Banking

Credit Suisse Opens New Advisory Office in Mexico 

The general economic outlook for Mexico is promising, despite the headwind it faces. Credit Suisse's newly established advisory office in Mexico City will allow its private banking clients to receive advice on-site. It also underscores the bank's growth ambitions on the continent.

The outlook for Mexico's economy is promising. Together with Brazil, Mexico continues to be one of the key growth drivers in Latin America. The country's overall GDP growth is expected to be higher than for the Latin America and Caribbean regions. According to Credit Suisse's Global Wealth Report, 20 percent of people in Latin America with wealth in excess of USD 1 million are domiciled in Mexico. And wealth per adult is expected to grow by 26 percent over the next five years. The new advisory office allows private banking clients to receive advice on-site and to invest their assets locally while at the same time benefiting from Credit Suisse's global footprint.

Successful Collaboration with Entrepreneurs

As in other emerging markets, growth in Mexico is predominantly driven by wealth generated by entrepreneurs – a segment of clients whose needs often encompass both private and business aspects. Thanks to its integrated bank approach, this is precisely where Credit Suisse sees its competitive advantage. "The wide range of our local and global private banking, asset management and investment banking capabilities allows us to deliver optimal solutions to our clients," said Iqbal Khan, CEO of International Wealth Management at Credit Suisse at the office opening celebration. Pedro Jorge Villareal, Credit Suisse CEO Mexico, added: "With the new advisory office, Credit Suisse has the local presence and specialist access required to cater specifically to the investment and lending needs of our Mexican clients. We see tremendous opportunities for providing our clients with holistic solutions."

Reforms are Progressing Well

At Credit Suisse's Mexico Investment Ideas Conference which took place earlier this month in Mexico City, José Antonio Meade, Mexican Secretary of Finance and Public Credit, outlined the considerable headwind that Mexico has faced in recent years. According to Meade, much of this was due to external factors such as slower global economic growth, divergent monetary policies, volatility in commodities like oil, and, more recently, geopolitical events including Brexit and the elections in the United States. In 2013, against the backdrop of a collapsing currency and a strong dependency on oil, the government implemented comprehensive structural reforms. These aimed to strengthen the country's position as an investment market for domestic and foreign investors, and secure its long-term economic growth. The centerpiece of these reforms was an energy reform that foresaw a substantial opening of the energy sector, which was nationalized almost 80 years ago.

The speakers of the conference generally agreed that Mexico's reforms were progressing well and that momentum for investments across the country's various energy segments was good. Also promising is the automotive sector. According to Eduardo Solis Sánchez, CEO of the Mexican Automotive Industry Association, Mexico is currently the biggest manufacturer of vehicles in Latin America, and ranks seventh globally. It is the fourth largest auto exporter in the world, with the United States importing more vehicles from Mexico than any other country in the world.

A number of leading car manufacturers such as Toyota, BMW and Mercedes/Infinity have concrete plans to further invest in Mexico, which means the country could be producing more than five million vehicles per year by 2020.

Winds of Political Change: Some General Unease

The Mexican economy has succeeded in becoming less dependent on oil and is, according to Meade, now more diverse and sophisticated. However, the uncertainty of the future relationship with the United States is leaving its mark. Because of Mexico's particularly strong reliance on the US, Credit Suisse economists consider the quandary surrounding future US policies to be the most significant risk faced by the country this year. Over 80 percent of Mexican exports, or almost 30 percent of Mexican GDP, go to the US, which means that Mexican GDP growth is highly dependent on US demand and free trade. Many jobs, especially in the manufacturing sector, rely on trade with the US. If NAFTA were to be suspended, this could also mean a sharp rise in the Mexican unemployment rate. In addition, many Mexicans are dependent on remittances sent home by Mexicans working in the US. If remittances were to decrease significantly, this would have a substantial impact on domestic consumption in Mexico, where private consumption accounts for more than 65 percent of Mexican GDP.

Although the Mexican economy is currently facing considerable challenges, it offers promising long-term opportunities. Credit Suisse is convinced that it has the right setup and expertise to support its Mexican clients in their future plans for growth.