Mexico Business Forum 2021 Echo - Impact Report by Mexico Business Publishing

IMPACT REPORT

Platinum Sponsor

Networking Sponsor

PRIVATE DEVELOPMENTS COULD PLAY LARGER ROLE IN NET ZERO

The fight against climate change must involve the cooperation of all parties, even non-manufacturing companies. To join the fight, private companies could turn to green buildings, one of the most straightforward and cost-effective ways to contribute to a zero-carbon economy.

The most successful initiatives have usually been accomplished through public-private partnerships, most recently exhibited through the development of the COVID-19 vaccine in record time. In contrast, the international community has repeatedly failed to successfully address a far more pressing existential crisis: climate change. The science is clear: if the international community fails to act soon, the world will suffer irreparable damage that will incur a cascade of consequences that are much more expensive than inaction.

“The participation of the industrial and the private sectors toward net zero carbon initiatives will be essential, otherwise addressing climate change will be impossible.”

Alicia Silva Villanueva President of SUMe

economy is through green buildings, said Villanueva. These buildings aims to reduce or eliminate altogether the negative impact of a development project on the natural environment, and if possible, create a positive one through intentional design and operation. In practice, that could equate to improving energy efficiency, water efficiency and conservation, implementing renewable technologies and sustainably sourced building materials. From a pragmatic standpoint, “buildings and real estate in general are the [white] elephant in the room,” said Villanueva.

“I remember when this technique first emerged, most viewed the movement as a trend that would disappear. Now that its value has been recognized, investors are exploring its application to their own development portfolios,” she added.

Beyond international governments, the participation of the global private sector will be critically important to effectively address the climate emergency. The most effective place for these entities to begin: net zero carbon buildings. “The participation of the industrial and the private sectors toward net zero carbon initiatives will be essential, otherwise addressing climate change will be impossible,” said Alicia Silva Villanueva, President, SUMe.

The most straightforward and cost-effective way the private sector can contribute to the development of a zero-carbon

Private sector initiative will be paramount in Mexico considering the country has actually added to global carbon emissions despite having ratified the Paris Climate Agreement almost six years ago. This was caused in part by a federal reprioritization of carbon fuels in energy generation over green renewable technologies, which has resulted in a sixyear delay in the country’s commitment to generate 35 percent of the nation’s energy with clean technologies by 2024. Under President Andrés Manuel López Obrador’s administration the country pivoted from a green energy transition to carbon projects, which could threaten to add another degree Celsius to the global environment. However, there are still plenty of energy producers and green initiatives the private sector could recourse to.

As development tries to keep up with a swelling global population, especially in urban centers where people are most densely concentrated, green building could play a central role in all new projects not only from a health perspective but an economic one. “It is more expensive to ignore climate

change than to prevent it, we have learned that repeatedly this year through multiple costly climate disasters,” said Villanueva. With only eight years to address this emergency, the “Net Zero Carbon Buildings Commitment challenges companies, cities, states and regions to reach net zero

operating emissions in their portfolios by 2030 and to advocate for all buildings to be net zero in operation by 2050,” she added. In order to supplement the success of this call to action the organization allied with banks to facilitate access to capital for green development projects.

PANDEMIC, NEARSHORING RAISE INDUSTRIAL, LOGISTIC DEMANDS

With the economic recovery seemingly in full swing, the growing demand for nearshoring manufacturing and logistics-focused activity provides Mexico’s industrial parks with plenty of demand. Adapting to current needs is essential to attract these new players, argue industry experts, but this shift should also align with optimal investment attraction strategies.

“The real estate market for industrial and logistics players has been one of the winners of the pandemic, although seeing markets in terms of winners and losers is too simple because they are all intertwined,” said Claudia Ávila, Executive Director, Mexican Association of Industrial Parks (AMPIP). Two main drivers are pushing demand in the market: the growing need for nearshoring to outsource manufacturing or logistics to Mexico, as well as the spectacular growth of e-commerce. Ávila mentioned that the latter industry has experienced a whopping percent 81 growth from 2019 to 2020, according to a report from the Mexican Association of Online Sales (AMVO). Overall, e-commerce now represents up 9 percent of all sales made. Growth in nearshoring might not be as explosive but the growing demand, thanks to Mexico’s excellent position and market fundamentals, can no longer be ignored. The uptick causes significant

“Mexico has one of the highest CAP Rates, between 6 and 7 percent, whereas the US has between 3.5 and 4.5 percent. This is a difference of 250-300 base points.”

Luis Gutiérrez President of Prologis Latin America

challenges to solve for companies providing industrial infrastructure.

“We are experiencing record growth in the industry,” said Enrique Lavin, Country Head, PGIM Mexico, the local arm of a leading global real estate manager and administrator. “Nearshoring is a reality, we see that it is increasing 15 percent year-byyear for industrial parks and logistic centers,” he added, noting that most players settling in the Mexican market tend to come from the US and Asia. But neither manufacturing nor logistics are standing still. Both are moving with current trends such as sustainability, environmental responsibility, digitalization and the use of electric vehicles (EVs), many of these trends having some form of overlap. Health and safety concerns have also increased significantly since the start of the COVID-19 pandemic.

“Adaptability to new challenges and trends is key,” said Juan r odrigo Vega, Chief Marketing Manager, CONST r UCTO r A INSU r . Investment volume in 3Q21 hit a record high, reaching US$193 billion, according to infrastructure giant Newmark’s 3Q21 Capital Markets report. In the current market, investors are looking for higher efficiency: “It is necessary to address challenges from industrial players looking to become more efficient,” said Jorge Fabris, Newmark’s Managing Director.

Though adaptation is essential for the success of real estate companies, the shift to client demand should go hand in hand with attracting foreign direct investment (FDI). Because Mexico is widely recognized as a force in manufacturing, with an excellent workforce to boot, the country is well-

positioned to attract such capital. In fact, Mexico is one of the world’s top locations for FDI. “During events and panels, people on the outside often see Mexico as a potential winner. We are in a privileged position to make good use of growing demand,” said Fabris. “Mexico has one of the highest CAP rates, between 6 and 7 percent, whereas the US has between 3.5 and 4.5 percent. This is a difference of 250-300 base points. These figures attract foreign capital to Mexico,” said Luis Gutiérrez, President, Prologis Latin America

“The biggest challenge is to develop joint platforms with the government to offer long-term solutions.”

Enrique Lavin Country Head of PGIM Mexico

need to be implemented correctly. “Because saturation is an issue, companies should consider going vertical instead of expanding horizontally,” suggested Vega. This means higher buildings, operating on an equally elevated level of efficiency. Converting Class B buildings to warehousing can provide more value, said Fabris. Older, unused manufacturing plants are often located in well-connected sites and become beneficial again by serving as storage spaces. What is more, green energy solutions such as photovoltaic solar panels could be installed on older buildings.

As a result of increased demand for e-commerce, more storage and inventory space is a must for companies in Mexico. “Changes in consumption patterns and logistic needs have altered how we see the industry,” explained Gutiérrez. Especially in the North of Mexico, storage space is becoming an issue, driving up land prices. “Storage and logistics practices are changing from a ‘just in time logistics’ to ‘just in case storage’ approach,” said Gutiérrez, which further compounds the problem. Higher rents and increased land prices create problems. “This limits growth,” said Lavin.

Finding Solutions to Position Mexico as a Winner

No matter the solution, Mexico should move quickly to solve issues regarding space and workforce. “Potential clients have no time to wait,” stressed Ávila. “This is indeed a challenge, but is a positive issue for developers because it forces them to be in touch with current demands,” replied Fabris.

To deal with a lack of storage space, plenty of solutions are already available and merely

Human resources pose the next big challenge for Mexico’s industrial players. Especially after a global pandemic, international companies have found that attracting the right workforce is an issue. “Mexico’s human resources are an asset, so the country stands a lot to gain here,” said Gutiérrez. But these resources have remained somewhat underdeveloped. “We are still somewhat behind developed economies in terms of infrastructure as well as in the training of human resources,” said Vega.

“Mexico has one of the best workforces in the world, but the public and private sector should develop its potential,” he added. Via improved universities and training centers, Mexico’s workers can begin to better tackle the challenges of modern logistics and automation. “The biggest challenge is to develop joint platforms with the government to offer long-term solutions,” said Lavin.

Mexico’s northern and center areas are quite well developed, but Mexico’s south has traditionally not enjoyed as much growth. By making use of the growing need for industrial infrastructure, this trend can change. “There is real industrial growth in southern Mexico, especially for storage facilities. We see that this area has great potential for this type of growth development,” said Vega. Fabris added that southeast Mexico has attracted attention from international clients, “particularly in Merida, Villahermosa and Veracruz.”

MEXICO CITY: A RENTERS’ COMMERCIAL MARKET

Commercial office spaces remain largely unoccupied in Latin America, a trend that will only grow as pre-pandemic development projects are completed.

“The over-supply in the commercial rental market has allowed renters to emerge as unequivocal winners but places owners at a growing disadvantage.” said Pedro Azcue, CEO of JLL Mexico.

Of Mexico City’s almost 7.5 million m2 of commercial office space inventory, roughly 1.8 million m2 remains available, concentrated mainly in Santa Fe with 22 percent, followed by Polanco with 15 percent and Insurgentes Sur with 12 percent of the total market.

Within the available market approximately 43 percent of the spaces are air conditioned, a deliberate choice from companies who looked to cut costs from their bottom lines. This choice has worked at the detriment of office buildings inaugurated between January and September 2021, which had to offer their spaces at the same cost as spaces without this amenity. yet, some have held out and currently represent 8 percent of the total available market. On top this, their added presence in the already saturated market has increased commercial market availability by

“The over-supply in the commercial rental market has allowed renters to emerge as unequivocal winners but places owners at a growing disadvantage.”

Pedro Azcue CEO of JLL Mexico

25 percent in just a year; coinciding exactly in the submarkets where there is presently most commercial space availability.

Demand, on the other hand, only increased by 245,739 m2 and about 30 percent of market activity was derived from preexisting contracts. If the hybrid work model takes hold, companies would be further incentivized to scale down their office spaces. In a comparative analysis over the past decade, it became evident that the demand for commercial spaces is cyclical in Mexico, reaching 556,846 m2 in 2014 only to backslide the next year before climbing back to 600,334 m2 in 2016. There was a definitive peak in 2018 with a demand increasing to 646,244 m2 before dropping to the current 245,739 m2.

