits or to find efficiency or productivity gains within the mining operation. Q: How is Centric Mining Systems using agile methodologies in its processes? A: The real change is being made in the way that we are implementing our solutions. With a more agile approach to our services, we can improve our delivery to clients ensuring collaboration at every step. At Centric Mining Systems we deliver scalable products, so it is important that we have room to change the scope of a project. Often, we see that as customers learn more about our product and what it can do for them, they begin to come up with more ideas on how to enhance its application. By following an agile approach we can address those additional requests from customers. It also allows for more collaboration and feedback throughout the process, which helps to reduce the risks inherent in the project itself and to improve

Antonia Salvas

user adoption. Q: What is the company’s role in changing attitudes toward technology within a traditional industry like mining?

Vice President of Operations at Centric Mining Systems

A: We understand that we are dealing with a more risk-averse client base and we want to make sure that Centric Mining Systems is easy and fast to implement, simple for our clients to use, and will deliver value quickly in terms of clear ROI.

Agile Tech to Turn Traditional Industry Digital

Case studies are helpful to instill confidence in potential clients so that they know that the promises we are making are promises we keep. Another action we take is getting involved in industry groups. This helps build collaboration between all stakeholders including mining companies, suppliers, organizations and governments. to define what these technologies do and best practices for implementation. All of this helps the introduction of tech in mining. Q: What new technologies is the company looking forward to releasing? A: We are excited about the next version of our product, which will be called Centric Cloud. It is a fully cloud-enabled solution that will be coming out this year. This gives us opportunities to implement new technologies that will increase the speed and ease of implementation. We are also creating a type of marketplace within Centric Cloud that allows any client to share processes and resources they have built within their own Centric solution with any other user.

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The company is working with a partner using digital twin technologies. This tool will allow the client to build a complete digital simulation of their mining operations, which will allow them to optimize their business.

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Q: What are Newmont’s standards for engineering, construction and operations, and what technical guidance ensure safe tailing facilities? A: Newmont’s engineering, construction and operating standards and technical guidance explicitly cover tailings management and establish requirements to ensure safe and stable facilities throughout their operating and post-mine closure life. Our approach covers standards, guidelines and governance; reviews, inspections, audits and reporting; emergency response, planning and communications. Governance is required at all levels of the organization to support our overall approach. In all phases of the life cycle, facilities are inspected at multiple levels – site, regional, corporate and external. The design, construction and operation of our tailings facilities are scrutinized through our Investment System process, supported by inspections and audits; critical controls and critical control reporting; as well as annual inspections by our Engineers of Record. As an additional layer of assurance, we have implemented Independent Tailings Review Boards at most of our operating sites and projects comprised of two to four subject matter experts in the areas of geotechnical engineering, supplemented by hydrogeological, hydrological and/or

Kimberly Morrison

seismological, depending on the project. Newmont has both operational (active and inactive) and closed tailings facilities in a variety of climatic and topographic

Senior Director of Global Tailings Management of Newmont Corporatio

settings. We conduct extensive siting, engineering, environmental and social studies to support the specific selection and design of each facility. Annually, Newmont safely manages and disposes of more than 100 million tons of tailings that are placed within engineered, surface containment

Ensuring Safe and Stable Mining Facilities

facilities, which are used to backfill former mining pits, or placed as structural backfill paste in underground mines. Q: What are the specific tailings characteristics at Newmont’s Peñasquito mine and how do you guarantee tailings safety? A: Peñasquito is a world-class operation, and our tailings management team at Peñasquito is truly world class. It is comprised of planning, operations, construction and geotechnical monitoring personnel. The TSF at Peñasquito has a perimeter of 11km. Tailings production is on the order of 120,000 tons per day, resulting in an approximate 5m rate of rise. The paddock-style embankment is constructed on three sides using the centerline method and downstream methodology on the fourth side, adjacent to the internal reclaim pond. Maintaining long beaches adjacent to the centerline raises is among the key success criteria for operations of the facility. Operations are in the process to commissioning an external pond system to further reduce the volume of water stored at the facility. The ultimate design capacity of the facility exceeds 800 million tons. The TSF is unique in that it is continually built 24 hours a day. We use mine fleet equipment for buttress construction, large haul trucks for sliver fill and smaller dump trucks for rockfill. A

