LT CFO Events Mexico City

Emilio Fortou, Business Leader Global Commercial Expansion Team, Visa; Jane Bussey, Editorial Director, Latin Trade Group; CFO of the Year — Mexico honoree Carlos García Moreno, CFO, América Móvil S.A.; Mike McKenzie, Managing Director, Head of Treasury & Securities Services for Latin America, J.P. Morgan.

The fundamentals of the Mexican economy are strong, but the country is contending with the impact of uncertainties elsewhere in the world, according to Luis Téllez, chairman and CEO of the Bolsa Mexicana de Valores.
Téllez offered that assessment in his opening remarks to the LT CFO event in Mexico City on June 16. “The numbers show a strong economy,” he told senior financial executives at the Four Seasons Hotel. Those numbers include gross domestic product growth of 4.6 percent during the first quarter of 2011, an inflation rate of 3.25 percent thus far this year, a debt-to-GDP ratio of 30.3 percent and $125 billion in foreign reserves.
“Exports have been the main drivers of employment and moving Mexico out of recession,” Téllez said. The rising costs of doing business in China have brought some business back to Mexico, too, he added.
However, Mexico is affected by factors from abroad, Téllez said, citing the debt crisis in Greece, uncertainty over the U.S. debt ceiling, rising commodity prices, unrest in the Middle East, the aftermath of the earthquake in Japan and economic overheating in Brazil, India and China. “What’s driving the market is not Mexican fundamentals,” he said.
Negative perceptions hurt, too. Téllez described Mexico as lacking excitement — something he hears frequently when abroad. Mexico is a very important, he said, but “If we don’t open up [the energy sector], we won’t be an exciting economy.” Another issue is crime, which “we’ll have to live with for some time,” he acknowledged.
J.P. Morgan Chief Mexico Economist Gabriel Casillas told the CFO forum that he foresees ongoing violence related to organized crime over the near term. He predicts that the level of violence will reach a turning point in the next six to eight months and then begin to decline. Unfortunately, the lead-up to that point “is the ugliest phase,” Casillas said, explaining, “There’s a strong increase in urban crime,” such as kidnapping and extortion. He said he is basing his projections on what happened in Colombia.
Bright spots in the Mexican economy included greater international tourism, a reinvigorated automotive sector and improving domestic demand, Casillas said, while stagnant wages could prove problematic.
One company growing despite the challenges has been wireless operator América Móvil, which last year successfully merged with sister companies Carso Global Telecom and Telmex International. At the LT CFO event, América Móvil CFO Carlos García Moreno received Latin Trade’s inaugural CFO of the Year – Mexico award for his role in managing the merger.
América Móvil required $10 billion in financing for acquisitions in 2010 alone. García Moreno said he tapped sources in Europe and other parts of Latin America.
“Local markets have developed quite significantly,” he said. “You should not underestimate them.”
Driving the acquisitions was the need to secure the fiber-optics infrastructure to carry data traffic, and to have a platform for services such as pay TV, García Moreno said.Convincing skeptical investors and analysts was another matter.
“We were very convinced of the merits. Not everyone out there, the shareholders, felt the same because they didn’t have the same understanding,” García Moreno said. “The CFO has to be the link between the company and the market.”
Carlos Césarman, CFO of Promotora y Operadora de Infraestructura (PINFRA), offered a more piquant description of the job. “The CFO is a dancer who has to dance with the ugliest partner,” he said. “You have to dance with the midday devil,” referring to the task of finding adequate financing.
Césarman began working with PINFRA, then known as Grupo Tribasa, when the company was in bankruptcy. His presentation focused on liquidity, a long-vexing challenge in Mexico, where companies depend heavily on suppliers instead of banks for financing.
CFOs can minimize problems by knowing their business well, adhering to austerity principles, keeping things simple and “not growing more than you can,” Césarman advised.
Burger King is applying many of those principles, company finance director José Manuel Carrillo said during his presentation. The quick-service restaurant chain has opened smaller outlets, such as kiosks and stands within food courts. They require less start-up capital, so Burger King could realize a faster return on the investment.
The 2009 outbreak of the H1N1 virus took a big bite out of revenue, as many Mexicans avoided malls, plazas and other public places. Burger King focused on reining in costs and formed teams that focus on finding ways to “do more with less,” Carrillo said.
Laura Maydón, senior business leader, commercial solutions, for Visa, addressed the issue of companies improving their working capital through the increased usage of cards and automatic payments for accounts payable.
A survey by First Annapolis found automated payments to be convenient and the “least painful” option for companies, but acceptance has been low in Mexico, especially among smaller businesses, Maydón said.

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