The pressing question for property owners is: will market demand rebound as it has in the past or should they start formulating an exit strategy now? So far, in the post pandemic economy, the numbers don’t look too great. In all but one submarket region, occupation of office spaces has decreased, most saliently in Santa Fe with a negative 70,944 m2.

Irrespectively, there are more development projects underway, which are estimated to add an additional 710, 019 m2 during the next few years. These are concentrated mainly in r eforma, Insurgentes and Polanco. In addition, there are dozens of other proposed projects on the pipeline that are expected to add a further 1 million m2 of commercial office space in reforma and Santa Fe.

DISRUPTORS REVOLUTIONIZE REAL ESTATE RENTALS, SALES

Mexico’s expansive real estate market had been gradually adopting new trends but the pandemic accelerated the transition. Developers are now looking for more space outside cities, cost-effective co-living and new ways to invest in property, said real estate insiders.

The pandemic has left a mark on Mexico’s real estate environment. Construction slowed down immensely and analysts say it will take a while before it recovers. On the other hand, the mortgage market was boosted by the increase in residential demand and offer, low interest rates and

forced savings generated during the pandemic. The housing lag was reduced too. “The initial uncertainty shifted to a big opportunity for the company,” said Bernardo Cordero, Co-Founder, Flat.mx, a startup that buys and resells upgraded property. The company saw that these factors led many to try to sell their property, while many potential buyers saw slightly lower prices.

yet few have sufficient funds to purchase expensive property, said rodrigo Barrera, Co-Founder and CEO, HAMOC, which provides service as an aval (a necessary guarantor for renters in Mexico). “The pandemic has affected the market in offer and demand. Nonetheless, even before the pandemic we saw that people were looking to rent property. Not everyone sees buying a house as a good opportunity,” he said.

However, the economy is picking up, showing a clear growth in demand for the mortgages, Juan Kasuga, Senior Partner, C r EDITA r IA Mexico. Many are not looking to purchase housing right where they live, though: “People are migrating away from cities, where they rent, and buying property elsewhere,” Kasuga said. The main driver is that people, often working from home, are looking for a better quality of life within the ‘new normal.’ “An increasing amount of people are buying real estate in Mexico’s central region, in places like Cocoyoc, Valle de Bravo and Queretaro, considered real estate hot spots at the moment,” he added. One major selling point is the quality of internet: living at Mexico’s beaches appears to be an attractive proposition but lagging internet can soon become a major nuisance

“Companies are looking for more advanced office spaces, with less of a focus on common areas and more of a focus on productivity and flexibility for workers who go there irregularly or infrequently.”

Samantha Macías General Manager of Yellow Block

for remote-working professionals. For those still looking at property within the city, demands are also changing. “When we value buildings, we had to adapt this valuation to a bigger need for common spaces,” said Cordero, pointing toward how families frequently look for apartments that provide spaces that can entertain their kids.

The new way of living is also changing how people use office space. “Companies are looking for more advanced office spaces, with less of a focus on common areas and more of a focus on productivity and flexibility for workers who go there irregularly or infrequently,” said Samantha Macías, General Manager, yellow Block. Now that hybrid home-office models are becoming popular, real estate companies need to step up and adapt their offer.

As some move away from the areas they traditionally lived in, others are looking to enter these exact areas now that spaces are becoming free. “The post-pandemic world is not going to lie down and relax forever. Schools and restaurants continue to add value,” said Barrera. Some areas, such as neighborhoods close to Mexico’s famous r eforma avenue, will remain popular for those reasons. “But some zones that were previously ‘hot’ to rent are no longer that enticing,” he added.

For those looking for spaces to work in person, new trends are emerging. Some do not have the money to rent or buy expensive properties in bustling areas of major cities. Co-living solves many of these issues, said Barrera. “Co-living is cost-effective because it gives people the opportunity to live in small, efficient spaces instead of large apartments. Coliving furthermore seeks to give an identity to social living through its shared spaces. It meets human needs by allowing people to live in a community,” supported Barrera. Other than co-living, co-owning properties is growing in attractiveness. Because it becomes increasingly difficult to purchase an apartment with one’s own budget, people are now gathering their resources

to buy property. “People still want to own property, but the possibilities to do so are simply not the same as in the past decades,” concluded Barrera.

Other, unforeseen trends could emerge soon, according to Cordero: “We will see the creation of products we have heretofore not seen in the market.” But whatever living trend people opt for, the online sphere is becoming increasingly important. “People are much more open to move online. you can see this in everything from video meetings down to commercial processes,”

said Macías. “The question is how flexible real estate companies can be and innovate through technology.”

Many people look for websites to facilitate their search for property. In-person visits are still common, though many have begun to use digital tools for formal processes in renting or buying. The real challenge for real estate companies, then, is to give clients a pleasant experience as they rent or buy real estate. “We need to see how we can provide added value to clients, which are also becoming more sophisticated over time,” said Kasuga.

RESIDENTIAL REAL ESTATE TRENDS, TECH, DATA

In 2019, the largest challenge in the real estate sector were permits. Two years later, the sector is fully changed following the overwhelming lifestyle changes caused by the pandemic. Demand for residential real estate has shifted significantly, generating long-term changes that developers must embrace to thrive.

“Development in this industry is slow, it is not going to immediately arose from what is trending, so while the market research is ready, we must listen to the immediate user for ideas.”

Rodrigo Rivero-Borrell Founder and CEO of Reurbano

Market. However, realtors foresee that 73 percent of individuals will be willing to move looking mainly for larger spaces.

Spaciousness, privacy for meetings and classes and well-defined areas within the home for different simultaneous activities are key to this new market, said Cerdas. “Big and better located spaces are very important. People like to live in urban areas where they have supermarkets, public transportation or parks nearby.”

The work decentralization was the main driver of change. It caused changes in mobility, demand and availability of resources to invest. Work from home modalities and online schools created a new lifestyle, increasing the value of space within a home, “within which notable priorities are outside spaces, such as balconies or terraces, as well as flexible areas to study, work or exercise,” said Federico Cerdas, CEO & Co-Founder. Global Businesses Inc & Skyhaus.

About 34 percent of tenants claimed they will change their residence at the end of the quarantine, found a study by r eal Estate

“Amenities within apartment complexes or residences are also decisive factor,” said Tony Hánna, CEO, Tiburon Inmobiliario. But there is uncertainty in the market as nobody knows if the current lifestyle changes are to stay. “The only thing is certain is that home office is here to stay,” he said.International trends are leading developers to build apartments with modular rooms, said Hánna, comprised of flexible spaces that can be easily adapted through panels.

However, the real estate industry might be slow to change, in comparison to other sectors, said r odrigo r ivero-Borrell, Founder & CEO, reurbano. “Development in this industry is slow, it is not going to immediately arose from what is trending, so while the market research is ready, we must listen to the immediate user for ideas.” New consumer preferences are also changing the commercial real estate market.

“Offices need to be more than desk spaces and simulate walking areas and parks with open spaces that promote interaction,” said rivero-Borrell.

“We have to now provide options for fast internet, doors and windows with acoustics and large spaces to offer added value to our spaces.”

Federico Cerdas

CEO

and Co-Founder of Global Businesses Inc and Skyhaus

to bring vibrancy and diversity to existing neighborhoods, he added.

While the trends are coming slowly, even small changes generate costs and shift finances and market priorities. As hybrid work modalities are likely here to stay, said Cerdas, developers have to provide spaces that allow the coexistence of working couples, children studying and many others. “We have to now provide options for fast internet, doors and windows with acoustics and large spaces to offer added value to our spaces,” Cerdas said.

Large cities are usually the hubs for residential real estate sales and rentals, so they are the first to feel market changes but represent significant opportunities for developers. “Mexico City is a major hub for employment and commercial activity. Like other large metropolises with high costs of housing, those in Mexico City are forced to live in its outskirts and spend several hours commuting to work on public transportation or in traffic,” said r icardo Amack, Senior Director of Investments and Development, Greystar. This is the primary reason why multifamily complexes are an ideal option for citizens who want high-quality, secure and well-located housing, as well as a way

Another critical change is the use of big data and data analytics. “Millennials are now the ones who buy real estate and Gen Z is already entering the market,” said Hánna. Every day, online real estate sales increase, just as in every other market. “I see a future where operations are mostly online. I already had a sales case there the operator did not know the client; the client did not know the property and even took mortgage credit all online,” said Hánna. The e-commerce boom will generate more data that will help focus marketing, development and construction efforts.

While there are large amounts of data available to developers, the country lacks a robust database that contains all this information in a single place. Information regarding the use of parking meters per hour, the location and busy hours of public transportation and location of schools, is public. But it is not stored in one united system that supports real estate sales and leasing, said rivero-Borrell.

While companies wait for a robust database, social media can be an optimal alternative to generate own leads and trends, said Gustavo Marcos, Partner, Grupo DAGS. “Social media has been a truly innovative tool for the construction industry because it requires a lot of planning and is quite challenging to maintain. Nevertheless, every single company in the industry should have its own social media platform,” he said. A social media strategy has allowed DAGS it to ally with other construction companies, said Marcos, because it has opened the doors to connect with the right companies and identify market trends.

SAFEGUARDING DEVELOPMENTS THROUGH SAFETY COUNTERMEASURES

International collaboration, technological innovation and continuous assessment garnered over 100+ earthquakes have made Miyamoto International a specialized partner

in public and private development projects. Now, the company finds itself fighting the added challenges presented by climate change, which are expected to include more

extreme and recurrent weather events in the near future. In anticipation, the company is looking to expand throughout Mexico to meet its customers wherever it is needed.

“We have to now provide options for fast internet, doors and windows with acoustics and large spaces to offer added value to our spaces.”

Federico Cerdas CEO and Co-Founder of Global Businesses Inc and Skyhaus

building could move during a seismic event, which has been known to be life threating. Furthermore, extrapolating from data gathered over the company’s life has led to engineering innovations such as base isolation and the rotor technology that gives buildings the flexibility to wobble without abruptly moving physical objects.

