Participation of Eng. Carlos Slim Helú in the Nearshoring Summit Mexico, Productivity with a Vision for the Future, Mexico City.
February 19, 2024
Stenographic version Nearshoring Summit Mexico
Pedro Haces – Thank you very much, so glad to greet you again in this Nearshoring Summit. And today, we’re going to have a very interesting conversation. Here with us is Paco Cervantes and also Juan Ramón de la Fuente; but with us is also the friend of you all, Engineer Carlos Slim, for whom I request a strong applause…
And here he is, at the end of the distance, but with all of you, Carlos, how are you? Engineer Slim, good evening”
Eng. Carlos Slim – Good evening, good evening, everyone! I’m sorry not being physically there, but I’m with you from here, through this means!
Pedro Haces – There is a lot of enthusiasm in this conversation today, to hear you, Carlos, we know the reason why you are not here with us, and we send you a strong hug. Let’s start talking with you, so people from the press, the media, businessmen, chambers’ presidents, union leaders, deputies and senators, members of the different government entities, who are here with us today, have a chance to hear from the voice of a Mexican who has exalted our country, with his name and with all he has done in it.
And particularly, the interest you have, as businessman, on moving this country forward, and achieves an historical growth in the next year with the nearshoring topic. This business relocation coming to invest in our country, I was saying, a bit ago, in one of the previous panels, today, we, unions must leave old practices behind and promote productivity, hand-in-hand with businessmen.
Carlos, what is your opinion about what’s coming to Mexico with nearshoring?
Eng. Carlos Slim – Well, first of all I want to congratulate, you and Paco, Paco Cervantes for the idea of this Summit. I really think it is a very important summit, to hold it also in a timely manner, because it is fundamental for us all to be aware of what is happening and what is about to happen.
If we go far back in time, it all begins since the Chinese government programs established, many years ago, 45 years ago, forty years, that they were going to change, that they were going to modify. It was Deng Xiaoping who promoted and arranged this situation, after Mao passed away.
And this development was modernizing, which is interesting, modernization in agriculture, in livestock; modernization in industry, modernization also in the military, and modernization in the science knowledge and technology. And they have arrived here, we have seen where have they arrived, at a level where, somehow, they are confronted with the US.
We have seen this confrontation for a leadership – economic and technological – since in recent years. In the last few years, the China progress has been in all directions. From the economic and technological point of view. And well, that progress somehow has implied a confrontation, a confrontation where, there even is a letter from President of the US, President Biden, dated March 212, I think, where he is clearly stating that this confrontation exists between some countries he classifies in that letter, and they are confronted with the others.
Fortunately, they are talking about an economical confrontation, and that is what this new civilization is implying. It is not anymore about the agricultural civilization in the war; when they were at war, all against all, widening their areas, their territories and sacking, etcetera, etcetera. All that happened in this agricultural society…
In this modern society, in this technology civilization, well, competence and reasons are economical, and for markets and for knowledge. It has been remarkable – and I think is very good news – the attitude of prince… of the Chinese president who, in the last summit in San Francisco. The president stated that, “he did not want Cold Wars nor Hot War”. And on the other hand, President Biden, I was saying, was talking about an economic war.
That economic war is already taking place, it is not going to happen, it is happening now. Fortunately, our proximity to the US, oppositely to what Porfirio Díaz once supposedly said, “how bad being so close from the US and so far from God.” Now, it is very good being close to the US, because that is going to change and accelerate Mexico’s economic process.
We, Mexico and the US have a very complementary economy, meaning that we are not a country that is competing with the US, but that it is complementing with the US, and as president López Obrador said, a few years ago, when he signed the USMCA Agreement, “Mexico integrates to North America, economically”.
And what was established in the Agreement, and what is expected to happen rapidly. And well, to justify this “rapidly” I’m talking about, well, I want to make some comments about the balance of trade. It happened that, on year 2022, China exported to Russia 536,300 M, and Mexico, 455,775 M. These figures are very impressive, because their magnitude is huge, particularly for Mexico as related to our Gross Domestic Product. OJO, en el archivo de facebook EL AUDIO ESTÁ CORTADO
But this is 2022. Year 2023 had an interesting phenomenon, they said that China exported 136,000 M, and us 454,000 M, Dollars. On 2023, it turns out that China reduced its exports in 109,000 M Dollars. China imports to the US shrank 109,000 M Dollars; while Mexico’s increased 9,000 M Dollars. This way, for 2023, Mexico is the biggest exporter to the US, and is exporting more than China, as I was saying, 475,600 M versus 427,200 M. This means that the US is clearly replacing Chinese exports with Mexican exports, directly and indirectly.
