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Dec 18, 2023

‘The challenge is relevance’: The state of investor relations in Mexico

‘Nearshoring’ brings new investor interest to the market but long-standing challenges remain

Vesta’s IR team is working hard to support the stream of investors that want to see its commercial real estate sites in northern Mexico.

With one or two site visits happening each month, director of IR Fernanda Bettinger has joked that her IR colleague should move out to Monterrey, an industrial city around 100 miles west of the US border, as she spends so much time there anyway. ‘Over the last year and a half, we’ve received a lot more interest,’ says Bettinger.

Mexico is back in the global investor spotlight thanks to nearshoring, where companies bring operations closer to home. With tensions high between the US and China, multinationals are looking for ways to diversify and shorten their supply chains. The Covid-19 pandemic added urgency to relocation plans, highlighting how quickly global trade can shut down amid a crisis.

The nearshoring trend has led international investors to refocus on a country that has lost visibility over the last 20 years, eclipsed by faster-growing emerging markets.

But Mexico’s IR teams still struggle for attention, both internally and externally. Getting global investors to consider Mexican equities remains a challenge, report IROs and consultants. The nature of Mexico’s market, meanwhile, with high levels of family ownership and low trading activity, means investor engagement is not always prioritized.

In the spotlight

Nearshoring has been on investors’ minds for some years now. Bettinger says Vesta has been getting questions on the topic since 2019. Until recently, however, investors weren’t sure whether the trend had really taken off. 

‘Last year was a tipping point,’ she says. ‘We saw a spike in public announcements of companies relocating to Mexico – the most relevant being Tesla’s Gigafactory in Monterrey. Investors started to understand that this was actually happening.’

The questions have now changed, explains the head of Vesta’s two-person IR team. ‘At the beginning, investors asked, Is it real? Now they ask, Where are we in the trend?’ she says. ‘I think we’re at the beginning. Companies take a while to process that they have to change locations. They need to think long term.’

Vesta is well placed to benefit from nearshoring. The company operates more than 200 buildings on industrial sites across Mexico, where top international clients include Nestlé, Safron, Nissan and Bombardier.

In June, it raised $387.5 mn through a listing on the NYSE, the biggest US IPO by a Mexican company in a decade, and earlier this month announced a follow-on offering to raise further cash for its growth strategy.

Aside from commercial real estate, other sectors to profit from the nearshoring boom include construction and transportation, although there are concerns over the ability of Mexico’s water and energy infrastructure to keep up with demand.

Nearshoring is ‘a positive impact, and a very big one, for the country,’ says Enrique Gonzalez, global head of IR at Cox Energy and co-founder of the Instituto Nacional de Relación con Inversionistas (INARI), the Mexican IR association.

‘It’s not like everything is going to change in one day, however. It will take some years to create the right infrastructure.’

Gonzalez notes that other factors are also in Mexico’s favor. ‘We have a very stable economy and currency,’ he points out. ‘And the interest rates are quite appealing for the market right now. So there is a lot of demand, in terms of information and interest, from the global investor community.’

Jorge Collazo, director of IR at Coca-Cola FEMSA (KOF), the world’s largest Coca-Cola bottler by volume, agrees that investor interest is up this year. He says nearshoring has had a positive impact, but so have other factors like a resilient consumer environment, declining inflationary pressures and business innovation, such as his company’s new digital platform for B2B customers.

‘We’ve seen more interest from investors to visit us, especially in Mexico and Brazil, our two biggest markets,’ he says. ‘They want to see our operations and, of course, meet with management. Definitely, there have been more requests than previous years.’

The struggle for relevance

Despite the benefits of nearshoring, however, Mexican companies still face longer-term issues when it comes to attracting new investors.

‘The challenge is relevance,’ says Damian Fraser, founder and CEO at Mexican IR and PR agency Miranda Partners. ‘As Mexico’s market has shrunk relative to other markets, getting investors to come here and make that effort to understand the country has become more and more important,’ he says.

Mexican companies also need to fight to show they are global businesses, adds Fraser, who served as UBS’ Mexico country manager for 17 years and, prior to that, ran the bank’s Latin American equities division.

‘Getting investors to understand these companies as not Mexican but global with headquarters in Mexico is an important challenge,’ he explains. ‘If you look at the 10 biggest companies in the Mexican stock market, at least half of them are global companies that compete globally with other companies in their sectors.’  

For those targeting new investors, a significant challenge is the wide range of stocks that investors and analysts consider today, says Collazo.

‘Investors and analysts have a broader portfolio of things to cover,’ he says. ‘We see fewer and fewer buy-side analysts who focus on a specific region or sector and become an expert in that niche. That’s especially the case when we think about global or emerging markets investors. They have to allocate their limited time to cover a lot.’