Miyamoto International has been present in Mexico since 2017’s Puebla-Morelos 7.1 magnitude earthquake, which caused the collapse of more than 40 buildings and killed more than 200 people. In the aftermath of the disaster the company helped rescuers navigate the epicenter and evaluate the structural integrity of buildings to reduce the loss of life. Since then, the company has stayed and helped development projects with the use of geophysics, seismic and structural engineering.

This expertise is coupled with digital innovations in modeling and data analysis that goes beyond initial structural risk analysis. The company evaluates foundational damage on the bed rock and even how physical objects within the

Moreover, the company also offer 24/7 remote monitoring to provide immediate and precise structural assessments after an earthquake to protect life, while also helping resume business operations as soon as possible. “Once a seismic event occurs, data is uploaded to the cloud. Soon after, we develop a quick data analysis and conclude by providing a technical report,” said Jesus Valdez, Miyamoto International.

The company has also taken on specialized engineering projects such as the Pieta rondanini in Italy and the Palace of Gaddi Baithak in Nepal to conserve and protect precious historical artifacts from major damage in the event of an earthquake. recently, the company has begun to adapt its preventive and reactive protocols for seismic events to other environmental scenarios, namely flooding.

Overall, Miyamoto International is preparing to confront the added challenges of climate change as its project development projections have helped.

SUSTAINABLE CONSTRUCTION IS NOW A NECESSITY

While COP26 climate talks gather steam and the world increasingly focuses on sustainability, some industries are unclear on how to achieve it. In sustainable real estate, sustainable materials, smart technologies and the retrofit of existing infrastructure are key steps, argue industr y experts.

“If we want to prevent disastrous climate change, we need to keep sustainability firmly in mind,” said Alicia Silva, President, SUMe, an organization looking to promote sustainable construction in Mexico. “Sustainable construction is not a luxury.

It is an absolute necessity if the world is to continue as we know it today,” she continued.

Nevertheless, sustainable construction is a challenge, which must be addressed from the root: the sourcing of materials. However, there are numerous barriers in its implementation, some of them perceptional. “It is a myth that sustainable materials are more expensive,” said Silva.

Even if costs were to be higher, their consideration might be well worth the

investment, said Luis Alberto Vega, Director of Sustainable Development for Mexico at globally leading glass maker SaintGobain. For manufacturers, costs concerns are also not the most pressing concern. “When designing solutions, companies need to ensure that designs improve life quality, meet regulatory norms and satisfy needs of modern buildings,” he said. Vega furthermore explained that Saint-Gobain further boosts the sustainability of its glass by recycling the materials the company uses in its industrial processes.

More than mere material is needed, according to Alejandro Trillo, Partner and Director at engineering and sustainability group IACSA & Asociados. “A combination of materials and technologies is necessary to have an optimal impact,” he said. In addition, those using the infrastructure need to know how to operate sustainably, “otherwise we might as well not have installed anything at all.”

Fortunately, demand for sustainable materials and best practices are growing organically, based on the modern market. “This creates an organic driver to adapt sustainable technologies. But we cannot just pick and choose, we need to pick the technologies that best fit what companies need. Analyzing costs and benefits is essential,” said Trillo.

While the overall market favors sustainable practices, companies could benefit from focusing on the most environmentallyconscious clients, said José Suarez Picazo, CEO, Suarez Picazo Arquitectos. “We do look for clients that focus on sustainability.

“...not implementing measures will be costly on the long term. Consumers increasingly demand sustainability and governments could impose regulations, for example”

Joel Sánchez

Mexico Green Building Lead at International Finance Corporation (IFC)

This mindset is essential to achieve good results,” he added.

Mexico’s real estate developers would benefit from a higher level of awareness regarding sustainable practices. “Building green makes a lot of sense economically, even though people might not be aware of this fact,” said Joel Sánchez, Mexico Green Building Lead, International Finance Corporation (IFC). As an expert in financing, Sánchez admits that accessing the funds that could boost sustainability can be difficult in Mexico. “But for commercial and industrial (C&I) players, sustainable solutions pay themselves back within a year and a half,” he said. What is more, “not implementing measures will be costly on the long term. Consumers increasingly demand sustainability and governments could impose regulations, for example,” added Sanchez.

Sustainability can also be more economically viable than the alternative. “Financial appetite for sustainability is already here,” said Sánchez, pointing toward a globally growing demand for green bonds.

When looking into sustainable solutions, real estate developers can take advantage of new materials and equipment, such as efficient air-conditioning and energy generation using photovoltaic solar panels. “Every year, these clean technologies drop in price, creating further incentives for companies,” said Sánchez. Many of sustainability’s benefits can be achieved through passive means. Once these solutions are constructed, they generate benefits without further efforts required.

Much of the market’s attention focuses on new developments, but the experts see an “elephant in the room,” said Silva: the buildings that already exist. “People were so focused on new construction, they almost forgot about their much larger existing portfolios,” said Sanchez. “ r eusing buildings instead of demolishing and starting from scratch benefits sustainability,” agreed Suarez.

“In 2050, we will have much more real estate constructed but also many more buildings to renovate,” said Vega. After the pandemic led many offices to send their employees back home, the market for office real estate contracted significantly, leading to opportunity. “We have a major opportunity to re-transform these buildings into something more sustainable and costeffective while matching it to new workplace cultures,” said Trillo.

But an issue is to measure the sustainability of new and existing infrastructure. “It is a major challenge to find the right tools that will certify our building portfolios,” said Sánchez. Though the investment necessary to achieve this goal is extensive,

some countries have managed to successfully implement this technology. In Colombia, for example, 20 percent of new constructions are green-certified thanks to the combination of positive government measure and easy access to financing to banks. “If we do not join the trend as financial institutions, we will be left behind. Therefore, I expect Mexican institutions to catch on rapidly,” said Sánchez.

“The private industry will have to invest significant amounts of money,” said Vega, since the country has fallen behind on the global energy transition. Climate change and its effects are real, so sustainability and a shift in the global mindset are crucial if humanity wishes to thrive.

MODULAR CONSTRUCTION: THE FUTURE OF BUILDING?

Automation has been slow to penetrate the construction industry in comparison to sectors such as automotive or health. Modular construction is aiming to introduce the nobleites of automation into the sector, among many other benefits.

To date, prefabricated housing has achieved a sustainable foothold in a handful of locations, including Japan and Scandinavia. In markets such as the UK and the US, it has been in and out of favor since the postwar era, explains McKinsey &

Company. “However, modular construction in the EU and US markets has the potential to deliver annual savings of up to US$22 billion, and there is reason to believe the current revival could be different,” according to the study.

Undoubtedly, modular construction offers developers of residential buildings, hotels, clinics and educational spaces a novel approach for urbanization. In Mexico, this type of construction is being led by companies such as Modulbox,

created after 30 years of experience in the traditional construction sector. From luxury apartments to worker camps, Moldulbox manufactures buildings in a controlled environment and mails clients the entire project, including finishes.

Modulbox’s broad range of products includes stackable and relocatable modules that are easy to install and do not need concrete foundations. These can be used for modern social housing and residential housing and they are all earthquake proof. The company also produces industrial buildings with light or heavy and galvanized structures.

“If manufacturing is a good thing for so many common items, why is it perceived as a negative when it comes to your home, school, hotel or office?” said Gonzalo Verón, CEO and Founder, Modulbox Mexico. Prefabricated construction is a common construction method in other parts of the world. “With the Modulbox manufacturing process carried out in a controlled environment, we can offer significant cost reductions, project execution times and high-quality control.”

Modular construction combines technology, design, sourcing, manufacturing, logistics and construction in one integrated offering, explained Verón. Modulbox has been able to halve building speed in comparison to the traditional method due to the use of prefabricated modules. “Construction can be 100 percent transported to any other place, according to the client’s needs, and it can be expanded as required; up to 4 levels,” says Verón.

Modular construction has fully insulated walls and ceilings, increasing comfort and reducing electricity costs. This type of construction also reduces impact in the construction zone by up to 80 percent and provides greater security.

One of the largest benefits of modular construction is sustainability. When building in a factory, waste is eliminated by

recycling materials, controlling inventory and protecting building materials. Because the modular structure is mostly completed in a factory-controlled setting using dry materials, the potential for high levels of moisture being trapped in the new construction is eliminated. Another large benefit of modular buildings is that they can be disassembled and the modules relocated or refurbished for further uses, reducing the demand for raw materials and minimizing the amount of energy expended to create a building to meet the new need.

To increase its market presence, Modulbox partnered with the Chinese government to export and import from China easily. “We can ship all modules by land or by sea. In Latin America, we deliver modules from Mexico to Patagonia,” said Verón.

Modulbox integrates design and sustainable development by combining steel and concrete in the same construction system, making it a highly competitive product that also offers long durability. “With Modelorama, we opened one subsidiary per day and by now they have about 200,” explained Verón.

In Mexico, Modulbox was worked with the public health sector building emergency clinics during the COVID-19 pandemic. “Our services have been very responsible for this sector because we are able to adapt to rural, remote zones and to even act upon natural diseases impacting a region,” Verón said.

In hospitality, Moldubox is working with private hotels in Mexico’s touristic areas following the highest quality standards. The company also sees potential in urbanism, specially for co-living and coworking spaces in Mexico’s urban areas. “Mexico City has extensive problems. Spaces for lease in the most sought-after neighborhoods, such as r oma, Polanco and Condesa, are inaccessible. With our urban construction model, we want to create something more accessible within the next five years,” said Verón.

LIQUIDITY: TOOL TO BOOST MEXICO’S ECONOMIC RECOVERY

Whereas the pandemic greatly hurt Mexican businesses, the country’s reopening can place them on the path to recovery. But to achieve it, these businesses need access to liquid capital, argue financing experts. To boost the private sector’s cashflow in this crucial period, it is essential to build an investment-friendly environment and provide flexible financial support.

“If we can give strong certainty to investors, economic development can truly kick off.”

