Jose Ruiz

It’s not done yet.  But signs continue to indicate that we are heading in the right direction.
by Jose Ruiz

Monterrey, Mexico (August, 25, 2009).-There are internal economic elements in Mexico that can be considered serious weaknesses if the global recession continues over a long period of time. As we continue to monitor key economic data it continues to look like Mexico will dodge the bullet.

80% of Mexico’s exports go to the United States.  The economy in Mexico will begin to pick-up steam when the U.S. consumer starts spending again.

This week U.S. consumer confidence proved that the sleeping giant might be waking up. The index climbed more than forecast at the same time that national home prices increased for the first time in three years.

The increase beyond forecast may be a surprise but the correlation should not be. Most of the net worth of the average American lies in two pots: The equity of their homes and their retirement savings. Both of which had been badly battered in the last couple of years leaving the average consumer feeling unprotected wondering what they would get by with  if they became part of the unemployment statistics.

While the official unemployment numbers are still of concern reports say the proportion of people who said jobs are hard to get decreased to 45.1 percent from 48.5 percent.

The positive environment in the U.S. is already having an effect in Mexico. The peso’s strength is at levels many thought we were never going to see again. It strengthened 0.1 percent to 12.8152 per U.S. dollar today.  At some point in trading it hit 12.7674, a number not seen since November 11 of last year.

The signs are encouraging and it appears we are on the path to recovery. There are internal concerns, but there is reason to continue to be optimistic as long as the U.S. economy continues to show signs of strength.

About Heidrick & Struggles International, Inc.
The world’s premier provider of senior-level executive search and leadership consulting services. The firm’s executive recruiters and leadership experts operate from principal business centers in North America, Latin America, Europe and Asia Pacific. In Mexico, Heidrick & Struggles operates offices in Mexico City and Monterrey. For more information about Heidrick & Struggles please visit www.heidrick.com

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We’re closely watching indicators in the US that would signal an improvement in consumer demand.  Mexico’s efforts to tackle the effects of the ongoing global financial crisis can help mitigate the impact but the recovery will come from an improved US economy.
 
“Mexico’s fate is so closely linked to the United States that they can’t get out of the recession on their own,” said Eugenio Aleman, a Latin America economist from Wells Fargo Bank.  “They are trying to smooth over the problems. The central bank has loosened policy. But there is not much the government can do.”
 
Looking for signs of recovery…
A report last Friday confirmed consumer confidence in the US tumbled more than expected in June, to a 28-year low. The report by the Reuters/University of Michigan said the confidence index fell to 56.7 from May’s 59.8. The figure is the lowest since the record low of 51.7 in May 1980.
 
Chicago Federal Reserve Bank President Charles Evans said the U.S. unemployment rate could get closer to 10 percent instead of 9.5 percent. He added that the jobless rate could peak later this year — earlier than a mid-2010 peak previously expected. This could signal a deeper fall but an earlier recovery.
 
Potential risks that can derail a recovery…
A current point of concern for many is soaring commodity prices. Food prices in the US have jumped 5% the past 12 months, with bakery products (up 10.5%), dairy (+11%) and oils (+12.8%) leading the way. Energy prices have skyrocketed. Fuel oil and other fuels have soared 50.7% in the past 12 months.

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Jose Ruiz is a Principal in Heidrick & Struggles’ Monterrey office. As an executive recruiter he has worked on executive search projects for multinational clients in industrial sectors and consumer markets. He can be reached at +52 (818) 8625-6521 or jruiz@heidrick.com

About Heidrick & Struggles International, Inc.
The world’s premier provider of senior-level executive search and leadership consulting services. The firm’s executive recruiters and leadership experts operate from principal business centers in North America, Latin America, Europe and Asia Pacific. In Mexico, Heidrick & Struggles operates offices in Mexico City and Monterrey. For more information about Heidrick & Struggles please visit www.heidrick.com

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Mexico’s central bank cut its key interest rate by three quarters of a point Friday saying strong action was needed because the economy had contracted more than expected this year after a fall in exports to the United States and the national shutdown to control swine flu.

This will be an active week:

On Monday, we are expecting to hear that March industrial production declined 8.41 percent year-on-year (according to a Reuters survey).

