Robust financing environment key driver for investment in Mexico
An improving financing environment have helped to boost Mexico’s ranking in the Grant Thornton Global Dynamism Index (GDI) which ranks the business growth environments of 60 leading economies. Overall, the country ranks 37, third in Latin America and ahead of Brazil (rank 42), while business leaders are keen to stress low labour costs as a key location driver.
Mexico has gained 11 places to rank 20 for its financing environment due to improved availability of credit for companies. Relatively low unemployment and a strong financial regulatory system are also areas where the country excels. However, a lack of investment in technology infrastructure and research and development are among the factors that could be holding the country back.
Luis Burgos, head of assurance at Salles Sainz Grant Thornton, said: "The Mexican economy has proven resilient to low oil prices and depreciation of the Mexican peso. Our ranking of 37 in the GDI, behind only Uruguay and Chile in Latin America, suggests robust business growth fundamentals supported by solid macroeconomic indicators."
Globally, Singapore offers the best business growth environment for dynamic businesses according to the GDI as a result of a strong financing and regulatory environment. Israel (rank 2) has also risen six places this year. Australia (rank 3=) drops two places but still ranks in the top five for business operating environment and labour market. Finland (rank 3=) and Sweden (rank 5) have both risen slightly, due to favourable business operating environments and an advanced technology infrastructure.
Perception vs reality
Further analysis shows that businesses are keen to emphasise the advantages of doing business in Mexico, despite its ranking. According to Grant Thornton’s International Business Report (IBR), businesses expanding or considering expanding into Mexico are keen to highlight the value of the country’s labour force.
A third (33%) of firms cite low cost labour as a key reason to invest in Mexico, while a higher proportion (35%) highlight the availability of skilled workers. Mexico ranks 29= for labour market in the GDI, behind on Uruguay and Argentina in Latin America.
Luis Burgos, added: “In a globalised world, businesses looking for opportunities in dynamic markets must consider a range of economic, social and political factors to increase the probabilities for success. They must balance instinct with reason, perception with reality.
“Mexico provides many attractive opportunities for international investors, but it is important that they are also aware of the potential difficulties. As advisors to dynamic businesses, it’s our job to make sure firms have the full facts at their disposal when making key investment decisions.
“The business world is always changing, with the realities on the ground often surprising business leaders who take a closer look. In order to maximise growth potential, business leaders need to refresh their perceptions of foreign markets in line with the market insights at their disposal. Once in tandem, better decisions can be made.”