Francisco Lira CEO of Banco Sabadell México

In Mexico, private companies face four barriers to financing, said Mark McCoy, CEO, Banco Finterra. The first is enforcing the rule of law. The second is providing guarantees for foreign direct investment (FDI) and similar backing for private funding. This is not necessarily happening in Mexico, as evidenced by recent measures to curb private participation in Mexico’s energy sector. Third, Mexico requires improved infrastructure such as roads and access to water and stable electricity. Finally, more detailed regulation is also essential. While McCoy said that Mexico’s regulatory bodies in a variety of sectors are doing excellent work, there are some “areas of opp ortunity.”

The pandemic hit Mexico hard, with the country’s economy contracting by 8.3 percent in 2020. While the GDP will likely bounce back 6 percent this year, the pandemic’s overall negative impact is undeniable. SMEs have been affected strongly, said Alberto Saracho, Partner, McKinsey & Company: “Global markets experienced shocks in terms of demand and supply. People could not go to work. The service sector stopped from one day to the next. Companies went into savings mode and put their payments on hold.”

Mexico counts 4 million SMEs, most of which are small enterprises, according to the Organization for Economic Cooperation and Development (OECD). These businesses, which represent 12.4 percent of total gross production and employ almost half of Mexico’s workforce, were badly hit by the pandemic. But big enterprises are also facing tough times.

For most companies cashflow became a major puzzle during the pandemic but now that the economic reactivation has improved the panorama, liquidity continues to be a problem. Financial experts agree that access to funding is an ideal solution; but it is not a straightforward one.

“The rule of law is important to foster longterm investment, especially for SMEs,” said Francisco Lira, CEO, Banco Sabadell México. “If we can give strong certainty to investors, economic development can truly kick off.”

Fostering stable investment environments has yielded excellent results in Mexico’s past development. “When I drove through the Bajio region in the 1990s, people would only sell sweets and strawberries. This area has since turned into a crucial part of the global automotive sector,” said Saracho.

A local focus for private capital is therefore essential so more areas in Mexico can specialize and become significant hubs for the global and national industries. “Anchoring local capital is unbelievable important,” said Liliana r eyes, Director General, Mexican Assocation of Private Capital (AMEXCAP).

This capital should focus especially on companies in their earliest stages of development. “SMEs begin as efforts from single entrepreneurs and startups, but they need a lot of support to be able to grow. Who has not heard of Mexico’s five unicorns? The reality is that these companies require the attention of private capital to reach their goals and grow,” she said.

Successful startups such as Cornershop and Clip were also backed early on, allowing the platforms to become international success stories, said reyes. But beyond support from private investors, blooming businesses need governmental support. “We believe that the government should be very concerned with fostering investment,” she said.

The of private financing institutions should not be understated either. Financiers did not come out of the pandemic unscathed: Lira estimated that demand for credit dropped by 3 percent. As the economy reactivates, banks can boost their own business and facilitate cashflow by taking a more flexible position in the market. “We can make asking for credit easier. Companies do not like to banks. In the best-case scenario, they see it like asking an airline for a refund. In worse

“Business cannot stop and wait (for investment). They need to grow immediately when they find an opportunity.”

Liliana Reyes

Director

General of

the Mexican Assocation of Private Capital (AMEXCAP)

cases, they have heard horror stories from family members,” said Lira. Banks can boost their reputation by making client interaction more pleasant and efficient by using online tools and focusing on customer experience. Financing institutions were able to comfort customers by being understanding of their situation during the pandemic, said McCoy.

Easy access to financing can be a boon for SMEs, said McCoy referencing Brazil’s case where businesses were able to access debt relatively easy. “We need to allow this to happen in Mexico too,” he emphasized.

A “close relationship” between finance and companies is necessary for faster operations, explained r eyes. “Business cannot stop and wait (for investment). They need to grow immediately when they find an opportunity,” she said.

A closer relationship stands to benefit both parties, said Lira. “Banks should be trusted advisors. The whole world asks for this but it is not a reality.” This can only be possible by addressing the major taboos permeating the financing world. “People should not be afraid of taking on debt, as long as the risks are calculated,” Lira explained.

COOPERATION: THE KEY TO INCREASING ECONOMIC COMPE TITIVENESS

Mexico has built a place for itself on the international economic stage as a fully integrated manufacturing center with outputs increasingly linked to the broader global economy. Mexico’s competitiveness is multisectoral but, to continue growing and strengthening its capabilities, the country needs to look at the industry as an ally, instead of an enemy.

While foreign matters might impact Mexico’s economic competitiveness, there are several internal issues that both the government and industry must tackle. For the country’s economic recovery, “joint work between the private and public sector is essential, coupled with an accelerated tech transition that fosters

a fully interconnected ecosystem,” said José r omán, President and Managing Director, Nissan Mexicana and NIBU. For Mexico’s automotive sector, one of its most productive industries, creating a strategic mobility plan considering electric, autonomous cars, clean tech, subways, airports and trains will also be part of a smart recovery.

Major concerns for the sector in Mexico and abroad are climate change and sustainable manufacturing. According to r omán, companies in the auto sector are already working in more efficient engines and better-quality fuels, which are expected to further increase interest in Mexico’s manufacturing cap abilities.

These capabilities are led by Mexico’s widely known high-quality talent, which is one of the country’s greatest assets and what has made it attractive for years. This talent will catalyze competitiveness, said Beni López, CEO, Softtek US & Canada. These competitive labor costs have helped strengthen the nation’s manufacturing base. In addition to producing sophisticated products for domestic consumption, the country has also evolved to become a robust exporter.

To continue growing at this pace, education needs a boost. In Mexico, “education is underprioritized,” said r asmus Duun, General Manager Latin America, The LEGO Group. “This is making the difference between countries and their global competitive a dvantage.”

Collaboration helps companies avoid duplicating efforts and create better things together. An industry level alliance would allow companies to operate as partners, instead of competitors. By aligning on every industry, “we could ask for clearer rules and a legal certainty based on united interest,” s ays López.

Industry leaders have struggled with the legal uncertainty in the working environment, such as the recent, sudden change in the outsourcing law. “Legal certainty rules need to be clear and consistent; it is no secret that the current public policies and regulations are changing overnight. Policies in Mexico need to foment a transparent environment that is open to listen to industry concerns,” said Duun.

“Mexico is already an attractive investment hub and competitiveness powerhouse but we compete with China, the US and India. This enhances the importance of caring for our current projects and our inhouse talent.”

Ana López Mestre

Executive Vice President and General Director of AmCham

A universal driver behind competitiveness is technology. Industry 4.0, for example, “not only boosts our manufacturing capabilities, but also helps avoid logistics and supply chain disruptions,” said López. Tech must be promoted so that the industry ecosystem can be improved systematically, he added.

To create and foster local tech, trainings and education are also essential. Joint sponsorships for research and innovation centers can help scale in-house talent, said López. Furthermore, creating innovation and development centers can help the country to be at the forefront of technology while supporting the implementation of factories and projects, s aid roman.

The integration of North America has given a great advantage to Mexico by boosting the development of many different industries. Tech, however, it is the key of success, so “we have to invest in tech, regardless of the industry,” said Dunn. Investment in tech is becoming a necessity, as was evidenced by the recent e-commerce boom. “E-commerce is a critical part of commerce now and in the future,” said Dunn.

Under these circumstances, the USMCA will greatly benefit Mexico, said López. No sector of the Mexican economy has benefited more from the USMCA than manufacturers.

The treaty attracted a significant amount of FDI to help expand productive capacity and ramp up exports. The manufacturing sector accounts for almost 50 percent of total FDI in Mexico and 80 percent of total trade.

CLARA SIMPLIFIES EXPENSE MANAGEMENT

As startup companies continue growing across the Mexican market, so does the need to provide easier payment and financing options for these companies, which is exactly what the startup Clara offers clients.

“Each company can obtain revenue in any way but all have to make effective use of it. And it is not only about making effective use of revenue but doing it with agility. Some believe that there is an ongoing tension between control and agility but we believe that with technology, it does not have to be this way,” said Clara Co-Founder Gerry Giacomán Colyer.

Giacomán saw the need for a company like Clara during his time at Grow Mobility, which grew at a rapid pace but ran into issues with expense management, a problem that is even worse in Latin America. Companies in the region are particularly in need of a dedicated expense management platform, which can reduce fund misappropriation by 60 percent and aid companies in the aftermath of the pandemic, said Giacomán. A recent study found that 40 percent of companies in the region did not have access to any type of financing to support business recovery.

“We are very happy to have their trust and to be able to support the majority of startups and companies of most-rapid growth in Mexico and the region…”

Gerry Giacomán Colyer

Co-Founder and CEO of Clara

tax deductibility and is only entrusted to key employees; self-financing expenses that rely on the company’s employees, which can make them anxious and lead them to waste time chasing receipts and filling forms; or the use of a prepaid card, which will not work abroad and might have limited funds. The shortcomings of these options can lead to countless hours spent closing books, a lack of real-time visibility, unchecked spending, poor planning, delays and expensed distributed across silos.

Clara allows startups to avoid these problems through a local solution where all the cards a company might need can be generated using a process simplified through digitalization. Clara aims to build the end-to-end spend management solution Giacomán would have loved to have during his start-up journey.

Clara’s flexible and endless card payments are available through three options: the world elite cards with exclusive benefits for high-profile executives, virtual cards for fine-tuned online expenses (software, e-commerce or ads) and business cards for travel and expenses for all employees. Beyond cards, Clara offers a expensemanagement platform with real-time expense visibility and a corporate credit card with a high acceptance rate and international coverage.

“To manage expenses, companies traditionally used different options that have great limitations,” said Giacomán. These options include applying for a domestic corporate credit card, which tends to be rejected due to a lack of credit history or positive cash flows and has limited functionality; the use of a foreign corporate card, which tends to lose local

Clara further offers a payment (SPEI) platform to send or schedule as many payments as a company may need. The platform also allows users to use Clara credit and make payments from an Excel file, their invoices or manually. “Let’s say I have a list of 100 payments and I want to program some for today, some for a week from now, some a month from now, I can do all of that in just one step through Clara’s solution,” Giacomán said.

Clara was built from the ground up to help local companies become more efficient, said Giacomán, and wants to be local companies’

biggest ally. It offers automatic expense and invoice matching. Furthermore, its principal member license ensures service stability, it is fully-compliant with local AML, K yC and banking laws, it offers direct debit payment from local banks and enables tax deductible expenses.