So, what I think this is pointing to is that we are not only going to grow through this way, but Mexico will also need to increase its investment as related to the Gross Domestic Product. And for that moment, I think we need to speed up to set that increase.
Mexico has invested 24, 20, 18, figures quite diverse as related to the Gross Domestic Product. However, I believe this situation demands of us to move towards a 28, hopefully 30 percent of the GDP, as investment from Mexico, as Mexico’s annual investment as related to the Gross Domestic Product.
I believe that such investment, or I hope, I hope, can happen, and it will take us to growths of five, six percent. And if Mexico grows at five, six percent, well, that would be unusual, However, from 1933 to 1982 we grew at 6.2 percent. For 50 years in a row, we grew at 6.2 percent. The best period, in my opinion, the best growth, the most relevant and remarkable growth, was from 1952, with the government of President Ruiz Cortines; then with President Adolfo López Mateos; and then with President Gustavo Díaz Ordaz. There was a very precise, careful management that also implied imports replacement, and it was called, “the stabilizing development.”
That stabilizing development allowed, in 18 years, to grow at 6.6 percent, conveying a very moderate inflation. Particularly in the last 12 years, growth was of 6.8, from 1958 to 70; 6.8 percent and with an inflation lower than that of the US, I think below three percent.
Well, I think we have that background, it is important. And of course, the background of the 50 years. It was when Mexico got industrialized. Mexico started a nationalist campaign, resulting from the Great Economic Depression of the 30’s. Then this growth started, this development started on 1933. I was saying, with that nationalist campaign, the motto of which was, “consume what the country produces,” that was the campaign motto, “consume what the country produces.” It is from 1932 or 33.
And, so, growth is here, was there, and I believe we can relaunch a new growth and development stage, strengthened in two fundamental items: One is that the US will need Mexican products, that many of the goods it imported from other places are produced here; and we are already seeing that on year 2023 it happened. So, once Mexico produces and exports more…
But another item, probably more relevant than that imports replacement, is that Mexico should invest, I was saying, between 28 and 30 percent; that we are able to grow at 5 or 6 percent; and that the population significantly improve its income, for example, through these new businesses, these new investments; that it strengthens its income, that has higher purchasing power… and that we are not only working for the North American market, or the Canadian, but also working for a strengthened Mexican market, implying much greater well-being for the population.
So, this will feed growth back. So, we have two ways in this nearshoring. One is having export and work facilities and activities, and large investments required for these huge production replacements. And the other is… sorry… this nearshoring, besides the border, besides the Mexico-US border, which is the point where this trade will grow more; where it has growth the most, where it is the highest… it will be also supplemented by the likely relevant growth, or the relevant potential growth in the Isthmus through the Interoceanic, through the Interoceanic Railway, when ships cross there and we can send goods from Mexico to the US eastern side, where, up to date, our market share in the US eastern side has only one digit and very small.
That is, we also have the export potential to the US eastern side, that so far has been minor. And I insist on the relevance of national investment and growth, of strengthening the domestic market, enabling an accelerated development. That is, the truth is that I see with a lot of optimism the next 10, 15 years of this country, where being consistent with some economic development policies, such as the stabilizing development, where the objective of course was having a population with better income. During those years, the minimum wage had a substantial increase, from 1952 to 1970.
So, relaunching… these last few years, for example, where we have had an economical growth… sorry… a moderate economic growth, particularly if we consider the pandemic that was 8% negative, well, it is obviously reduced. However, there was a relevant issue that is not often considered, that by increasing wages and the population’s purchasing power during these years, consumption went up, and that consumption gave certain sustainability to growth and improvement of a good population sector.
So, summarizing, confronting economic conditions between China and the US, imply that the US will not purchase where it is cheaper, as some previously recommended; that they do not purchase in other places only because it is cheaper. That they should try to produce and be complementary with México, and perhaps with Canada. Some commodities such as chips… such as… chips… I forgot… but… chips. Keep on moving technologically as they have done, and not depend on receiving them from somewhere else, and that will enable them to eliminate that dependence, as some other high added value products like these, and that is very important.
