Mexican oligarchs are expanding abroad
Mexico both benefits and suffers from its close proximity to
the United States. When the ‘gringos’ on Wall Street trigged a financial
crisis, Mexico was plunged into an even deeper recession than its northern
neighbour.
Still, the benefits may be coming round again. Mexico houses
a growing number of firms with global ambitions. Grupo Bimbo, a bread maker,
purchased Sara Lee Bakeries in 2010 to become the US’s biggest baker. Another
giant, Grupo Modelo, has long been exporting its wares abroad. Corona extra,
one of Modelo’s most popular brands, sells strongly in the US but also in places
like Hungary.
Not the only one with money to burn |
It’s not merely bread and beer which are developing a
Mexican taste. Cemex, a large cement producer, has grown from its Monterrey
base to be one of the largest producers globally. A recent acquisition of
Rinker, an Austrailian cement materials firm, for £15.3 billion has added to
its global credentials.
What does Mexican beer, bread and cement all have in common?
The decision to expand a firm’s operations abroad often
stems from a mix of opportunity and necessity. This doesn’t seem to apply to
the likes of Cemex. The firm has a 35.7% operating margin in Mexico and a
paltry 0.2% in the U.S. Bimbo doesn’t fare much better; a 9% Mexican margin is
eroded to 2.7% in the U.S.
What allows these firms to expand is their dominance at
home. Grupo Modelo holds over 60% of the beer brands Mexican’s are guzzling.
Cemex and Bimbo hold over 80% in cement and bread.
Such control over captive markets provides the Mexican
oligarch with security and room to focus on foreign expeditions without
worrying about pesky Mexican consumers. The recent strong performance of the
Mexican economy, growing at around 4% annually, has further lined the pockets
of such firms.
The Reconquista excites many in the country as it is seen as
about time Mexico exerted itself on those across the border. Yet the strategy
of expanding with low margins abroad, whilst protecting entrenched monopolies
at home, is likely to benefit foreign consumers more than Mexican ones.
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