cyclone sand zone is also placed in paddocks to form part of the embankment structure. We recognize that a catastrophic failure within any of our tailings would be considered a significant risk to our business. We perform risk assessments on a TSF-specific basis, considering all phases of the TSF life cycle. As a project or facility matures, the level and detail of the risk assessment must also evolve. Our newlydeveloped TSF Risk Assessment Guideline ensures we assess our tailings management risks, manage our facilities in a manner commensurate to the risks and make performance-based risk-informed decisions. In December 2019, we brought a multidisciplinary team, including our Engineer of Record at Peñasquito, to perform a risk assessment of the tailings facility and external pond system. Subsequent to that risk assessment, we drilled down into specific failure modes and completed a failure modes and effects analysis. Myself and members of my team had the opportunity to visit Peñasquito in December 2020. During the visit, we reviewed and updated the risk assessment from 2019, as well as our risk management plan. We have a good handle on the risks with our facility, due in part to the depth and breadth of the risk assessments performed, and are actively managing those risks. Our geotechnical monitoring program for the TSF at Peñasquito includes 177 vibrating wire piezometers, four mechanical inclinometers and two Shape Accel Arrays among other deformation monitoring processes. We also perform a bathymetry of the reclaim pond approximately every month and conduct periodic cone penetration test programs to improve understanding of the in-place tailings characteristics and phreatic conditions. Q: What are the water savings systems Newmont has in place related to tailings handlings? A: We have water savings systems at each of our operations. Water management and tailings management truly go hand in hand. At our Musselwhite mine in Ontario, Canada, we employ high-density thickened tailings to develop a nonsegregated tailings stack with minimal bleed water. At Eleonore, in Quebec, we dewater our tailings before placement in a TSF. And, in several operations, we use paste tailings for structural backfill of underground workings.

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Cyplus Idesa

SPOTLIGHT

Mining | 226

Newmont: A Leading Example of Responsible Mining Newmont is committed to Mexico’s progress and the implementation of ESG practices. The company has made a global commitment to reduce its greenhouse gas emissions by 30 percent by 2030 with the goal of being an emissions-free company in 2050. The company’s Peñasquito mine is located 780km from Mexico City. The operation (Peñasco) is an open pit mine that produces gold, silver, lead and zinc. Newmont’s approach to the talent at its operations focuses on gender, nationality, and local and indigenous groups. In 2020 and for the 13th year in a row, Newmont made the Dow Jones Sustainability World Index and was named the top global gold mining company for its leading ESG performance. Peter Hughes-Hallett, Country Manager for Mexico at Newmont, said at Mexico Mining Forum 2021 that, “Newmont is the only gold producer ranked on the S&P 500 index and recognized for its ESG efforts.” Hughes-Hallett emphasized that future mining will require strong and sustainable relationships with communities. He added that Newmont has ramped up efforts to establish thorough communication with nearby communities. The company has implemented a program called “Ideas With Value,” in which it partners with Peñasquito’s communities to strengthen their business capacities. The goal is to promote the creation or improvement of small and micro businesses. Juan Reynaud, Peñasquito’s Head of Human Resources at Newmont, also stressed the importance of Newmont’s community commitment and explained that the company has hired 150 people from nearby communities to be road operators, who are being trained for future projects.

Mining and AMLO’s Economic Policy Adrián Juárez Founder and Director of Consultoría y Tecnología Ambiental

Mining’s Strongest Allies Are Mexican Communities Adrián Juárez Founder and Director of Consultoría y Tecnología Ambiental (CTA)

Mexico Needs a Mexican Code for Resources, Reserves Armando Alatorre President of College of Mining Engineers, Metallurgists and Geologists of Mexico

Public Perception as a Driver of Change in the Industry Robert Schafer President of SME

Crisis in the Mining Industry Israel Méndez Becerra President of Association of Miners and Cooperative of Mexico (AMICOM)

Natural Protected Areas: Good Idea, Bad Strategy Rubén de J. Del Pozo Mendoza President of Association of Mining Engineers, Metallurgists and Geologists of Mexico, Zacatecas District (AIMMGM)

Five Challenges Mining Will Face in 2021 Rubén de J. Del Pozo Mendoza President of Association of Mining Engineers, Metallurgists and Geologists of Mexico, Zacatecas District (AIMMGM)

Are Mexican Mining Opportunities Over? Jesús Enrique Pablo-Dorantes Chairman of the Advisory Board of Mexican Academy of Environmental Impact

Gold: The Smart Choice for ESG-Savvy Investors Terry Heymann CFO of World Gold Council

The Silver Institute’s Interim Silver Market Review Is Out Mining Concessions the Path to Sector’s Recovery USMCA: An Opportunity for Mexico to Integrate Metals Value Chain Armando Ortega President of the Mining Task Force and USMCA

