On Oct. 8 Frontier Strategy Group hosted Mexico executives for a breakfast discussion centered on “Finding Pockets of Opportunity in a Post-Reform Mexico.” Below are the key takeaways from the discussion.

1) Mexico is an increasingly important priority for multinationals

• 76 percent of clients surveyed expressed that Mexico, despite tepid economic growth, has become either a somewhat or significantly larger priority for their company. Within an increasingly dire outlook for other Latin American markets, especially Brazil, corporate headquarters see Mexico as a growing opportunity.
• However, this increasing prioritization comes amid economic growth that continues to disappoint, with average growth stuck at just above 2 percent over the last three years, while GDP expectations for 2016 do not look much better. Only 8 percent of clients surveyed believe there is strong alignment between corporate’s growth expectations for the market and the economy’s underlying reality.

2) The declining fortune of the Mexican peso has hammered performance

• Most multinationals were taken by surprise by the heavy depreciation of the Mexican peso this year, particularly over the summer. Sixty percent of clients surveyed believe further depreciation remains the most significant external threat to their near-term growth targets, and though on average executives believe the Mexican peso will likely depreciate somewhat more next year, most remain concerned over the potential for the Mexican peso to depreciate significantly beyond their current expectations.
• While about half of executives considered a price increase the most important measure they have pursued thus far against the peso’s depreciation, significant discussion centered on fears of further price rises in an environment of low purchasing power growth. This was despite continued low inflation and the high probability of other headwinds, particularly government spending cuts that will keep domestic demand muted through 2016.

3) Mexico executives are focused on sourcing new opportunities and revamping their channel strategies to continue growing

• Given increasing expectations from corporate headquarters and a challenging macroeconomic environment for multinationals, executives in the meeting expressed a growing importance of sourcing new sales opportunities, with 44 percent mentioning this as the most important internal challenge they face over the medium term.
• On the other hand, 36 percent of Mexico executives signaled the importance of adjusting their go-to-market and channel strategies, mentioning the emerging opportunities offered by increased technology adoption and e-commerce.

4) Multinationals continue to focus on revising their value proposition through value-added services

• Multinationals facing margin pressure and increasing competition are adapting their value proposition by giving greater prioritization to value-added services, with 50 percent of clients stating that this is how they want their company to change their value proposition over the next few years. A limited number of executives thought a focus on pricing would be helpful for the long-term performance of their companies in the Mexican market.

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