Why Mexicans Don't Drink Molson. Andrea Mandel-Campbell

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СКАЧАТЬ NAFTA, was just being signed. The twenty-something figured that if he learned Spanish and got a handle on the Mexican market, it would give him an advantage when he eventually moved back to Montreal.

      “Looking ten years ahead, I thought Mexico was going to be important,” says Perron. “Unfortunately, it is not as important as I thought it would be.”

      Far from it. More than a decade after NAFTA was signed, the road paved into the dense, jumbled market is largely deserted. While Americans, Europeans and Asians have piled in to sell product to Mexico’s young and underserved population or outsourced manufacturing to take advantage of lower labour costs, Canadians have eschewed Mexico’s arid northern industrial parks and rutted city streets for the silky-white sand beaches of Cancún.

      Canadian business, either baffled by Mexico’s seemingly inscrutable business culture, leery of corruption or dismissive of its still developing market, has largely opted out. While bilateral trade has tripled since 1994, Canada sells a scant 0.7 per cent of its merchandise goods to Mexico. As of 2005, Canada had invested a measly $3.1 billion, equivalent to less than 1 per cent of its worldwide assets⁷ and a drop in the bucket compared with the more than $130 billion in foreign investment that has poured into Mexico since 1994.

      It is not as if the Mexicans didn’t want Canadian investment. In fact, as they launched the largest sell-off of state-owned assets in Mexican history in the late 1980s and 1990s, they actively courted Canadians. Modest, manageable and politically neutral, the Canadians offered a middle road between powerful American interests still tainted by a history of war, annexation and economic imperialism and the powerful clutch of Mexican families whose sprawling, interwoven conglomerates dominate the economy. But there were few bites.

      One Canadian banker recalls how he was approached by a Mexican cabinet minister looking to unload a vast copper mine in northern Mexico. The government was anxious to keep the mine out of the hands of Jorge Larrea, a hard-nosed tycoon who already controlled a number of privatized mines and railroads. Canada seemed like an obvious candidate. “The minister told me price was no object,” said the banker, who set up meetings with Canadian mining companies Noranda and Falconbridge. “The Canadians didn’t even want to look at it,” he said. In 1991 Larrea acquired the mine — Cananea — turning it into a springboard for his company, Grupo México, which went on to buy mines in the United States and Peru and is now the world’s fifth-largest copper producer. As for Noranda and Falconbridge, they no longer exist, having been acquired in a $20 billion hostile takeover by Xstrata and subsumed into its sprawling empire.

      In 2001, President Vicente Fox took the unusual step of inviting twenty Canadian energy companies to his private ranch in a bid to coax them into investing in the creaking Mexican energy sector. His country was ramping up its industrial production and was in dire need of new energy capacity. The Canadians, mid-sized and without the political baggage of the Americans, seemed like the perfect fit. “There were twenty guys at the ranch— and only three went in,” said Michael Stewart, former president of B.C.-based Westcoast Energy International and one of the guests.

      Of the three, including Westcoast, only the Alberta energy utility TransAlta is left. “People view Mexico as a wild, unsophisticated country, but parts of it are much more sophisticated than Canada, and some parts are much better to do business in than some parts of Canada,” said Stewart from his Calgary office. “You would think people in this town should look there. You can fly to Mexico City in the same time it would take you to get to Halifax — and the food’s better. But it’s tough to get people interested— they’re put off by the bureaucracy, the language and the built-in biases of what they think they can and cannot do.”

      It’s the same story in banking. Canada’s Scotiabank and Bank of Montreal (BMO) were among the first foreigners to make careful inroads into Mexico’s tumultuous financial sector. Mexico’s banks had been nationalized in the 1980s and then reprivatized in the early 1990s before a currency crisis in 1994 prompted the collapse of the entire financial sector. In a cautiously astute manoeuvre, BMO swapped Mexican sovereign debt in 1996 for a minority equity stake in Bancomer, the country’s number two bank. The move was expected to position BMO, which already owned Harris Bank in Chicago, as the pre-eminent NAFTA bank. Instead, at the height of a foreign feeding frenzy in the sector, including the massive us$12.5 billion purchase by Citigroup of Mexico’s largest bank in 2001, BMO pulled out of Mexico.

      David Winfield, Canada’s former ambassador to Mexico, was on the board of Bancomer at the time. He tried to persuade BMO to buy the bank. “They could have done so much better, and so much better throughout the Americas. BMO was well positioned with Harris Bank in the United States, and Bancomer was exceptionally well positioned to do Hispanic banking.”

      Instead, Tony Comper, BMO’s president and chief executive, “was persuaded it was too big a risk and too expensive,” says Winfield. “I think it was the wrong decision. But it required a visionary to see there was a business opportunity there.” Comper, who was tapped for the “Don Knotts Award for Meekest Ambition” by National Post Business magazine, sold out to the Spanish, who along with the Americans and the HSBC Group dominate the amazingly profitable sector, which boasts returns of over 20 per cent.

      It is not as if there are no Canadian companies in Mexico. Scotiabank survived the currency crisis to see its wildly profitable Inverlat subsidiary, which represents just 6 per cent of the Mexican market, contribute 11 per cent to the bank’s bottom line. A number of Quebec companies, like Bombardier, Quebecor and Transcontinental, have also made the trek. In many cases, however, companies such as auto parts maker Magna “were dragged down” by their clients. Others tried, but were unable to penetrate the market. “When I compare the number of Canadian companies going through my office and the rate of success, it was very, very low,” says longtime Mexico hand and former Scotiabank executive Pierre Alarie. “We missed the boat everywhere.”

      Troy Wright, former president of the Canadian Chamber of Commerce in Mexico and the managing director of Inverlat’s capital markets division, admits Canada’s track record has been patchy. “The Europeans— Spain, France, Italy — have been aggressive. It’s an attitude you don’t see in Canada. The U.S., when they see an opportunity, they attack,” says Wright. “Canadian companies take the cautious route or no route at all.”

      To be sure, there are plenty of risks in doing business in Mexico, and Canadian companies are justified in being cautious. Although conditions have improved significantly, Mexico remains rife with corruption and its democratic institutions are still a work in progress. Yet, it is not the tenuous rule of law or language barriers that seem to most flummox Canadians. As Ambassador Winfield recalls a businessman telling him: “Why should I go to Mexico if I can’t even drink the water?” One Canadian government bureaucrat explained the dilemma this way: “How do we get Canadian companies more engaged in Mexico and not get diarrhea?”

       ARMCHAIR TR AVELLERS

      At first blush, the delicate constitution of Canadian companies seems incongruous with the country’s claim to be one of the world’s great trading nations. Despite representing 2.5 per cent of the world’s economy and just 0.5 per cent of its population, Canada is the world’s eighth-largest trader, a feat that has secured its place in the elite group of eight most-industrialized countries, the G8. Over the past two decades Canadian trade has expanded exponentially, from 44 per cent of gdp to 72 per cent, making it the most trade-reliant country of the G8.

      But while some $1 million in merchandise trade criss-crosses the Canada–U.S. border every minute, cementing the world’s largest single trading relationship,* Canadian “trade” rarely ventures beyond the cozy confines of the northern United States. When it comes to the rest of the world, Canadians are armchair travellers, rarely roused from the familiar contours of the “intramestic” American market to seek their fortune in foreign lands.

      Canadians СКАЧАТЬ