The adoption of Clara has been rapid due to a large demand for its services. Weekly Mexican CC and TPV transaction accounts have risen impressively, with giant leaps observed during the past three months. The startup has a clear line of sight to continued rapid growth. Its key product releases include Clara Payments and Clara Credit. Liquidity advance and a launch with MasterCard are allowing growth across region.

The startup secured Series A investment backed by top regional and global investors Kaszek, Monashees and DST Global, which are the founders behind most startup success stories in the region such as rappi, Kayak and Casai.

“We are very happy to have their trust and to be able to support the majority of startups and companies of most-rapid growth in Mexico and the region… We started in Mexico but we have prepared from the beginning and now we are very close to announcing plans for growth in other countries. We are very happy to provide our grain of sand to help local companies become more competitive through technology and through the experiences that we create.”

MEXICO’S VIRTUOUS ECOSYSTEM: A STARTUP DREAM

In Mexico, “the stars have aligned. Capital access, ambitious entrepreneurs and a diversified talent pool”, all the necessary components for a vibrant and innovative startup ecosystem have emerged, said Nima Pourshasb, CEO & Co-Founder, Minu. These favorable conditions have led to a start-up boom, which has been sustained thanks to a unique community of entrepreneurial mentors who have inadvertently created a self-feeding ecosystem that has drawn investment and talent from all corners of the world.

“In Mexico, the stars have aligned. Capital access, ambitious entrepreneurs and a diversified talent pool”

Nima Pourshasb CEO and Co-Founder of Minu

geographic appeal, internal conditions in the country have also changed, turning Mexico into a favored strategic business entry point for businesses of all sizes.

Previously, access to venture capital was difficult and limited to about US$27 million, which in turn shut out the participation of businesses with the potential to disrupt stagnant industries. Since then, however, this figured has ballooned upward of US$10 billion coming mainly from the US said Alejandro Diez Barroso, Managing Partner, DILA Capital. Consequently, this has allowed start-up businesses to join a market that was previously reserved for large companies. Their entry into the market, coupled with a growing middle class with a disposable income, has generated a dynamic economy in Mexico that has driven innovation at an incredible speed.

Before this favorable environment emerged however, Mexico had typically been selected as a starting point for many international businesses based on geographic proximity to the lucrative US market, with whom it shares a free trade agreement with since 1994, in addition to access to the wider Latin American market. Beyond this obvious

Mexico City in particular is an important hotspot, “it is a country within a country. It is possible to build a successful business in one city alone due to the population density. It is as if New york was combined with Silicon Valley. It is very unique” said Sujay Tyle, CoFounder & CEO, Merama. Other important metropolitan centers include Guadalajara and Monterrey. “If you thrive in these cities,

you are sure to thrive in all of Latin America,” said Ivan Ariza, Founder & CEO, Cargamos.

The start-up sector has enjoyed sustained growth mainly due a unique sense of community between CEOs and entrepreneurs who, through investment and mentoring, have continued to impulse the sector forward. “Second and third-time founders are coming forward from other successful companies to invest and/or build businesses on recognized market needs that their predecessors failed to address,” said Alan Karpovsky, Co-Founder, Mendel.

Beyond monetary investment, CEOs and founders are mentoring their own employees to develop the business leaders of tomorrow by nurturing their skills and giving them a realistic picture of business environment in Mexico. This fraternity

has attracted and successfully drawn in international talent from adjacent business sectors, which inversely has contributed to a more dynamic and innovative workforce.

Within Mexico’s dynamic start-up business sector, fintech has emerged as a leader, driven mainly from popular dissatisfaction with traditional tools to access capital, from which many people have been excluded. Although previously resisted, innovation of the fintech infrastructure has evolved to provide consumers with greater safety and purchase assurance, which has already boosted other domestic sectors such as e-commerce and retail. Undoubtedly the sector got a boost from the COVID-19 pandemic that forced many onto digital platforms, which will continue expanding now that people have recognized their accessibility and convenience.

HOW CAN STARTUPS RIDE THE INVESTMENT BOOM?

Startups in the Mexican and wider Latin American ecosystem are living through an investment boom. But even within this soaring environment, critical success factors determine which companies get funded. Mexico’s venture capital experts argue that startups focusing on the right technology for growing sectors, with solid strategies and governance, are likely to be successful.

“This is the best time in human history to begin a startup,” said Diego Muradás, CoFounder & CEO, insurance startup Zenda.la. The reasons are simple: there is significant liquidity available to invest in startups and the pandemic greatly increased the speed of digitalization. These circumstances have created an environment where innovative startups excel. “The digital economy is

“We are living in a spectacular moment to be an entrepreneur. Today if you do not make money there is something fundamentally wrong with your company.”

Camilo Kejner Managing Partner of Angel Ventures

formalizing rapidly. Digital startups benefit greatly from this development,” said Diego Serebrisky, Co-Founder & Managing Partner, Dalus Capital.

“The numbers do not lie: at the end of September, we received US$12 billion in our regional startup ecosystem. This is much, much more than we received in the past,” said Muradás. This great environment provides great opportunities for investors too. “We are living in a spectacular moment to be an entrepreneur. Today if you do not make money there is something fundamentally wrong with your company. There is plenty of money to make in the world of entrepreneurs,” said Camilo Kejner, Managing Partner, Angel Ventures.

This is great news for Mexico’s startup scene, although its tech companies are not as recognized as those of other countries. While the US’s Silicon Valley is an obvious example, Brazil’s tech companies have also gained popularity with international investors. However, Brazil is not necessarily ahead of Mexico. “Brazil has been better at marketing its startup sector to large

investment funds,” said Kejner. But Mexico’s tech startups are much more advanced, he added.

Boosted by several unicorns, the Mexican market is gathering steam. “Mexico is behind in the region but is catching up very quickly,” said Paqui Casanueva, Chairman, NGO Endeavor México. “This is good news for Mexico and entrepreneurs everywhere.”

As Mexico’s reputation grows, big capital is catching on. But how can companies ensure they do not miss the capital train?

To get investment, companies need a clear, concise long-term strategy to show to investors. “Venture capital favors startups with significant clarity in their ideas, followed by a catchy narrative and later translated into an effective strategy,” stated Antonia rojas, Partner, ALLVP, a private equity firm.

Venture capital experts agree that these factors help boost a startups story and therefore improve its acceptance among investors. A solid approach toward environment, social and governance matters must also be taken into account from day one so it permeates company culture, argued Casanueva. Nevertheless, companies should not become bogged down by their own politics. “Compliance should not turn into complicated-ness,” he said.

Other than solidly sustainable management, investors are attracted to businesses that can grow rapidly, both in the local market and elsewhere. “As an investor, you want fast and scalable companies, who can deliver results in other countries,” said Casanueva.

“Investors are no longer just looking for fintechs,” said Muradás. Venture capitalists

“As an investor, you want fast and scalable companies, who can deliver results in other countries.”

Paqui Casanueva Chairman of NGO Endeavor México

are looking for startups in health, city applications and e-commerce or other online consumption avenues. Other industries will soon follow. “We will experience investors moving away from traditional industries toward digital economies in virtually all sectors of the economy,” said Serebrisky. Nevertheless, some market developments will be deemed more necessary than others and therefore attract more liquidity coming from the investment boom. “An area where we will see major investments is in startups that will reduce climate change,” added Serebrisky.

Tech startups, however, are expected to keep a special place in investors’ minds. “Deep tech startups are receiving a lot of attention because they can solve substantial scientific or engineering challenges and fit in neatly with future trends like blockchain and web 3.0,” said rojas.

When looking for funding, maturing startups can make a big impact with initial public offerings (IPOs) on stock exchanges. But this is not the best option for every company. “Institutional investors and public markets need to see that your business has merit for a good IPO,” said Casanueva.

“If startups do choose to get listed, they often choose the US’ NASDAQ instead of local options, a sign that the market is not yet mature yet,” said Casanueva. Nevertheless, Mexico’s stock markets can become more robust and become a great intermediate step for startups. “Not every company needs to move in the US,” added Muradás.

There are many reasons for optimism in future listings, said r ojas. For early investors, exits do not always translate to massive paydays but this is slowly shifting. “If you look at the sales of Cornershop to Uber and Auth0 to Okta, you see Latin American startups being sold for billions of dollars. No one would have imagined this some years ago,” she said. Whereas there are still plenty of challenges ahead, many more startups from Mexico’s ecosystem could see similar successes.

FINTECH: ANSWERING CONSUMER’S IGNORE D REQUESTS

From long lines at the bank to high interest rates, the average consumer in Mexico is fed up with the traditional banking system. recognizing this unaddressed market need, fintechs rose to the challenge and captured a large market. Now they have to grapple with their success.

“The Mexican market is screaming for disruption in its financial and banking markets. This is why so many startups and fintechs are coming to Mexico, since they can provide better products and services,” said Aitor Chinchetru, Founder and CoCEO, Fintonic.

Traditional banks’ continuous reluctance to provide better customer service, coupled with their disinterest in providing financial services and capital access to the greater Mexican population, has come at a cost in the era of digitalization. Fintechs have turned Mexico’s traditional banking model on its head, accelerating the democratization of access to capital that has been historically available to only a small percentage of the population. For the average person, banking translates to high interest rates and a low rate of credit card holders. “Only 15 percent of Mexican citizens have access to credit cards and most of them are high income earners. People should have other options to build a credit history,” said Marlene Garayzar, Co-Founder, Stori.

The nascent fintech sector found significant success by disrupting the traditional banking model that had limited finance services to a select few. As market disruptors, fintech companies have deliberately made the financial services market better for the

“Only 15 percent of Mexican citizens have access to credit cards and most of them are high income earners. People should have other options to build a credit history.”

consumer by driving up market competition in a sector that was complacent and reluctant to change.

Fintechs’ emphasis on business to consumer services has driven the rapid growth of many companies but this is not to say that they will completely replace traditional banks. “Undoubtedly, alliances between both parties will have to emerge because the banking infrastructure traditional banks created will not disappear overnight,” said Stefan Moller, Co-Founder & CEO, Klar. An example of this is user demand of cashouts, which require physical infrastructure that fintechs do not have and is expensive to install.