As a result, it’s vital for KOF to be strategic in its engagement activities, says Collazo: ‘You have to think carefully about the targets you want to meet. And it’s critical to build trust and deliver the right message in the limited amount of time we get with investors.’

Another challenge for Mexican companies is low trading activity. Free floats are small, due to the prevalence of family-controlled businesses. On top of this, domestic pension funds have grown over the years and increasingly bought up the shares of local companies.

‘These guys sit on the money for many, many years,’ says Gonzalez. ‘They don’t trade much, so that really doesn’t help. As an IRO, you need to go outside [the country]. You need to create the right story and strategy to be able to sell the company you work for in the US, Europe, the Middle East or wherever you need to go. We need to be very active.’

The adoption of digital tools during the Covid-19 pandemic has helped Mexican companies do more with less, says Collazo, a helpful boost given the rising cost of flights and hotels. ‘Thankfully, travel and in-person events are fully back,’ he says. ‘But we also need to make efficient use of the resources we have. We need to balance those high-impact in-person interactions with hybrid or virtual events.’

The role of IR

How is IR perceived within companies in Mexico? Gonzalez says many still view it as a back-office function, where IR may not have a lot of interaction with the CEO or board. ‘In Mexico we need to have a step up in terms of the importance of the IR position,’ he says.

High levels of family control also have an impact. ‘IR is probably less of a priority for some of these family-oriented companies,’ says Fraser. ‘In Mexico, you might get a mid-sized company that most people haven’t heard of, and you won’t get that same level of involvement. And nor should you, given that it’s not the company’s priority for its long-term horizon. [But] that’s not the case with every company.’

In addition, the security situation in Mexico affects how companies engage with investors, notes Fraser. ‘In general, people want to keep a low profile,’ he says. ‘It tends to be a more understated approach to IR. People don’t want to be on the front page of newspapers saying how wonderful a job they’ve done because of security and very sharp inequalities of income. They want to be discreet and careful.’

Despite these factors, however, there are many examples where IR is given a prominent role, especially at companies focused on engagement with the global investment community, says Gonzalez.

Fraser adds that IR remains a coveted post at larger firms. ‘In a big, listed company, IR gives you very broad exposure to the [entire firm],’ he says. ‘It gives you exposure to the CFO and the CEO internally. It gives you exposure to the international market and travel. So I think IR within a company in Mexico is still a pretty sought-after profession. It has a lot of attractive qualities that other positions don’t necessarily have.’

IR can also act as a stepping stone to other corporate opportunities. At KOF, former directors of IR now occupy high-profile positions such as strategic planning director for Brazil, CFO for Guatemala operations, CFO for the Jugos del Valle joint venture, and chief procurement officer, says Collazo.

‘Within IR, you are able to learn about the business from many different angles,’ he points out. ‘For many people, that has been an opportunity to continue their careers, sometimes in IR but also in other senior roles.’

Working to build up the stature of the profession is Mexican IR association INARI. The organization began as a WhatsApp group among IROs who often visited the same cities for conferences. They would use the chat to arrange dinners, but conversation soon expanded to other areas.

Today the group has close to 80 members, representing around 90 percent of the Mexican benchmark IPC Index, says Gonzalez. ‘It’s pretty much the most active companies in Mexico,’ he notes.

The association is particularly focused on sharing international best practices, offering networking opportunities and preparing the next generation of IROs.

On the latter point, INARI last year trialed an IR 101 course in partnership with a private university in Monterrey. ‘We try to let them know that, among many other professional positions, there is one in public traded companies that works like this,’ says Gonzalez.

Talking politics

Looking ahead, a key issue for Mexican companies and their IR teams is the upcoming election year. In 2024, the country will elect a new president, with incumbent Andrés Manuel López Obrador unable to run again under the constitution.

With the US presidential vote falling in the same year, issuers are facing many questions from investors about how different political outcomes could impact their business and broader investment trends.

Fraser advises companies to avoid discussing politics where possible. ‘Our advice is… to talk about things they know more about than other people, which is their company, business and sector,’ he says.

He adds that the ‘vast majority’ of Mexican companies operate in a form that’s independent of the public sector. ‘What’s much more important is the global economic cycle, global interest rates and demographic trends, rather than who the president of the day is,’ he notes.

At Vesta, Bettinger is fielding many questions on both US and Mexican politics. She tries to guide investors past short-term political outcomes and focus on the long-term outlook for nearshoring. ‘I think this trend is going to be here for the long run,’ she says. ‘The tensions between the US and China are not going to stop anytime soon. Mexico can really benefit from this.’