On the other hand, when you talk about nearshoring, near, near, I think it also results suddenly, overnight, the cost of transporting one… transport increased from 2,000 Dollars to 12,000 Dollars, per container. That is, containers that were exported at very competitive prices, attractive even, well, out of the blue to 12,000. They rocketed and, as I was saying, chips also remained unsupplied during a time where vehicles could not be finished, nor TVs, nor refrigerators.
Well, that situation led to this that is very favorable to Mexico, that now the production must be in North America, that production must be here. And nearshoring also means that transportation will not be a factor; the connection is rapid, immediate. The tram systems, I mean, freight railroad systems will be very important.
And, well, this is the US and Mexico part, on the imports replacement topic, and as I was saying, we substantially increased our exports. I repeat the figures, on 2021, Mexico exported 382,589; on year 2022, 454,000.77 MM Dollars; and on 2023, 475,607 MM Dollars. Well, these figures of 362,000, 454,000 and 475,000 are already highlighting that it is a fact, that it is not a hope, it is already happening.
And I hereby ratify the nearshoring part, that will also be linked with an improvement of the economic development, because this will imply a higher investment. As I pointed out, we had an investment of 22, 20 percent of the GDP. Usually the big one, no, no, no, not regularly, but the highest investment comes from the private sector. Which is in the order of 18, 16… and I hope it can reach 20 percent. That we in the private sector can reach 20 percent. Abroad, foreign investment is 4, I hope it could reach 5 percent, and public investment, which also has been in 3, it could reach 4 or 5%. Then, we would be talking about an investment of 28%, in general.
So, I think, in summary, I am very optimistic about this investment will crystallize, this investment will come very soon, and of course, these topics of trade and investment to build plants, productive employment, maquila, etcetera. Now, we are not going to be so maquiladores as before, we are going to be more like partners. That association of the US, Canada and Mexico will be very important for national development. And of course, for Canada and the US, it will also be of great importance.
Pedro Haces – Very good, Carlos! Your friend, Juan Ramón de la Fuente has a question for you. Here is Juan Ramón with you!
Juan Ramón de la Fuente – Hello, Carlos, good evening! Thank a lot for your insights! Look, besides the investment topic, which you have reiterated in several occasions, and I fully agree with you, in your opinion, which would be other, not exhaustively, but let say, maybe other two or three major challenges you see, for this relocation topic really takes us to exactly what you were saying. That is, being partners and not only maquiladores. For example, I think about the human resources factor, where I think there is still a long way to go. But which two other major challenges are you seeing to complete the reference framework to our discussion this evening, Carlos!
Eng. Carlos Slim – Well, I think it is fundamental from the socioeconomic and political point of view, etcetera, this will be a very wide view, ok? You have to give good nutrition to the mother during pregnancy. You have to take good care of toddlers during their first two years, also obsessively. You have to consider maternal and infant mortality. Then, I think you must significantly improve education, the education quality. Then of course, you will have high level studies, and medium level studies, etcetera.
But I think there should be a lot of studies that we are emphasizing on our Aprende program, for the job training. And now, more than ever, job training. There is a very important thing, in my opinion. In the US, the famous Blue Collars, workers, employees, have been disappearing because the US have been purchasing goods abroad for a long time. So, goods manufacturing plants in the US have been substantially shrinking, and American labor is not very good for the industry, because it has its nine-to-five and coffee-break, and there are many, many, many things slowing industrial productivity down in the US.
And we also know by experience, we have some operations up there, and employees, workers, industrial workers are not good productivity workers. I won’t say high productivity. On the other hand, in Mexico, workers are excellent, excellent! It was confirmed by automotive industry many years ago, that is why many of them came here. To automotive industry, because Mexican workers is excellent. And I think what we should do is train them, provide more training to workers, particularly to people in the Southeast, for them to try to improve themselves, because there, their main function has been agricultural, and their economy has been stunted.
So, I would say, strengthen people education and training significantly; and of course, try for them to improve their income. I believe that the most important thing for workers is having better income, as that will make us have a larger, more solid, better domestic market, better every day.
