Despite its challenges, Mexico belongs to the big leagues in the global economy. With the world’s 11th largest GDP (in purchasing power parity terms), Mexico has become one of Julius Baer's core markets over the past six years. What’s next? We talked to our Mexico Market Head Luis Mariné to find out.
Luis, as an Argentinian, who has spent over twenty years in Switzerland and is covering Mexico for Julius Baer – what is your personal connection to the second economic power of Latin America?
My attachment to Mexico stems from its connection to Latin America. There are definitely many points the countries across the continent all have in common. I feel tied to what happens in Mexico and to its people. For a number of years I have been responsible for our team in Mexico and the truth is that the business is going well for us there. Covering this great country has reinforced my respect and appreciation for the people of Mexico.
What do you like most about the country?
Mexico is a fascinating country. It certainly has a rich history, diverse culture, possibly to a much greater extent than the majority of Latin American countries. And then there is its geography with its distinct climates and landscapes, its food, which is extraordinary, and, as I said, I am very fond of the people here.
What is your favourite dish?
I have several. But, of course, I never say no to tacos.
At the moment, 80% of Mexican exports are sent to the US.
How would you describe the strengths of the Mexican economy?
The Mexican economy is very diverse and this makes it more stable and more robust than other Latin American countries, although the fact that its main trading partner is the United States – given its ‘privileged’ geographical position – means that the Mexican economy is strong when the US is doing well but also that it becomes weak when the US is struggling. At the moment, 80% of Mexican exports are sent to the US so there is a need for the country to diversify its trade partners.
Which are the largest sectors of the economy?
Well, oil obviously makes up a significant chunk. Pemex, a public company, has been the engine and main symbol of the Mexican economy and stability. At the moment, Pemex has seen better days. In fact, its risk rating was downgraded, and this can impact the global economy, or at least how Mexico is seen from a lending perspective.
Which sectors in particular should be strengthened to make the economy more diverse and less dependent on oil?
In my opinion, the Mexican economy – as well as the rest of Latin America – must make progress on innovation. Currently it is still very dependent on all raw materials and it is in innovation where I think the future not only of Mexico but of the whole region lies. Until the education system is adapted and the laws are geared towards a dynamic, modern economy that promotes innovation, the country will continue to depend very heavily on the fluctuations of the global economy.
I believe that the country itself is its best ally and also its worst enemy.
What attracts investors to Mexico?
International investors are always looking for opportunities and Mexico offers a great one because it is a growing country – growing at a faster rate than the majority of developed countries. The problem with Mexico – and, I repeat, with Latin America in general – is that in many cases these investments involve volatility – whether that is due to political or legal reasons – which means that the international investor does not have confidence in the market in the long term.
Where do you see the main obstacles to attract more foreign investments?
Mexico has a large internal task it needs to work on. I believe that the country itself is its best ally and also its worst enemy. It’s already common knowledge, that corruption is definitely a systematic problem, which is deeply-rooted in the economy. Eradicating this corruption will be very difficult but it is important to do so because this could gain the confidence of foreign investors. It then needs to clamp down on drugs, which is a very significant problem, and of course it must address its lack of law and order. Mexico has very high levels of insecurity which must be addressed to regain the trust, not only of the Mexicans themselves, to continue investing and having faith in their country, but of foreigners too.
How do we distinguish ourselves? Undoubtedly through our strength as a pure wealth manager.
What is Julius Baer’s position on the Mexican wealth management market?
Up until just six years ago, there were just two external managers working on that market. Today the situation has changed radically. We have relationship managers covering Mexico from Geneva and Zurich. We also have a very important partnership with a local family office – NSC Asesores – which has given us tremendous credibility on the market. Additionally, we are conducting very select marketing campaigns. One of these, which has helped us to significantly raise our brand awareness is our Formula E campaign, which we have been running this February for the fourth year in a row. All of this has meant that today, Julius Baer has a name and a good standing, which was not the case six years ago. So, making our mark was no easy task, but we definitely seized the opportunity to do so.
What is it that attracts wealthy individuals most to our franchise?
We offer many services that many of our competitors offer as well, that is undeniable. So how do we distinguish ourselves? Undoubtedly through our strength as a pure wealth manager, something that differentiates us from all the institutions and competitors offering all types of financial services which we do not. Furthermore, our solid economic and financial grounding means that we are more attractive for large-income families.
What is Julius Baer’s vision for Mexico, what are your plans there?
We think that the service of private banking is developing, like many industries, and that sticking to the strategies of the past will only end in failure. Our progression strategy will thus be precisely to continue down our path of finding opportunities in the private banking sector, of being present on the ground with institutions like NSC Asesores and also, why not, offering services from the US which we cannot provide as of yet, but will possibly do so in the future. But in essence we want to cover the entire spectrum of services possible to a private banking clientele and also to cover the ever-developing technology market for these services, which is especially important for the next generation of clients.