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PwC México, a synonym of quality

Interview - August 22, 2012
With more than 100 years operating in the Mexican market, PwC leads the industry with a solid presence and as the firm to trust. Upper Reach meets with Carlos Mendez Rodriguez, Partner/Director of PwC Mexico

Private analysts increased for the fifth time the predictions for economic growth in Mexico in 2012 positioning it at its highest level in ten months, according to a poll by the Central Bank.
Exactly, the growth that Mexico has experienced in the last few months has been very good. I think that this growth will remain steady; we have a good platform of domestic savings, reserves and a good labour force. It was recently announced that a very important company, Audi, will open a plant here with an investment of US$2 billion dollars and they are moving their people from the United States as it is more expensive there and their level of error or production defects are a lot higher in the States than in Mexico – this is why they have decided to come to Mexico. I insist, I believe we have a very solid economy, we have carved it out in the last 12 years, perhaps 18 if we take into account PRI’s last presidential term, we began to build the bases and now I feel that the economy is shielded.
We have had a drop in the constant exchange rate which has kept us in balance, there haven’t been any jumps, we have forgotten about those devaluations of 100 or 200%, and the drop right now follows market forces. Nowadays we are exporting approximately US$1 billion dollars to various parts of the world. Petrol, which a few years ago represented the majority of our exports, now only represents a third of our exports. The automotive sector has risen in importance as has the food industry and other Mexican products that have been widely accepted abroad. The programmes of assembly plants, which started a few years ago, had slowed down a little due to the issue of security; but even still, investors are returning to Mexico thanks to our qualified labour force that works well and is cheaper than the United States. If you add to this the high transport costs and production errors in Asia, it simply makes more sense to work in Mexico.
On the other hand, we can’t forget that there are problems in Europe and the United States, which is our main partner. Growth is slow and on top of that they are protecting themselves from any impact which could imply an economic problem like that of Europe. This could reduce our growth slightly; however, the predictions for this year have been revised and even though they have been lowered by 0.1% or 0.2% for this last quarter, growth is still at 3.6%. We export one-third of our production and the other two-thirds is for domestic consumption. On the other hand new jobs have been created; the increase in salary has been higher than the inflation rate so Mexico is really growing and we have a middle class, which is constantly increasing and also helps domestic consumption.
So to summarise, I believe that this growth is going to continue, even though it may not be at the same level that we have seen these last ten months. We also have to take into account that we have just elected a new president, and we are at an “impasse” between the pleas of one party. The courts have to ultimately declare that the elections are valid and the emerging party should start being conservative with its investments. So all of this adds to the fact that the growth of the third quarter of the year will be inferior to what we have had up until now.
You mentioned that one of the principal causes has been the diversification of the economy and specifically, the strengthening of various sectors. The consulting sector is growing in parallel. How has this been seen in PwC?

Fortunately we have had good growth in the last few years. We have reached and even surpassed our budgets year after year. We had a difficult year in 2008-2009 but I think that was a bad year for everybody. Once we got over this bad patch we have maintained growth. In that moment, we believed in Mexico, in the economy and in our business, and we were one of the only companies that did not undertake mass layoffs. We kept our personnel and today we are a lot more solid than our competitors who did decide to cut their workforce, including partners, by 200 people in one go. We didn’t do so and four or five years later we are solid.
We are currently taking two measures. Firstly, we are finding flexibility in our way of working in order to retain our valuable employees. We are in the process of converting 2,000m of office space in a building and totally remodelling it to adapt to the most modern needs. The rooms are more spacious, the offices of the partners are smaller and we spend less on rent. We are also working on flexi-time programmes for our employees, especially for our female employees who are married or with children and who can’t keep their current working hours.
Secondly, in this massive city that we live in, we are finding ways to implement work-from-home programmes, ie ‘the home office’, and we have adapted the computers of all our employees to allow them to connect remotely.
We employ 3,500 people and the average age is 27 years. There are about 100 people who are older than 50 years and the rest are younger. It is an extremely young organisation.

This firm was established in Mexico in 1906, it has been studying the Mexican market for over a century and offering auditing and consulting services to both the private and public sector. What have been the main milestones over the years?

You can imagine that in 106 years we have been through various crises and various strategies. When we first started out the strategy was to deal with international clients only. All the subsidiaries, trains, petrol, investment in that moment were from abroad. We passed the Revolution, the great depression of the United States, the world wars, and the petrol expropriation. This is when we began to focus on national clientele. Nowadays our strategy is to grow in the national market. In these 106 years part of our success has been due to continual innovation and new ideas on how to improve our operations on a day-to-day basis. Changing the strategy from international clients to national clients took us 40 or 50 years, after that realising that these national clients are as important took as a few years more. We have to be constantly transforming and in comparison to 100 years ago, the only difference is that I have to do this more quickly.

We know that the Professional Services sector has great potential and that in the last ten years it has grown 4.1% per year and more productivity is forecasted. How does PwC look to differentiate itself and carry on being number one?

