Reporting by John Suddeth, CFA & Kent Cheesborough, Analyst
The city is teeming with life, the sidewalks are lined for miles with red and green poinsettias, restaurant patios are full of diners, and street vendors are enthusiastically peddling their products to locals and tourists. For those who live or vacation in Florida, this illustration could be from any one of the many small town main streets decorated for the winter holidays. Surprisingly, the scene described is not in Florida or even the U.S.; rather it is a scene from a recent Sunday morning walk down Avenida Presidente Mararyk in the Polanco neighborhood of Mexico City.
After a two-year hiatus, our pursuit of uncovering exceptional global companies in which to invest returned with a December research trip to Mexico. This trip was unique as it was our first time experiencing international business travel under the ever evolving “Rules of Covid.” Although the team had been to Mexico several years ago, the awkward fist bumps at introduction, masked meetings, repetitive temperature checks for hotel entrances, and testing to re-enter the U.S. all comprised new territory for us.
Also since our last visit, Mexico had a political regime change that ushered in the progressive candidate Andres Manuel Lopez Obrador, or AMLO, as he is known. AMLO, a left leaning nationalist, garnered the support of the masses with a vision of a reformed Mexico. His campaign promised to empower the underprivileged, eliminate corruption, provide funding for needed infrastructure improvements, end the country’s widespread violence, and reassert the state’s centrality in the Mexican economy. While directionally the pledges are commendable, the stance on reasserting the state’s power raised eyebrows and was a topic of conversation with many of the business leaders we visited. Mexico’s previous President was pro-business and encouraged international investment, while the new regime’s policies have sought to reverse that progress and centralize the power over energy, banking, and law within the executive branch.
In addition to the political uncertainty, we arrived in Mexico with any number of embedded social concerns and stereotypical expectations. The threats of crime, smog, and traffic snarls are all real and notoriously unpleasant. Despite those headline risks, we were pleasantly surprised on most every front—the lovely weather, ease of using various modalities of transportation, and frequent bilingual nature of the local population to name but a few.
Given the historical shared borders, the embedded trade and tourism relationships, and the ubiquitous access to U.S. television in both English and Spanish, there is a visible intermingling of cultures between the U.S. and Mexico. And with a growing population that is now over 129 million, we noted a vibrancy in the Mexican demographic structure where the average age is just 29 years old. For comparison, the average age of the population is 39 in the U.S., 41 in Canada, 48 in Japan, (and 66 in Naples), placing Mexico among the youngest countries, demographically speaking, in the world. As we’ve witnessed in numerous emerging markets, an expansion of youthful workers goes hand in hand with increased technology utilization. Technology is a wonderful equalizer, empowering businesses with efficiencies and the ability to bypass any number of historically bureaucratic obstacles. The impact of technology was evident to us across a wide swath of the Mexican economic strata and within the companies we visited which were all using highly sophisticated technology in their work routines. Additionally, with little in the way of historic social security safety nets to rely on, the noted predominant mantra is that everyone must work to live—and to work hard if they intend to prosper in a highly energized and competitive environment.
Travelling during the pandemic added challenges, but the effort was necessary. We came away with a fresh perspective and renewed convictions related to investing in our critical southern neighbor.