Challenges still abound, however. Fintechs have to comply with a regulatory system that is incomplete and unprepared to address the needs of the sector. Fintech regulations are still evolving, posing a further challenge that does not concern traditional banks. This requires individual fintech companies to formulate robust and ethical growth strategies with the best interest of their consumers in mind. To do so, companies are placing a salient emphasis on cybersecurity that in necessary to avoid security breaches and maintain consumer confidence. “Disruptors have better technology, especially in cybersecurity, and we have changed users’ relationships with financial institutions,” said Moller. While companies can attempt to cover all their bases, they are still exposed to the risks of a volatile regulatory environment.

Marlene Garayzar Co-Founder

of Stori

Despite challenges, a revolution is necessary. “Only through pushing the existing limitations can we expect structural change, otherwise we can only expect marginal change,” says Pablo Viguera, Co-Founder and Co-CEO, Belvo. regardless of company stance, they all benefit from learning and adhering to their clients demands. This is the only fireproof way companies can expect to survive this constantly fluctuating environment.

PROVIDING VISIBILITY, ORDER IN AN EXPANDING MARKET

The commercial environment changed drastically during the age of digitalization and while it expanded businesses’ market access, it also reduced their viability as more business avenues spring up. In recognition of this problem, Vtex created an omnichannel solution and pathway toward unified commerce for the complete centralization of business data currently dispersed across various third-party platforms.

“The unified customer’s strategy focuses on creating a shopping experience that fully meets the needs of new consumers,” said ricardo rodríguez, Vice President Enterprise Sales, VTEX Mexico & Central America.

The commerce market has rapidly expanded outward from physical stores to the internet, various social media platforms, marketplaces and most recently livestreams. While this horizontal expansion has made commerce more complex, thriving is not impossible, argued r odríguez. Through the collection and centralization of data related to business assets and consumers, companies will effectively gain greater visibility and control over their business, starting with more seamless operations and distribution.

Companies will also be able to recur to a greater pool of consumer data needed to understand changing consumer preferences, tailor intelligent company campaigns and take informed business decisions. Holistically this will increase running efficiency, thereby allowing business to focus on innovation instead

“More than 40 percent of unfulfilled sales are due to stockouts or because

the company was not able to provide additional buying options.”

Ricardo Rodríguez

Vice President Enterprise Sales of VTEX Mexico and Central America

of logistical lags and data collection. This is particularly important in a market that will keep changing in response to an evolving consumer.

In the age of digitalization, consumers have evolved, making the traditional price market obsolete. Today’s consumer is not the passive consumer that singularly focused on the lowest price while waiting for the market to provide them with solutions. Present consumers are informed and self-aware, they assess quality in relation to price, are not afraid to create market solutions where they are absent and genuinely care about how products are made and how they impact the environment. In acknowledgement of this market shift, the objective is to create a shopping experience that satisfies the expectations and needs of the informed consumer. Before this can be achieved, however, companies need to know who and where their consumers are, which can be difficult if consumer data remains out of reach and unco ordinated.

The most pressing consumer need is thankfully actionable, as it relates to internal monitoring and diversifying consumer payment options. “More than 40 percent of unfulfilled sales are due to stockouts or because the company was not able to provide additional buying options,” said r odríguez. Without the ability to easily track internal assets, companies have inadvertently shut themselves out of certain transactions because of stockouts, which could have informed secondary decisions about price increases, mobilizing production or suggesting similar products if they had been identified earlier. Moreover, companies with limited payment options have shutout new potential consumers.

Overall, in a complex and horizontally expanding commerce market, the centralization of data offers companies greater visibility and control over their business to better access new consumers.

DELIVERY, CX DETERMINE OUTCOME OF E-COMME RCE BATTLE

E-commerce experienced unbelievable growth during the past two years, boosted by an unusual mix of circumstances. Analysts expect the boom to continue. Mexico’s leading e-commerce players state that enhanced delivery times and spotless customer experiences will decide which platforms users will gravitate toward.

The global pandemic set off explosive growth for online sales. Data from Google’s Euromonitor shows that e-commerce is not just here to stay but will continue its expansion with a 225 percent growth up to 2025. “We are living in times of fierce competition and huge possibility to grow,” said Alvaro de Juan Iriarte, CEO, iVoy, a delivery service company. In the battle for the optimal market share, companies are forced to modernize rapidly and continuously. Offering fast and efficient delivery and meeting client expectations are the crucial demands to be met in this process.

“Everyone is innovating constantly,” said Ignacio Caride, SVP eCommerce, Payments and Financial Services Mexico & Central America, Walmart, told MBN. In the past, companies such as Walmart would be able to offer multiple-day deliveries and clients would be satisfied. Now, potential customers expect same-day deliveries at least, with some even wanting to see their products arrive within the hour. To meet this stringent demand, new technologies are essential: “We can improve the purchasing and delivery process every day by using technology, as well as lower costs,” Caride said.

David Geisen, Country Manager & VP Marketplace Mexico, Mercado Libre, agrees

“Client retention is less of an issue standing on its own and more about streamlining the purchasing process in general.”

Marinus van Gestel Head of Latin America at Uber

on the importance of technology. According to Geisen, “the winners and those able to retain clients are companies that offer the best customer experience.” And there are a few factors that ensure a client is contented: the best offer, availability of products, the lowest price and fast delivery. For this reason, Mercado Libre offers over 50 million products on its Mexican platform alone. Alejandro Solís, Director General México and Costa rica, rappi, highlighted that availability throughout all of Mexico is important but sales are also key. “Varied and segmented promotions help to retain users and possibly get back the ones that had a bad experience,” said Solís.

Client retention, however, is not the end all solution, said Marinus van Gestel, Head of Latin America at Uber’s recently acquired Cornershop app. “Client retention is less of an issue standing on its own and more about streamlining the purchasing process in general,” he said. This includes easy logins, simple one-click payments and integration between apps. Because Cornershop employs pickers, people that seek out the goods in supermarkets and then deliver them to clients, their unavailability can cause friction. These potential put-offs need to be removed via smooth communication between picker and customer. If clients are satisfied, other e-commerce platforms can benefit further. “Good experiences are essential for other e-commerce efforts too. If people consistently like their experience, they will purchase other goods online too,” said Geisen.

Pressure to Deliver

The experts see that delivery times are an especially important skirmish within the wider battle. “We are obsessed with the idea of reducing delivery times. In our surveys, 70 percent of users really value that their products arrive within 48 hours,” Geisen emphasized. To make this happen, Mercado Libre relies for 84 percent on its own, recently constructed logistics network.

For Solís’ rappi, some verticals cannot be fully controlled as per their nature. Food deliveries, for example, rely on restaurants to prepare food and delivery drivers to move it to the customer. Despite the obvious challenges, rappi does what it can to take control of the process. “We predict cooking times and factor in issues that could complicate delivery such as rain,” he said, adding that complying with client expectations is essential.

Indeed, not everything needs to move at the same pace. “There is a difference between delivering an urgent missing ingredient and planned purchases so these issues have different cost attached to them. Not everyone needs their weekly groceries or a brand new flatscreen TV within the next hour,” explained Caride. For this reason, Walmart delivers most of its products and groceries in less than 3 hours. Flexibility and communication with the client are essential to strike a balance between cost and convenience, said De Juan Iriarte: “iVoy can be incredibly fast, but faster deliveries cost more. We need to ask what clients want to pay in return, or who else will foot the bill.”

This shifts the focus to extremely quick commerce, or Q-commerce, which delivers within 15 minutes. “We are seeing this grow rapidly elsewhere in the world and companies are raising capital to make it a success. It is important for us to be a part of this development, though we need to be careful to not blindly follow trends,” said Solís, pointing to rappi’s Turbo-Fresh service, which works efficiently in densely

populated zoners. Van Gestel argues that for Cornershop, Q-commerce is not as important as offering a wide catalogue of products with reasonably fast deliveries. “It is an interesting development, but it is too early to see if it is really essential,” he said, underscoring a Goldman Sachs study that revealed that only 5 percent of China’s mature e-commerce market needs Q-commerce delivery speeds. When prompted to pay more, many clients appear to be happy with one-hour deliveries instead.

“People see something in it, but I am not a major believer,” highlighted Caride. Like van Gestel, he said low prices and reasonable delivery speeds are more important for his company. “Just like in China, we see that Mexicans prefer to wait a bit longer instead of paying more, except in rare urgent cases,” stated Caride.

Geisen does think that for products other than groceries, it is important to deliver as fast as possible. But how quick the process goes is limited by the proximity of products in warehouses to the location of end-users. For this reason, Mercado Libre tracks these locations and seeks to be able to accurately estimate exactly how fast the company can distribute by enhancing the visibility off the process.

E-commerce companies continue to innovate to become more sustainable too. Electric vehicle (EV) fleets, possible drone deliveries and sustainable packages are just some of the main developments available.

On the era of interconnectivity, companies had to shift their business models to adapt and respond to the population’s new demands, which are based on a need for real-time digital interaction at virtually every moment in life.

In this new panorama, “products alone are not the basis of differentiation anymore,” explained Douglas Montalvao, Experience Cloud General Manager for Hispanic Latam, Adobe. “Businesses must now deliver great experiences to win in an increasingly competitive world and exceed client’s everincreasing expectations at every point in the journey.”

Creating experiences for the customer requires of personalized approaches, “to date it is not enough to base (developments) on focus groups sorted by gender or age, companies need to know the exact interest of an individual client to offer the experience they would enjoy,” said Montalvao.

The US has seen a gigantic shift in experience-related spending, as individuals spend four times more on experiences than on physical goods, found a study by Adobe. Individuals spent 6.3 percent of their income in experiences, compared to 4.7 percent in services.

To successfully create an experiencedbased product, business conversations need to revolve around audiences, campaigns, journeys and lifetime value. “Consumers’ digital days and journeys are much more complex nowadays. They go beyond the control of companies due to the multiscreens, options, social networks, reviews

“Businesses

must now deliver great experiences to win in an increasingly competitive world and exceed client’s ever-increasing expectations at every point in the journey.”

