There is a statue of Sir Winston Churchill outside my hotel in Mexico City. I have no idea why. I don’t think he ever visited Mexico or played any role in the country. The statue depicts him in his war-time boiler suit with what is meant to be an expression of grim determination on his face. Actually, he just looks grumpy.
I am not sure why: a sunny Sunday morning in the upmarket Polanco district of Mexico City is a pretty cheerful place to be with its relaxed café culture and tree lined streets. It is rather like Barcelona. But with fewer pick pockets.
It is hard to reconcile this sophisticated metropolitan Mexico with the grim reality of the country’s brutal narco-wars that are ravaging parts of the northern region as rival gangs battle for supremacy and market share in the lucrative business of trafficking drugs northwards into the United States. The savagery that they inflict on each other and to members of the public unlucky enough to be caught up in their crossfire is breath taking.
Unfortunately, it is this version of Mexico that often informs the impression outsiders form of the country, particularly across the border in the United States. For some, Mexico is not just the location of brutal narco wars but with its cheaper labour, an easy scapegoat for the loss of manufacturing jobs in the US. In an election year, it is easy for the triple concerns of jobs, immigration and drugs to be fused together unfairly distorting the US – Mexico’s principal trading partner – view of the country.
The reality is that foreign investors – led by the US – are following with interest the new government in Mexico’s attempts to liberalise its economy and kick start growth levels. This is not an easy task. The current proposals to change Mexico’s labour laws will provoke all sorts of opposition from entrenched vested interests. Equally, the prospect of an opening up of the local oil and gas industry to more meaningful foreign participation will involve complex political manoeuvres.
Long-term investors understand these challenges and likely timescales but the scale of the opportunity – and no doubt the lack of growth elsewhere – is sufficient to make all but the most cynical look anew at Mexico. Even the notorious border region continues to attract high levels of inbound investment not least because for prudent businesses the drug wars that wage around them are a tactical headache rather than a strategic impediment.
It is not just the domestic market that belies the stereotypical view of the country. Mexican companies continue to seek new opportunities abroad. Last week my discussions with Mexico’s main industrial conglomerates in the northern city of Monterrey covered a wide range of investment destinations. These ranged from the obvious – China, the Middle East, Sub-Saharan Africa – but also, ironically, the prospect of snapping up cheap Eurozone assets in Spain and elsewhere.
Mexico lives with these two realities: dynamic emerging market and narco courier state. The existence of one does not preclude the existence of the other. The fact that it should be a rewarding place to invest does not diminish the seriousness with which the Mexican and the American government should search for a lasting solution to their mutual drug trafficking problem. Equally, our experience of helping companies manage their risk profile in Mexico demonstrates that gory headlines about drug violence need not deter from commercial success.
Sometimes the binary nature of external analysis makes it difficult for outsiders to hold both realities in their head at the same time. They see these alternative realities as a choice when actually they both hold true. How they affect you depends on the lens you look at them through and what you are hoping to achieve.