Acronyms AI

Artificial Intelligence

CNBV

National Banking and Securities Commission

Electric Vehicle

FDI

Foreign Direct Investment

IoT

Internet of Things

NOC

National Oil Company

SME

Small and Medium Enterprises

USMCA

United States-Mexico-Canada Agreement

WHO

World Health Organization

WTO

World Trade Organization

Advertising Index Mexico Business 1

The Hidden Kitchen 115

Mexico View 5

U-Storage 119

Genesys 15

TIP 127

SkyHaus 25

Safelink 134

Mexico Business Events 28

Atramat 138

Rising Farms 36

Olivares 146

Runa RH 43

Eolis 153

Justo 46

Alian 156

Rappi 54

Evonik 164

Mexico Business Communication 60

Mazda 169

OpenPay 63

Mitsui 174

Fintonic 72

Iberdrola 182

paloalto 77

Enel Green Power 187

Veeam 82

RelyOn Nutec 199

Fortinet 91

Alpha Deepwater Services (ADS) 206

Dynatrace 96

TorexGold 210

Pearson 100

Sandvik 222

Ergotron 110

Cyplus Idesa 225

Index ABB 168

CENAGAS 186

Acclaim Energy 176

Centric Mining Systems , 223

Adobe 47, 59-60 231

CFE 176, 183, 189

Agnico Eagle 217, 218

Citi 176

Agnico Eagle Mexico 211, 217

Citla 194, 232

Alamos Gold 213

CLAUT 172

Alian Plastics 162

Climate Bonds Initiative 6, 19, 231

Alio Gold Corp 215

Coeur Mining , 211, 221, 221

AMDA , 158, 165, 171

Conekta 29, 38, 231

AMEXHI 194, 202, 232

Cyber-T 83, 93

AMGE 194, 203, 232

DD3 29, 33, 231

AMGN , 175, 184

Dell 139, 151

AMIA , 158, 160

DNV 194, 205-206, 232

AMID 139, 147, 232

Doctoralia 139, 152-153, 232

Angel Ventures 29, 34, 231

Dynapower 188

ARIDRA 158

EDF Renewables 180

ASEA 194, 201

Enagás 183

ASEM 29, 32, 39, 231

Endeavor 101, 114-115, 231

ATA Renewables 180

ENEL 178

Bank of Mexico 219

Energy Information Administration (EIA) 183

Bayonet 47, 56, 231

Engie Mexico 180

BayWa r.e. 188

Estafeta 120, 232

bioMérieux 139, 148

Evonik 157, 163-164

Bitso 29, 41, 231

F5 83, 90-91

Blue Yonder 168

FEMIA 6, 24-25, 231

BMW 158, 162, 165, 166

Fieldwood 194, 197, 232

Bocar Group , 167

Finerio 29, 37, 231

Briq Fund 64, 75, 231

Fintech Mexico 67, 231

Bristol Myers 139, 143

Fintonic 64, 70, 79, 231

CAMIMEX 209, 212, 219

First Majestic Silver Corp 212, 213

CANACINTRA 6, 9, 21, 231

Ford 161

Cargamos 120, 130, 232

Fresnillo 219

CENACE 176, 189

FrontierView 10-11

Index GE Renewable Energy 188

nowports 120, 124

Getin 47, 52, 231

Nuvocargo 120, 123, 231

Globall Businesses Inc. 13

Office Depot 47, 53-54, 231

Golder 213

Petronas 199-200, 232

González Calvillo 185

PPG 194, 207, 232

Grupo CPQ 139, 144, 232

Prosegur 83, 89

Grupo México 175, 189, 219

ProtectMe 83, 97

Grupo Neolpharma 139, 145-146, 232

PSA 158

Iberdrola 173, 175, 181-182, 232

PwC 212

ICS 83, 86

Reyna Silver , 211, 214

IEnova 183, 185

RGA 139, 150, 232

Intelimétrica 47, 58, 87, 231

Rising Farms 21, 29, 35-36, 39, 231

Invenergy 175, 179, 232

Rokk3r 29, 42-43, 231

IronHack 101, 106, 231

Runa HR 101, 109-110, 231

Jaguar E&P 194, 196

Sandvik , 211, 222

Kaspersky 83, 88

SEforALL 6, 20, 21, 231

Kavak 47, 50

Siemens Energy Mexico 185

Konfío 64, 76-77, 231

Someone Somewhere 29, 39, 40, 231

Lalamove 120, 131, 232

Sonect 64, 74, 231

Latinas in Tech 101, 108, 231

Sr. Pago 64, 78, 79, 231

Maersk 120, 122, 231

TalentHow 101, 107, 231

Magna Gold Corp , 213, 215

Tenable 83, 92

Mazda , 158, 169, 170

Torex Gold 209, 211, 220, 232