CMR: We have differentiated ourselves and I think that the market recognises us as a company of quality. In some cases, clients complain that we are sometimes too strict in the work that we carry out. However, we would like to think that PwC is a synonym of quality. When a high quality job is needed PwC is what should come to mind as a synonym of trust. On the other hand, the fact that we are innovating in all aspects with our employees, in finding different ways of working, working hours, home office etc. must be helping us with our workers. In terms of growth, we are opting for different industries such as the financial sector, which is growing continually, seeing as it has been the motor for many economies.
We are also opting for sectors such as infrastructure, health, government, automotive and energy. We are hoping that there will be reforms in the energy sector. PEMEX is already opening with an English company and many national companies are taking the first steps. We are hoping that with a reform that doesn’t have a high political cost, there will be an opening for foreign investment,
What we do is to study where we think the opportunities are, strengthen these areas and based on this, create groups of specialists. We have reinforced our group in the financial sector, we brought over two Spanish firms and we have also hired specialists from the financial sector as partners. We have also reinforced the health sector. We have also started working closer with capable public sector officers from the current government, letting them know of our interest in bringing them to our ranks depending on any readjustments made in the new cabinet.
So this is what we have been doing, that’s to say, reinforcing the areas that we decide to opt for with significant sums of money according to the expectation that there is for growth.

The Economic Commission for Latin America and the Caribbean revealed that Mexico has been placed as the second largest receiver of Foreign Direct Investment (FDI) in Latin America, which has led to the opening up of large transnational and foreign companies.

This year the figures vary constantly but this year we received more than US$20 billion in direct investment and as we already mentioned, the UK is one of our main commercial partners. At a global level we are 14th or 15th in bilateral trade so we feel that in spite of insecurity problems and presidential changes, we are still a stable and reliable country.

Does PwC invest in investment promotion in Mexico?

The alliance that we have is basically with our network, we meet quarterly and discuss strategic plans. We also have certain alliances with other companies depending on a specific project. The projects are increasingly more complicated and whenever we need an expert in a certain area, we create alliances to help us to give a complete service.
We have created an international business centre and we are hiring young foreigners with a lot of energy; for example we have Chinese, an American, a German –in fact we have recently hired the son of the German Ambassador here in Mexico – and we have Italians, various South Americans, Russians and a Brit. With the Spanish we have a business alliance in the financial sector and they have sent us two Spanish workers. We also have a Venezuelan. This international business centre composed of so many different nationalities provides a complete service with our network and helps to facilitate the language. This centre helps us greatly with relations with various embassies, in the last six months we have been working with various embassies such as the German, Chinese, Italian, French and British embassiesy and this has helped us to strengthen our network and extend our services.

PwC is committed to the social development of the Mexican society and has for five years running, been awarded as a “Socially Responsible Company”. Tell us about the 11,000 hours that have been invested in voluntary work each year, the campaigns that have been carried out and the projects you are most proud of.

CMR: It is the Philanthropy Business Centre of Mexico who has awarded us this recognition over the last few years. We have a programme where we dedicate a part of our budget to work for companies that are dedicated to philanthropy such as Teletón and the Red Cross. On the other hand we have internal programmes where we help those with low-income. Currently we have a programme for the Christmas season and we invite those that have little income to help us wrap presents. We found some low-income areas and bought 150 or 250 bicycles and we hire around 200 people per year. We tell our new workers in their first briefing to come to work tomorrow in casual clothes and they assemble bicycles. Symbolically we ask two out of three mothers with children from the poorer areas to receive these bicycles. It’s these kind of programmes that has helped us receive recognition in social responsibility.

PwC has been in Mexico for over 100 years and you have been in the company which you now lead for 38 years. What motivates you to face the responsibility as Director of PwC and what are your aspirations for the future?

During these 38 years there hasn’t been a single day where I have felt like I’m taking a step back or feel stuck. I have practically climbed each rung on the ladder. In fact 90% of the workforce enters the company as auditing assistants and then they become managers and supervisors. I entered in the administrative department even before finishing school and I was in the company for one and a half years until they gave me the opportunity to work in auditing. In this department I did a bit of everything, the only thing left to do was serve coffee and be a courier!
I had the relevant promotions in a variety of categories and a few years after becoming a partner they put me in charge of the Satélite office, the third largest office in the country. Then I was brought back here and I was in charge of Auditing in Mexico, then at a national level which represents 60% of the company’s operations. Basically it has been a natural change and the partners vote for me. On the other hand, at 60 years of age invariably one has to retire and one of my responsibilities and commitments is to train my successor and I have four more years to do so.
In this sense what I did was carry out a series of changes in the various areas of my business, consulting and markets. I hired professionals younger than 50 so that they have time to prepare and to take charge of the business if need be. I have been in this position for one and a half months and I have already carried out five or six changes with these young workers. We are also training mature workers that still have a few years ahead of them to be able to follow me. In this sense and in function with the growth that I spoke about, we have in mind to duplicate profits in these four years and I have chosen partners who are workaholics and give it their all. I don’t know if we will achieve it or not but if we reach at least 80% that would be great.

As a director of a Mexican company, what final message would you like to give to those that to come and invest in Mexico and in PwC?

We consider ourselves as a high quality and highly trustworthy company that knows how to innovate and rejuvenate itself and can give our clients the service they require. We understand that all our clients are different and that we have a specific solution for each one of them. We want and we try to make them understand that we don’t see them as simply a client, but rather a commercial ally. Some even tell us that they are not used to receiving the treatment that we give them.
In terms of Mexico, I think there is a lot of potential, we have an ideal geographical position, and as I mentioned we have a solid and qualified work-force base and it’s this workforce that is our primary asset. We know how to work well and hopefully people who are looking for opportunities outside of Mexico will stay here if there is sufficient job creation. A while ago in a meeting outside of the country an American told me that Mexicans work harder than anyone.
We have a lot of potential and we want to grow; we have the economic foundations and as a country we can help foreign investors. As a businessman I see the huge responsibility we have in maintaining job creation, in helping my people grow, in ensuring their happiness so that they wish to carry on working in the organisation. I believe it is a responsibility that all the businessmen whom I have interviewed want to form part of and create jobs.