Douglas Montalvao

Experience Cloud General Manager for Hispanic Latam of Adobe

and interaction with other people and brands,” said Montalvao.

According to Adobe, a company’s “must-haves” for customer experience management include actionable experience data, dynamic content, seamless customer care, real-time decisioning, optimization and collaboration. These are the main issues customers and competitors are talking about, said Montalvao. “If you do not deliver on these basic elements, you are not delivering positive customer experiences. In Adobe, we are the only technology company in a position to deliver on this at scale.”

Adobe’s transformation was seen through its flagship product, Photoshop, which went from a single in-person software purchase bought physically to an online subscriptionbased model that is cloud-based and offers direct contact with the company.

To operate this novel service, Abode developed Adobe Experience Cloud, which Montalvao describes as the industry’s most comprehensive solution for marketing, advertising, analytics and commerce, serving both B2C and B2B customers.

“Experience Cloud allows you to deliver exceptional experiences from creation all the way through monetization and acquisition through renewal. It has played a pivotal role in transforming industry after industry. Whether it is financial services reimagining digital customer journeys or the world’s largest hotel chains delivering personalized hospitality, Adobe Experience Cloud has become the ‘experience fabric’ for the digital world.”

Adobe’s journey has been one of the most globally recognized digital transformations. It was named the second deepest transformation of the decade by Harvard Business review. Adobe was considered to be the second largest software company in the world by value. The company was named the one that prospered the most during the pandemic. “Our transformation drove our market value to go from US$19

billion to US$222 billion in a period of five to six years,” said Montalvao.

Data is the primary factor behind this successful transformation. “Many companies have huge databases that simply do not get taken advantage of, we call this a data graveyard.” Montalvao said that the smart use of data using new activation channels creates new opportunities to communicate with well-known customers in their preferred

channels. “We are turning real-time omnichannel customer experiences into reality; we update 970 million customer profiles in real-time on Adobe Experience Platform and moved from 72-hour data refresh cycle to a 10 seconds period.”

Adobe Experience Platform is leading a multi-industry digital transformation, according to Montalvao, ranging from banking to sports.

LEVELING THE PLAYFIELD WITH DIGITAL PAYMENTS

Mexico’s banking infrastructure has undergone a radical change with the arrival of fintech companies that have come disrupt a stagnant finance ecosystem. Spurred by a climate of competition, Mexico’s central bank (Banxico) is doing its part to increase inclusion among those who have been traditionally excluded from financial services through the use of CoDi.

“Our objective is to provide the conditions so all businesses can compete under the same guidelines and rules of the game,” said Miguel Diaz Diaz, Banxico. CoDi is a digital payment platform meant to even the playing field and increase competition within the county’s domestic commercial market. Although electronic payments have been supported by the Electronic Interbank Payment System (SPEI) since 2007, their widespread adoption has been slow but exponentially incremental. While digital services have been widely resisted in Mexico, the COVID-19 pandemic left businesses without recourse, leading them to widely adopt digital services.

From 2019, when SPEI realized 834,000 transactions, the organization observed a

“Our objective is to provide the conditions so all businesses can compete under the same guidelines and rules of the game.”

Miguel Diaz Diaz

General Director of Payments Systems and Market Infrastructures at Banco de México

47 percent growth into the next year with 1.23 million, where most of the operations consisted of amounts below MX$8,000 (US$387). This bracket alone experienced a 72 percent growth from 2019, indicating the incorporation of smaller market players.

It is expected for the digital transformation to continue supporting the expansion of this financial service, which is within the reach of approximately 80.9 million people with access to smartphones, according to a study by National Institute of Statistics and Geography (INEGI). In 2020, approximately 17.8 million Mexicans realized a banking activity through an application on their smartphone. It is Banxico’s hope to incite the other 63 million who own a smartphone to become senders and recipients of electronic payments through the simple, non-presential adoption of CoDi.

“Banxico plays a key role in promoting electronic payments across the country,” said Diaz.

CoDi is characterized by four main components: efficiency, security, 24/7 access and zero cost. The application was designed specifically to draw in the informal market, which is still heavily relies on cash payments stemmed from an unwillingness to adopt digital payment services because of the commission rates. The app is easy to use, free and provides immediate liquidity in comparison to 24-48 hour waiting periods associated with other providers. Moreover, since this finance infrastructure

is maintained by the central bank consumers can be confident that their information is secure. In essence, Banxico has removed

the barriers that had previously barred the informal market from participating and using electronic payment services.

TACKLING E-COMMERCE FRAUD WHILE RETAINING GOOD CUSTOMERS

Mexico’s e-commerce has never grown so fast, with an 81 percent increase in volume in 2020 compared to the previous year. But the explosive growth comes with an increased risk for fraud. Now, companies need to carefully balance risk prevention with optimal consumer experiences. Payment security experts agree that by identifying good customers and adopting new tech, the industry can make headway.

The pandemic truly kicked off the move toward e-commerce in Mexico, where now close to 10 percent of all retail takes place. This makes Mexico the fastest-growing e-commerce market in Latin America, although this development did not happen spontaneously. “Previous years of hard work have made the move to e-commerce possible. Mexico’s online ecosystem is now quite robust and even developed strongly before the pandemic,” said Pierre-Claude Blaise, CEO, AMVO. yet as online activities grow, so does online fraud.

“The biggest challenge for Mexican companies is reaching the goal of having less than 1 percent fraudulent transactions, as dictated in international guidelines,” said Erick McKinney, Country Manager México, Adyen. Doing so is easier said than done. CONDUSEF, a regulatory body that defends users of products and financial services, has seen a massive increase in reported fraud over 2020, a trend that continues into 2021. McKinney emphasized that companies need to diversify their strategy and prepare to tackle irregularities, especially during

“Figures show that about 35 percent of online orders are declined. Between 30-60 percent of this group are good customers.”

busy times such as the consumer-focused deals of the Hot Sale and the Buen Fin. Emilio Vázquez, Senior Director Merchant & Acquirer Solutions, VISA, sees that companies are perhaps not taking enough measures. “In the meantime, the number of channels for delivery and communication in which fraud can occur only increase. This alters the situation drastically,” he said.

“Companies should look out carefully for fraudulent practices but there are a lot of challenges they need to overcome,” said Victor Islas, Country Manager, ClearSale Mexico. Industry insiders, however, emphasize the risk of being too careful in the face of fraud and thereby hurting good customers. “Figures show that about 35 percent of online orders are declined. Between 30-60 percent of this group are good customers,” McKinney explained.

It is essential to identify those good customers, said Christian León, r egional Director Latin America, Signifyd. “We have a major opportunity to identify new e-commerce users and give them a good check-out experience so that they will return often.” Nevertheless, this is complicated by fraud’s increasingly complex and sophisticated trappings. “The amount of risk you can take on is also significantly different for SMEs compared to big companies,” added Blaise.

Erick McKinney Country Manager México

of Adyen

So, what does this risk look like in Mexico? According to Léon, fraud is taking up 1-2 percent of e-commerce’s total costs. This makes Mexico once again the highestranking country in the region but costs are in fact higher. “The total cost is actually 3 percent if you sum up total implicit costs, because you lose more than just your product. Administration can be expensive, just like investing in anti-fraud measures,” he said. McKinney stressed that losing money

because of fraud is inevitable but companies need to find a good balance between security and an easily navigated system. “Many companies would rather invest in other areas to improve their customer experience or offer at the end of the day,” he argued.

Islas knows the risks of losing customers: “If you have a high false decline rate, you lose a lot of potential lifetime customer value. About 58 percent of falsely declined customers do not come back and choose a competitor.” reputational damage can also be a problem. “People are vocal about bad experiences and complain online,” said Islas. “Payments are part of a good customer experience,” agreed Blaise.

To solve the issue, experts are turning to technological developments. “Tech is key: machine learning and AI can be utilized to make fast real-time decisions instead of a costly and slow manual review,” Léon said. But this implementation should not go at the expense of the customer, warned Vázquez: “We have to put more focus on customer experience design and provide all the elements we need for safety seamlessly.” Tools such as network tokenization can help companies improve their operations.

Léon highlighted that companies can use tools that track behavioral data. Fraudsters, after all, do not use a website the same way as regular customers and AI or machine learning tools can help identify problematic visits, while supporting the correct real-time decisions.

Furthermore, standardization of these tools is important, according to McKinney: “Global standards can help prevent fraud,” he said. “It is also important to not try and reinvent the wheel, which Mexico’s ecosystem often tries to do,” he added.

Preventing fraud requires active approaches from all stakeholders involved. “We need to align all these different players if we are to prevent fraud from happening,” said Islas. “For the first time we have a chapter in the USMCA related to cyber criminality, this will push the Mexican government ahead. It is not a Mexican problem, after all, it is a global issue,” said Blaise.

The issue will not be solved any time soon, because fraudsters will continue to find new loopholes and trick the system. Nevertheless, the problem can be combatted. “We feel that e-commerce players will be better prepared for next year,” said Léon.

CRYPTOCURRENCIES PUSH INTO THE MAINSTREAM

Cryptocurrencies, and Bitcoin in particular, are increasingly becoming a feature of the modern financial market. The possibilities that arise from this technology have driven most of their current market capitalization, which will likely continue to be the case until they achieve price stability and market acceptance, forecasts PwC.

The disruption of the traditional financial market, propelled by cryptocurrencies, has deepened due to the wider use of big data analytics, decentralized payments, peerto-peer platforms, electronic transfers and mobile access to financial services. These tools have changed the way people save and spend. While their role in disrupting the market is pronounced, they are still seldomly used by individuals.

Latin America has historically depended on cash for payments and transactions. The region has still a lot of room to grow

overcome in terms of bank penetration and financial services, explained Javier Martínez, Chief Product Officer, Bitso.

The traditional financial system ruling Latin America has proven to be non-inclusive and to perpetrate economic inequality.

For example, only 47 percent of Mexico’s population has a bank account, according to the Mexican National Institute of Statistics and Geography (INEGI). The bulk of the population that does have access to financial services lives in urban areas that have a medium to high level of income — the population residing in cities is 9.3 percent more likely to perform banking operations than those in rural areas. These data points are comparable to other countries in Latin America, where in aggregate 85 percent of transactions are carried out in cash.

