Restoring Mexico s International Reputation

Transcription

1 Restoring Mexico s International Reputation Roberto Newell G. WWICS-Comexi May, 2011

2 Today s presentation Perceptions are negative All not well with Mexico Truth and perceptions misaligned High costs of bad reputation Time to fix this

3 1 Perceptions are negative Country Brand Index: 2010 Mentions (K) Grade Rank China Brazil India Russia Mexico Source: East-West Communications, 2010

4 1 Perceptions are negative Wasn t always so The men running Mexico are probably the most economically literate group that has ever governed any country anywhere. also great salesmen. They have convinced the world that Mexico is on the verge of an economic miracle The Economist December 14, 1991

5 1 Perceptions are negative NY Times less interested in Mexico Topic frequency NYT: Economics 200 Politics 150 Crimen y temas fronterizos Source: Restoring Mexico s International Reputation, Newell, 2011 Source: Newell, 2011

6 1 Perceptions are negative focused on reputation damaging news Source: Newell, 2011rce: Newell, 2011

7 1 Perceptions are negative Same with WSJ Topic frequency NYT: Source: Newell, 2011 Source: Newell, 2011 Economics Politics Crimen y temas fronterizos

8 1 Perceptions are negative whose focus has also changed to crime and migration Share of mind: WSJ 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Share of mind Source: Newell, 2011

9 1 Perceptions are negative Reforma headlines also focused on crime Reforma's headlines April 12-May 11, % Crime All else 57% Source: Newell, 2011

10 1 Perceptions are negative Gary Larson foresaw this; we have become Tyrannousaurus Mex

11 Today s presentation Perceptions are negative All not well with Mexico Truth and perceptions misaligned High costs of bad reputation Time to fix this

12 2 All not well with Mexico Labor productivity stagnant Source: Peña, Pablo A. Aggregate Shocks and Investment in Human Capital: Evidence on Postsecondary Source: Peña, Schooling Pablo, during Las décadas the Lost perdidas Decade in y Mexico. el futuro económico, Febrero, 2011

13 2 All not well with Mexico Factionalism explains low productivity growth Reform PAN PRD PRI Electricity (1997) x x Fobaproa (1996) x x Fiscal (2002) x x Petroleum (2008) x x Fiscal (2009) x x Security (2011) Reforma del Estado (2011)? x x &

14 2 All not well with Mexico After a period of improvement, violent crime has risen Index of Murders per 100 K 100% : 14 murders per 100K Source: U.N., PGR, estimates by author

15 2 All not well with Mexico But, Mexico not homogeneous Murders per 100 K population in 2010 Frequency of States National Average 0 0 to 5 5 to to to to to to to to to to to to to to to 80 Source: U.N., with data from PGR

16 2 All not well with Mexico Nor is it the worst Intentional homicides por 100K population Mexico China India Other countries: Salvador 71 Jamaica 60 Guatemala 52 Venezuela 49 Trinidad 43 Colombia 35 Russia Brazil Source: U.N., Interpol, various national agencies, most recent statistic, compiled in Wikipedia Source: U.N., with data from PGR

17 Today s presentation Perceptions are negative All not well with Mexico Truth and perceptions misaligned High costs of bad reputation Time to fix this

18 3 Truth and perceptions are misaligned BRICS growing more rapidly 14% 12% 10% 8% 6% 4% 2% 0% -2% GDP growth (annual rate in current $US) Brazil Russian Federation India China Mexico Source: World Bank. World Development Indicators

19 3 Truth and perceptions are misaligned China and India won t catch up to Mexico soon Source: IMCO using IMF World Economic Outlook data base

20 3 Truth and perceptions are misaligned Mexican households consume much more $6,000 $5,000 BRA RUS IND CHI MEX $4,000 $3,000 $2,000 $1,000 $ World Bank. World Development Indicators

21 3 Truth and perceptions are misaligned Easier to do business in Mexico of Ranking Doing (out 183) Business Brazil Russia India China Mexico Ease of doing business Source: Doing Business Report, World Bank, Starting a business Dealing with construction permits Employing workers Registering property Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Closing a business

22 3 Truth and perceptions are misaligned Population projections favorable Accumulated population growth: 2050 Mexico China India Russia Brazil Source: Census Bureau, International Statistics, 2011* -20% -10% 0% 10% 20% 30% 40% 50%

23 3 Truth and perceptions are misaligned Life expectancy also better Mexico China India Russia Life Expectancy HALE Brazil Source: Nationmaster, Statistics, 2011, HALE taken from OECD

24 3 Truth and perceptions are misaligned As are schooling levels, compared to most BRICs Mexico China India Russia Brazil Source: Nationmaster.com, Statistics, 2011 N.A.

25 3 Truth and perceptions are misaligned In sum, this is best Mexico ever In this context

26 3 Truth and perceptions are misaligned Subs of multinationals are doing well Kimberly Clark Operating profits* from Mexican subsidiaries: 2010 BBVA Procter & Gamble AMEX Walmart/Walmex Citigroup 0% 5% 10% 15% 20% 25% 30% 35% 40% *Operating profit used to eliminate effects of debt and taxes Source: corporate 10Ks, author s estimates

27 3 Truth and perceptions are misaligned as are domestic corporations 35% Operating profits / Total assets: % 25% 20% 15% 10% 5% 0% Bimbo Telmex America Movil Cervecería Modelo Source: company annual reports, author s estimates FEMSA Coca cola

28 Today s presentation Perceptions are negative All not well with Mexico Truth and perceptions misaligned High costs of bad reputation Time to fix this

29 4 Costs of bad reputation are high FDI not growing as expected $600 FDI inflows per capita $500 $400 U$S $300 $200 $100 $0 Mexico Brazil China India Russia Year Source: IMF, International Financial Statistics, author s estimates

30 4 Costs of bad reputation are high Investment flows possibly affected by rising crime rates Tasa de homicidios* Formación Bruta de Capital Source: Serra Puche, 2011

31 4 Costs of bad reputation are high Triple whammy to tourism 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Incoming tourism revenues (Million U$S) Great recession Swine flu Risk perceptions (Mexico brand drops 11 places)* % revenue drop in 2009 Source: INEGI, BOP statistics

32 4 Costs of bad reputation are high Bad luck contributed to this outcome

33 4 Costs of bad reputation are high Other significant effects Loss of confidence in democracy (Latinbarometro, 2011) Loss of political support to current administration (Mitofski, 2011) Politization of war on crime (May protest marches) Loss of talent

34 Today s presentation Perceptions are negative All not well with Mexico Truth and perceptions misaligned High costs of bad reputation Time to fix this

35 5 Time to fix this Need to act on two fronts simultaneously Future reputation 1. Real measures Reforms Execution Resources Continuity Committed leadership 2. Influence strategy Clear mission Targeted messages Institutional skills Quality staff Metrics Follow-up

36 5 Time to fix this Experiences to draw on Lobbying policy decision makers Israel Canada Korea Mexico ( ) Communication strategies Brazil China Soft power deployment Chile Singapore

37 5 Time to fix this Stakes are enormous Present value of perpetuity without growth 10% more FDI +/- 2.5 % GDP 10% higher tourism revenues +/-.3 % GDP Source: INEGI, author s estimates, discounted at 8%

38 Summary Mexico s reputation seriously damaged Failure to act would be costly Perceptions will shape reality Lose critical strategic options (i.e migration reform, next phase of NAFTA) Destroy valuable intangible asset Huge opportunity cost Imperative to act now