On Wednesday, the release of the gross domestic product numbers are expected to show the economy shrinking 7.61 percent in the first quarter, compared with the same period a year ago.

On Thursday, March retail sales data are expected to show a decline of 5.93 percent, while Mexico’s consumer price index for the first half of May is expected to fall 0.3 percent.

“A string of sluggish economic data should reinforce expectations of a potentially deeper rate-cut cycle,” RBC Capital Markets said in a research note.

However, it is widely believed that the first signs of an economic turn around will come from US consumer indicators. As the US consumer goes so does the economy in Mexico.  The peso and Mexican stocks soared as US recession fears began to ease early this week.

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Jose Ruiz is a Principal in Heidrick & Struggles’ Monterrey office. As an executive recruiter he has worked on executive search projects for multinational clients in industrial sectors and consumer markets. He can be reached at +52 (818) 8625-6521 or jruiz@heidrick.com

About Heidrick & Struggles International, Inc.
The world’s premier provider of senior-level executive search and leadership consulting services. The firm’s executive recruiters and leadership experts operate from principal business centers in North America, Latin America, Europe and Asia Pacific. In Mexico, Heidrick & Struggles operates offices in Mexico City and Monterrey. For more information about Heidrick & Struggles please visit www.heidrick.com

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Peso / Dollar Exchande Rate (FIX): $14.1975
Exchange Rate Trend: Up

Minumum Wage:
General: 50.84

Geographic Zone A: 52.59 (Pesos per day)
Includes Tijuana, Mexicali, Ensenada, Tecate, Cd. Juarez, Mexico City, Matamoros, Nuevo Laredo, Reynosa.

Geographic Zone B: 50.96 (Pesos per day)
Includes: Guadalajara, Monterrey, Guaymas, Hermosillo.

Geographic Zone C: 49.50 (Pesos per day)

Inflation:
Inflation – December 2008: 0.69
Inflation – YTD: N/A
Target Inflation 2009: N/A

Rates:
Rates (TIIE 28): 8.1050
Rates (TIIE 91): 8.0850
Rates (CETES): 7.3100

Mexico Indexes Mexico Economy

According to data released today by the Association of Executive Search Consultants (AESC) in its 2009 AESC Member Outlook report, several market sectors are expected to strengthen despite the state of the world economy. Executive search consultants anticipate executive job opportunities to increase in healthcare (32%), government (30%), pharmaceuticals/biotech (26%), and natural resources (26%). The AESC Outlook Survey was conducted from 5 to 30 December 2008.

While the overall outlook of executive search consultants for 2009 is negative, recruiting demand in several industries is expected to remain stable throughout the year, including non-profit (52%), education (48%), professional services (39%), media/entertainment (34%) and information technology (31%). AESC members surveyed expect the global executive job market to rebound in the second half of 2009.

The survey findings reveal that executive recruiters expect to see the greatest scarcity of talent in finance and accounting positions, as well as in executive management/board positions and engineering posts. Globally, China is expected to see the greatest need for executive talent in 2009 (66%), followed by India (43%), and Eastern Europe (30%).

Comparing this data to the last AESC Outlook report conducted in mid-2008, executive recruiters continue to anticipate demand for executives in the natural resources and healthcare sectors, while they expect to see less demand for executives in manufacturing and professional services.

According to AESC President Peter Felix, “Despite the current state of the global economy, our members still see several bright spots for executive hiring in 2009. Other sectors will begin to step up their executive hiring as the current uncertainty dissipates and greater optimism begins to work its way into boardrooms. Typically executive search is an early indicator of renewed strength in the economy as organizations either upgrade or begin to invest in new executive talent. Given the extreme talent shortage which was being experienced in many sectors globally until the end of the third quarter last year our members are optimistic that strategic recruiting will pick up by the second half of the year.”

The 2009 AESC Member Outlook Survey is sponsored by Talent Technology. A full copy of the survey report is available upon request (contact nrenton@aesc.org)

www.aesc.org

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Peso / Dollar Exchande Rate (FIX): $14.0950
Exchange Rate Trend: Up

Minumum Wage:
General: 50.84

Geographic Zone A: 52.59 (Pesos per day)
Includes Tijuana, Mexicali, Ensenada, Tecate, Cd. Juarez, Mexico City, Matamoros, Nuevo Laredo, Reynosa.