This is compounded by further deficiencies in financial education, which inhibit people from tracking expenditures, increasing their savings and, ultimately, accumulating wealth.

As in every other industry, tech is offering a democratization of services. From financial to health services, digitalization can lead to accessibility. In the financial sector, this democratization is being brought by cryptocurrencies.

Blockchain technology is what makes cryptocurrency such an attractive solution. This is a network or a distributed ledger that allows two parties to make a transaction without an intermediary. The latter has been shown to have the potential to disrupt a wide variety of transactions. Intermediaries are also a core of the traditional payments system as stocks, bonds and other financial

“Today we have obtained the first and, so far, only fintech license in Mexico, ahead of 94 other applicants, some of which were large companies like Mercado Pago and Uber.”

Adriana Villaseñor

Corporate Development Lead at Bitso

assets need a trusted third party to provide verification of the transaction.

Cryptocurrencies have boomed in the last couple years and now are available all over the world. They have fewer intermediaries and lower costs, thereby creating greater financial inclusion. Additionally, they claim to be more efficient than traditional financial methods.

Cryptocurrencies could play an important role in countries that have been troubled by the regressive effects of inflation and capital controls, such as Venezuela and Argentina, explains Adriana Villaseñor, Corporate Development Lead, Bitso. In these countries, using cryptocurrencies as a store of value can help bypass the erosion of purchasing power. This can be accomplished not only via commonly known crypto assets such as bitcoin, but also through stable coins, which are less volatile and enable exposure to traditional fiat currencies. Furthermore, as a borderless means of exchange, cryptocurrencies also offer an alternative to interact with the globa l economy.

The adoption of bitcoin has been exponential; it grew by 881 percent just last year, mostly through the use of P2P payments, according to Villaseñor. Stable coins, which are those whose value is tied to a fiat currency, offer the benefits of cryptocurrencies with the characteristics of fiat currencies, so users can be sure of their regulatory status. “Stable currencies allow one to open accounts, in dollars for example, using less expensive and faster global transactions,” explains Villaseñor.

Bitso is the only fully regulated cryptocurrency operator in Latin America and had a leading role in the elaboration of Mexico’s Fintech Law. “We played a key role since 2016 by lobbying for regulatory clarity. Today we have obtained the first and, so far, only fintech license in Mexico, ahead of 94 other applicants, some of which were large companies like Mercado Pago and Uber,” said Villaseñor.

Due to its market success, Bitso has become a leader in this market. Its inclusive solutions have allowed them to build a 3-million-user strong community. It is the largest and most liquid exchange, offering the best prices and user-friendly products, said V illaseñor.

“Investors are increasing their trust in cryptocurrencies and immediately turn to us as a leading option, we lead the C Series investment round of Tiger and Coatue, which will be used to begin our expansion to Colombia, as we just opened in Brazil,” said Villaseñor.

BREAKING GROUND WITH REMOTE 5G APPLICATIONS

Although the rollout of 5G networks has been disproportionally thwarted by the COVID-19 pandemic in emerging economies, formerly hesitant businesses are now seeking to adopt digital technologies, looking increasingly for added value beyond faster speeds. Nevertheless, this technology is expected to catalyze Mexico’s digital transformation, benefiting all business industries and the overall economy.

“Those do not have the capability to implement this technology are currently faced with an internal battle to figure out how they will survive and maintain their competitiveness.”

Carlos Perea

Digital Transformation Strategist and Senior Vice President of Cradlepoint

and increasingly obsolete. Updating this inflexible infrastructure can get expensive and it does not offer the option of adding other technologies or added services without compromising the speed of the network. This is particularly important now that people are increasingly working remotely and may lack the necessary infrastructure to support added features, potentially compromising the security of business operations.

Infrastructure, added value and cybersecurity are “the three principal features that big corporate clients are beginning to look for to build a sustainable growth model and extend these capabilities to their users,” said Perea.

“At the end of 2019, leaders projected the widespread adoption of digital technologies in the next four to five years, specifically related to cloud services technology, cybersecurity and blockchain,” said Carlos Perea, Digital Transformation Strategist & Senior Vice President, Cradlepoint.

Companies that realized the potential of this disruptive technology and invested before the pandemic won big and “are already seeing the results,” experiencing rapid growth over the last 12-18 months. Meanwhile, companies that had failed to invest in digital technologies suffered and now find connecting to consumers difficult.

Existing internet infrastructure is mainly made up of legacy installations such as coper wires, which are severely limited

Initial 5G applications are being used in company vehicles and fleets to monitor and control transactions remotely. Other uses include real-time logistical tracking, monitoring deliveries and intracompany asset tracking. This stands to innovate the internal process of all public and private sectors from healthcare to agriculture.

As people have realized the potential of this technology, business leaders have become impatient with the rate and investment needed to update existing legacy infrastructure. Cradlepoint offers a way to bypass this wait period to start using now 5G applications and all the available value-added services the technology offers. Companies that invest in 5G now stand to get ahead of the market and develop knowhow before their market competitors.

“Those do not have the capability to implement this technology are currently

faced with an internal battle to figure out how they will survive and maintain their competitiveness,” said Perea.

Overall, 5G technology and adaptations stands to add layered dynamism to Mexico’s already robust emerging market sectors, where early adopters stand to come out as winners over those who trail behind. This is particularly important in an economy that is

characterized by a young population that has readily embraced technology applications and will lead future business sectors. Since Mexico is still in the initial stage of its digital transformation, concrete projections of how this technology will revolutionize industries is unclear but they will most definitely catapult competitiveness of the economy for the benefit of the consumer.

TECH ENABLES A NEW DIGITAL WORKPLACE

The digital transformation of the workplace began years ago but while this development dragged on for years, the pandemic opened the flood gates. Industry experts outline which factors enable this rapidly evolving digital transformation and what challenges need to be overcome.

Office spaces and their importance were taken for granted for so long that the COVID-19 pandemic initiated quite a shock: not only was remote work possible but it became highly desirable. Still, now that in-person contact is possible again, the modern workforce is shifting to a hybrid system, trying to meet demands from both sides. Verónica Peña, Modern Work, Security & Surface Business Group Director, Microsoft, called this the hybrid work paradox. “Sixty-three percent of employees said they wanted to work remotely when asked in a survey. But at the same time, 77 percent did want to have meetings in person. This paradox is difficult to facilitate for employers,” she told MBN.

In any case, such changes require a significant amount of financial investment, as well as a commitment to change. “Perhaps companies should accept that not everything will be as smoothly implemented

“Remote work requires a higher level of autonomy too, but this needs to be repaid with this improved efficiency.”

Agustin De la Maza Chief Solutions Officer of Softtek

as it is in a traditional office,” suggested Amilcar Alfaro, Head of Field Marketing GCP for Mexico and Emerging Markets, Google Cloud. regardless of these bumps in the road, the benefits could far outweigh the negatives. Employees can spend more time at home, a major boon as long as they can maintain a healthy work-life balance. Alfaro furthermore emphasized that people have been more productive working from home. Agustin De la Maza, Chief Solutions Officer, Softtek also pointed out the higher efficiency. “ r emote work requires a higher level of autonomy too, but this needs to be repaid with this improved efficiency,” he added.

Furthermore, remote work “changes the global dynamics of work,” allowing companies to hire talent from outside of their own region and therefore become more inclusive, said Peña. The in-person mode will remain a part of the working environment regardless, the experts agree. “Meeting in person positively influences the playing field and builds a platform where people can then meet online after,” said De la Maza.

The move to remote work increased the willingness of companies to spur on their digitalization. While such developments always come along with some anxieties, this is unnecessary, if understandable, said Alfaro: “People are always scared of how technological advancements will affect work. But just like after the founding of the internet, these developments actually breed opportunity instead of harm employment.

Digitalization is making it easier to access higher levels of employment for many.” Medina agreed. “All this change is coming to help and bring process, not to harm working opportunities,” he said.

But there are also challenges in fostering an environment in which employees can efficiently employ digitally transformed tools. “We cannot leave lesser skilled workers behind,” underscored De la Maza. Technical skills are a major global issue to be tackled. “Information from PwC shows us that 64 percent of CEOs around the world worry that employee skills are a barrier for growth in their company,” said Peña.

But rather than seeing it as a problem, training workers can be turned into a major weapon for any company. “According to the same report, 94 percent of workers say they will stay at their company if it were to invest in their skills. Because replacing workers is much more expensive than retaining them, the costs of training are justified,” said Peña. What is more, 86 percent of top employees argued that digital skill trainings helped to get them to their high level of performance. “I see that many agree on this issue. It is indeed important that people reskill and that a company’s evolution should take along its people,” agreed Medina. retraining depended on wider social factors such as age and technological aptitude. “People do not resist technology on average, but need to see the benefits and be aligned with its goals,” said De la Maza.

In terms of speed, Mexico is not exactly at the forefront of digitalization. Fortunately, it is not far behind either and the USMCA opened further room for improvement.

“(The USMCA) has allowed us to get the right level of investment to adopt the latest trends, albeit a year or two later. But this does get us on a good level of forward movement,” said De la Maza.

Still, digitalization does not need to happen for its own sake, said Alfaro. “Digital transformation does not all go at the same pace. We need to look at Mexico’s consumer realities, where people often have a ‘mobile first’ or even a ‘mobile only’ approach,” he said. In this environment, the digital transformation should be in the service of cost reduction and simplification of business processes. “Tech should not turn into something unruly and hard to wrangle,” he continued.

Cost reduction should be a main concern, said Peña, but that exact reason companies should not be afraid to invest in digitalization. “Investing technology is not a sunk cost. It boosts productivity and opens up new business avenues,” she emphasized. “Business can never be hampered or it will harm its main objectives. Technology can be an ideal solution to boost its progress,” concurred Medina.

One significant hurdle to overcome is security. With hybrid models being the latest trends, experts argue that companies need to foster a culture surrounding security. Keeping client data and operations safe is essential in a time where cyberattacks are becoming more frequent. When it comes to security, the biggest steps cannot be made with technology but through culture and safety processes, “especially now that we have so many portable devices,” said De la Maza.