Electric Mexico – Henrique Gonzalez, President
The president of Schneider Electric Mexico highlights the vast investment opportunities in Mexico unlocked by the energy reforms and the importance of ensuring they translate in job and wealth creation for Mexicans.
Could you please introduce the history of Schneider in Mexico to our readers?
Schneider came to Mexico in the early 1940s during Pemex’s initial post-nationalization expansion. In the early years, we helped to support the growth of Mexico as a country and as an oil producer. Schneider has provided innovative technological solutions and products to help satisfy Pemex’s needs in terms of energy management, as well as electricity generation and distribution.
In 1995 Schneider Mexico was making a loss, but has since grown to become one of the most profitable companies under Schneider’s global umbrella. What does this tell us about the strategic importance of Mexico to the company’s global operations?
Mexico’s status as a newly industrialized country has motivated Schneider to place particular emphasis on investment in the country. As part of the process, we have devoted substantial resources to developing new studies, business models, and adding new products and solutions to our portfolio. Some of these recent innovations have been around security, access control, solar and electrical vehicle systems.
Schneider is also always trying to provide the best for our customers, and maintain a strong presence in our markets in terms of products and facilitates. Given Mexico’s strong manufacturing base, we have invested in eleven different facilities in the country with over 9,000 employees to support both domestic and international demand. To illustrate, in 2013 we opened the Center for Development and Innovation in Monterrey (CDIM), which is the largest in North America region for Schneider Electric and represents an initial investment of USD 65 million. CIDM is currently composed of 230 professionals dedicated to R&D, 30 percent of whom have earned postgraduate degrees. Effectively, this places us in the top ten largest Schneider companies in terms of employment.
Schneider is an important supplier for the energy and petrochemical industries, with many of our products performing key functions in refineries and on offshore platforms. We have recently developed products dedicated to security and supervisory functions for offshore as well as transportation activities, giving producers more control over the production and flow of their goods. This has given Schneider a presence in the oil and gas market all the way from the well-head to the refining and distribution process.
What do you make of the recent energy reforms?
The reforms will obviously stimulate growth across the energy sector and peripheral industries, and hopefully that will help drive growth in the rest of the economy. With many young people entering the workforce and a changing demographic structure, it is important that this growth translates into Mexican jobs and growth of Mexican domestic income in the macro sense, and that the amount of wealth allowed to flow into foreign hands is limited. This issue is far more important today than it would have been thirty years ago due to the current price of oil; at $100 per barrel, Mexico’s oil reserves represent a vast potential for the Mexican people if the money is properly distributed and invested.
The reforms were driven in part by the need to increase stagnating production, and by the need for cheaper energy for the Mexican people. Maintaining the current level of production is a priority. Being involved across the oil and gas value chain, where will you focus the majority of you energy?
It will take a full business cycle for the majority of the benefits to surface, but in the short to medium term I think there is a lot of progress to be made downstream in refineries. The technology in Mexico’s refineries is quite outdated and it would take a relatively small investment to update them so that they are able to produce higher quality fuel and petrochemicals with less pollution. Next, I would look to similar upgrades to mature fields that are in need of newer equipment to produce shale gas and shale oil.
The deepwater opportunities will take much longer to develop, and while much of the equipment will be brought to Mexico from other countries, I think that it would be quite profitable for someone to invest in building a shipyard to construct some deepwater platforms here in Mexico, and it would of course create a lot of jobs for. Keppel and Pemex, for instance, have recently signed a memorandum of understanding to jointly develop a shipyard to build several jack up rigs, and hopefully this could lead to some investment in local deepwater construction.
How much do Mexican firms seek to acquire the latest technologies, and how does Schneider persuade firms to adopt these technologies?
Many people in Mexico have learned that the lowest price isn’t always the best. Spending a little more upfront on better technology can lead to large increases in production capacity and savings from greater efficiency. It has taken people a long time to learn this lesson however, so it is only been recently that we’ve seen subcontractors and service providers begin to take a longer view and pay more attention to the quality and capability than to price when making purchases for fulfilling a particular contract.
The lack of talent in the oil and gas industry is a problem globally. What steps is Schneider taking to ensure their human resources for the future?
We have a program called ATD, accelerated talent development, which brings ten recent graduates into our office every six months. After two years, we place them in a more permanent position, or let them go if necessary. This program allows us to bring in new talent, and to bring in a younger generation who are more ‘tech-savvy’ in an increasingly digitized world.
When we met with you in 2007 Schneider was the number two automation and control company in Mexico, but you had aggressive plans to become number one. Have you achieved that?
Since 2007, Schneider has expanded its product and technology portfolio significantly, however our direct position in the market has not changed a lot.
Nevertheless, Schneider Electric has strengthened its positioning in the automation market by acquiring two companies which; Invensys, which has a strong presence within Pemex as well as other large oil and gas companies, and Telvent.
Do you have any advice for foreign investors who are looking at Mexico?
I think Mexico is a good place to invest. The reforms have done more than anyone hoped they would, and I think that they have established clear and fair rules for how the industry will be managed in the future. My expectation is that we will see many of the macroeconomic benefits of these reforms in a short period of time.
Mexico provides a lot of benefits for investors; it’s a fairly large economy and a lot of skilled and talented labor at competitive prices. We have a lot of well-developed and efficient industries, the car manufacturing sector for example, and have made great progress in increasing production cycles and reducing inventories. In the medium to long run, I expect that Mexico will be an important economy at the global level.
To read more articles and interviews from Mexico, and to download the latest free report on the country, click here.