Geographic Zone B: 50.96 (Pesos per day)
Includes: Guadalajara, Monterrey, Guaymas, Hermosillo.

Geographic Zone C: 49.50 (Pesos per day)

Inflation:
Inflation – December 2008: 0.69
Inflation – YTD: N/A
Target Inflation 2009: N/A

Rates:
Rates (TIIE 28): 8.1368
Rates (TIIE 91): 8.1116
Rates (CETES): 7.4400

Mexico Indexes Mexico Economy

Peso / Dollar Exchande Rate (FIX): $13.9145
Exchange Rate Trend: Stable

Minumum Wage:
General: 50.84

Geographic Zone A: 52.59 (Pesos per day)
Includes Tijuana, Mexicali, Ensenada, Tecate, Cd. Juarez, Mexico City, Matamoros, Nuevo Laredo, Reynosa.

Geographic Zone B: 50.96 (Pesos per day)
Includes: Guadalajara, Monterrey, Guaymas, Hermosillo.

Geographic Zone C: 49.50 (Pesos per day)

Inflation:
Inflation – December 2008: 0.69
Inflation – YTD: N/A
Target Inflation 2009: N/A

Rates:
Rates (TIIE 28): 8.1500
Rates (TIIE 91): 8.1250
Rates (CETES): 7.4400

Mexico Indexes Mexico Economy

Peso / Dollar Exchande Rate (FIX): $13.9050
Exchange Rate Trend: Down

Minumum Wage:
General: 50.84
Geographic Zone A: 52.59
Geographic Zone B: 50.96
Geographic Zone C: 49.50

Inflation – December 2008: 0.69
Inflation – YTD: N/A
Target Inflation 2009: N/A

Rates (TIIE 28): 8.1875
Rates (TIIE 91): 8.1625
Rates (CETES): 7.7000

Mexico Indexes Mexico Economy

Peso / Dollar Exchande Rate (FIX): $14.1083
Exchange Rate Trend: Up

Minumum Wage:
General: 50.84
Geographic Zone A: 52.59
Geographic Zone B: 50.96
Geographic Zone C: 49.50

Inflation – December 2008: 0.69
Inflation – YTD: N/A
Target Inflation 2009: N/A

Rates (TIIE 28): 8.6125
Rates (TIIE 91): 8.6200
Rates (CETES): 7.7000

Mexico Indexes Mexico Economy

When the markets in Mexico began to first blossom in the early 1980s, the demand for labor from U.S. and other foreign companies in the region were mostly for low-skill, basic assembly operations. The ensuing need for engineers, administrative talent, and mid level management to support manufacturing operations accompanied the boom. But, even while there was demand for all of those skill positions, these individuals where still overseeing basic operations, and essentially, direct labor was a commodity, workers could be chosen right from the street and become productive all in the same day.

As the region became a hub for the automotive industry and specific electronic products like televisions in the late 80s and early 90s, more skills were in demand and training programs were soon set in place by many of the large organizations. However, once they were adequately trained, employees could then jump from one factory to the next, commanding better wages as they went since they wouldn’t have to be trained but would also have an immediate impact on production.

It was a rude awakening to many when many operations began to transfer to lower cost regions like China in the mid to late 1990s, causing the employment bubble to burst.

Today, there is a much greater mix of industries creating an increased demand for more well rounded skills. Some electronic manufacturers do still remain, but far more demanding industries such as biotechnology, medical devices, and aerospace are following on the heels of the automotive industry in Mexico.
Once again, these industries are changing the way labor behaves, putting a higher premium on industry-specific skills and creating a more stable workforce as they see their earnings decrease if they switch from one industry to another.

So, what does this mean for hiring managers? In short, this recent trend creates a more committed workforce who is trained on specific skills that increases their pay. In fact, individual workers are acquiring specific skill sets that are definitely more difficult to market to the factory next door, unless they are also from the same industry. So, for you, this can lead to increased loyalty. However, a drought in technical and engineering talent coupled with a NAFTA visa program is creating a labor market for technically trained Mexicans that extends into the U.S. and Canada. This extension of the labor market for Mexican technicians and engineers is now leveling salaries and benefits which means loyalty comes with a price.

Mexico Indexes Mexico Economy