Mercado Libre 47, 51, 231

Torex Gold Resources 213

Minera Camino Rojo , 211, 216

Toyota , 158, 161, 165, 166, 170

Ministry of Economy 212

Ualá 64, 73, 231

Mirage Energy 183

Uber 47, 55, 161

Mitsui & Co. Power Americas , 177, 180

UKG 101, 116, 231

Mozper 64, 68, 231

Wärtsilä 190

Naturgy 175, 186-187, 232

WeWork 101, 103, 231

Newmont 224-225, 226

Yanfeng 166

Novartis 139, 142, 232

Yinson 120, 125, 231

Novopayment 64, 69, 231

Photo Credits Cover Marcos González

Intelimétrica

Facebook México

Adobe

CANACINTRA

61 nubank

12 Fronterview

62 Nubank

Global Businesses

Fintech Mexico

Mozper

Novopayment

Endeavour Silver Corp,

Hogan Lovells, Citibanamex

Maquia Capital Agro Fund, Becerril, Coca

& Becerril, SC, Grupo Roales, Aerocharter

Fintonic

Climate Bonds Initiative

Ualá

SEforALL

Sonect

CANACINTRA, Casai, SEforALL, Rising Farms

Briq Fund

FEMIA

Konfío

26 MBP

Sr. Pago, Fintonic

27 Bosch

Arcus Financial Intelligence

ASEM

80 Nubank

DD3 Capital Partners

81 Bosch

Angel Ventures

98 Bosch

Rising Farms

99 Bosch

Finerio Connect

103

Conekta

104 Comunal

ASEM, Someone Somewhere, Rising Farms, Finnu

106

Someone Somewhere

107 Talenthow

Bitso

108

Latinas in Tech

Rokk3r

109

Runa HR

WeWork

IronHack

44 McKenzie

112 Humanologo

45 Bosch

113

TalentHow, Runa HR, Konfio

Mercado Libre

114

Endeavor

Getin

116

UKG Latin America

Office Depot

117 Bosch

Uber

122

Maersk

Bayonet

123

Nuvocargo

Dextra Technologies, Chihuahua Global, Export

124 Nowports

Development Canada (EDC), Mitsubishi Electric Automation

125

Yinson

Photo Credits 129

Estafeta

179

Invenergy

130

Cargamos

184

AMGN

131

Lalamove

186

Naturgy

132

Aeromexico cargo, GNK Logistics, Grupo TM

188

BayWare, Dynapower, GE Renewable Energies

133 netLogistik

189

Grupo México Energía

135 U-Storage

190 Wärtsilä

136 Bosch

191 IEnova

137 Liomont

192 Exterran

142

Novartis

196

Jaguar EP

143

Bristol-Myers Squibb

197

Fieldwood

144

Grupo CPQ

198

Petronas

145

Grupo Neolpharma

200

Citla

147

AMID

202

AMEXHI

148 BIOMERIEUX

203

AMGE

150

205

DNV GL

151 DELL

207

PPG Comex

152

Doctoralia

208

Photo by Mieko Mahi

154 CONACYT

209

Torex Gold

155 Bosch

221

Coeur Mining

172 Accenture

222

Sandvik

173

232

Envato

RGA

Iberdrola

177 Mitsui

Credits Journalist & Industry Analyst: Andrea Villar Journalist & Industry Analyst: Miriam Bello Journalist & Industry Analyst: Pedro Alcalá Editor: Alicia Arizpe Editor: José Escobedo Senior Editor: Mario Di Simine Managing Editor: Alejandro Salas Publication Coordinator: Sebastián Vázquez Publication Coordinator: Rodolfo Vélez Publication Coordinator: Alejandra Yick Publication Coordinator: Carolina Morales Content Partnership Coordinator: Tatiana Petrova Content Partnership Coordinator: Alexa Villaruel Graphic Designer: Tania Aguiñiga Graphic Designer: Marcela Muñoz Senior Graphic Designer: Mónica López Design Director: Marcos González Web Development: Omar Sánchez Collaborator: Alejandro Enríquez Collaborator: Sofía Hanna Collaborator: Cas Biekman Collaborator: Mirjam Schipper Collaborator: Constanza Blanco Director General: Jeroen Posma

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Mexico Business Review 2021

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Introduction