So, I would say, health, of course, but education would be fundamental, and workers training. And we have a very, very good staff, of very high productivity. And only as a comment, within the whole potential there is, on year 2003, around 2003, in a study conducted by Morgan, JP Morgan, it was established, it said that China had a manufacture hourly rate of 63 Dollar cents, while in Mexico it was of 2.50 Dollars. There, the same study, but on 2015, the hourly rate for a Chinese worker was of 4.50 Dollars, and the Mexican’s was 2.50.
I think, today, the Chinese wage must be around 7, 8 Dollars, 10 times higher, 14 times higher than the one they paid 20 years ago. That is, it has been increasing, now it is an expensive wage, if compared to Mexico. And that is why is so important that in this activity workers have an increasingly better income.
Juan Ramón de la Fuente – Very good, very good, Carlos, and thank you very much. I’m going to leave you with Francisco Cervantes, who is also here with me to make comments and questions he considers adequate. Regards, Carlos, I leave you with Francisco!
Francisco Cervantes – Engineer, very good evening, happy to greet you!
Eng. Carlos Slim – Good evening!
Francisco Cervantes – Engineer, you were also talking about reaching the eastern side of the US, do you think improving ports to use them more, and using maritime routes would be a good opportunity to reach ports on the eastern side of the US, and I think that could also help developing the South, Southeast?
Eng. Carlos Slim – Well, yes, I think the ports of Los Angeles and Manzanillo are saturated, they are somehow saturated. The Interoceanic Project opens the Salina Cruz port, the Salina Cruz port, which has to be done right, structured, because it is possible that it will receive lots and lots of freight. And on the other hand, the Coatzacoalcos port, which has always been active.
A few years ago, it was usual, well it may be still usual, using trainships. So, these trainships, I don’t remember their capacity, 140 railcars per trainship. So, we would expect that, if the Coatzacoalcos port is further expanded to receive trainships, trainships, but also, it is probable that you have transportation from Asia to the US eastern side, which has to be moved through the Isthmus, given the current saturation in the Panama Channel.
But beyond that, where more training is required, is in the Southeast. Training, and what has to be brought there, hopefully they can bring, is a lot of industries. Parks are already established. There is a huge cement manufacturing plant, since many years ago. But I think it is very important to start producing different goods down there, which may be exported to eastern side of the US.
I don’t have the exact number, but I think that in some places, Mexico was exporting about 4 to 6 percent to that area. So, I think this area… with a relevant available market, and I think we should do it.
So, I do believe ports must be prepared, and of course, let’s do it not only with trainships, but with cargo ships that are constantly moving from the eastern side down here. I think that transportation route is very important, as well as the market, which must be harnessed, that market coming from other places, or goods from other places, that we could also manage, through the Isthmus.
Francisco Cervantes- Well, thank you very much I think it is very important turn our heads to the South, Southeast too. I also think it is very important to reach to that important market of the US west… US eastern side. Thank you very much!
Eng. Carlos Slim – I think it is important that it can also be be touristic, I also think it is important, and the US also said something about it 15 years, 20 years ago, but has not crystallized it, and that president López Obrador has insisted to them, is that Americans call it the “Northern Triangle”, which is Guatemala, Salvador and Honduras. Anyway, the economy in Panama works very well, it has a very good per capita income, I think it is around 15,000 or 14,000, I don’t know how much. Costa Rica as well.
So, to help those countries to raise investing in them to produce goods to be sent to the US. That would also be important. All those goods could also be sent through the Isthmus.
Francisco Cervantes – Well, I think this reflection is very, very important, Engineer, and I give the microphone back to Pedro Haces. It was very nice to talk with you and big hug!
Eng. Carlos Slim – I send another back to you all!
Pedro Haces – Engineer, thank you very much for this conversation, with all our friends gathering here in the Nearshoring Summit, and we hope to have you with us in another meeting. We send you a hug, and say good bye to you with a big applause, to Engineer Carlos Slim.
Eng. Carlos Slim – Thank, you, thank, you Pedro, and I remain at your disposal. When you organize other events, please, don’t forget to invite me!
Pedro Haces – Of course not, you know you always give us great lessons. We admire you, we respect you, and we love you, dear Carlos! A strong hug, and Godspeed!
Eng. Carlos Slim – Thank you, so long, thanks!
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