"Mexican industry continues unhindered by politics and more foreign companies are entering the Mexican market. Long term investments look beyond government policy and there are important projections for Mexico globally."

Martin Toscano

MANAGING DIRECTOR, EVONIK INDUSTRIES (MEXICO)

January 14, 2020

Can you comment on the company’s performance for 2019?

Evonik’s diversified presence across industries and sectors makes the company versatile and adaptable to market conditions. We have 17 active and diverse business lines and are therefore less dependent on market fluctuations. Indeed, 2019 has been positive for business growth with an increase of 15% in sales in comparison to last year. The growth has been structural and comes from an array of permanent factors. First, we made considerable progress in integrating new acquisitions. Secondly, we increased our involvement with global partners and their projects in Mexico collaborating in their start of operations in the country. Finally, we developed our business portfolio with current clients taking into consideration their demand for products.

More specifically, an area that is seeing interesting business growth is agriculture. It is it the fastest growing industry in Mexico, next to automotive. As opposed to the large monocrop farms in Argentina or the United States, Mexican agriculture revolves around fruits and vegetables that have high added value. There is excellent potential for involvement across the production chain. Additionally, the potential to grow is large due to Mexico’s extraordinary access to international markets. We already abide by USDA regulations for many products and have existing relationships with retailers.

On the negative side, an area that was affected by uncertainty was pharmaceuticals. Lack of clarity in the purchasing commitments of the Mexican Institute of Social Security impacted laboratories. We are also looking forward to more stability in the sector of coatings and paints.

How will changes brought in by the new trade agreement in North America impact Evonik in Mexico?

We are part of Evonik’s North American platform and our closest partner for imports is the United States, as expected. However, we have not been affected yet and do not envision large impacts. Being an international company, we are flexible and can source our resources from Europe or Asia. Where we source our products from depends on our strategy and the product. One sector which might be affected is the automotive. The rules around manufacturing for the sector might require changes to operations. Nevertheless, adjusting to the regulatory framework will suffice to sustain business projections.

Mexico has surpassed China as the United States’ largest trading partner. This places us in an interesting position. Countries in the North American bloc must understand that they are allies and should therefore work together to make the most of the advantages each can offer. Instead of competing with one another, they should consider how to best collaborate to deal with competitors from elsewhere.

Can you comment on the effect the López Obrador administration is having on business expectations?

Mexican industry continues unhindered by politics and more foreign companies are entering the Mexican market. Long term investments look beyond government policy and there are important projections for Mexico globally. For example, in the country’s role as a global manufacturer across sectors. There are interesting opportunities for growth and past investments are now becoming productive. After all, it is a matter of remaining smart and adaptable, because you cannot expect year on year investments of the same magnitude and there are many areas to focus on. Right now, at Evonik we are committed to improving processes and efficiency and working towards long term growth.

What is the company’s strategy for innovation?

We want to collaborate closely with our clients to understand how to become more efficient and resourceful holistically. Innovating along with them makes us more flexible and allows us to respond to external changes better in regard to time and cost. We want to extend our involvement throughout the value chain and become more integrated with our partners. For example, our clients do not limit themselves to looking to apply technology in Mexico but are actually setting up Research and Development centers in the country for solutions that can be applied abroad.

When developing new products the “time to market” is becoming more rapid and the number of companies in the market is increasing. So, innovation is an unnegotiable part of business. Some of the areas in which we are innovating are digitalization, artificial intelligence, sustainability and alternative energies. We are also very conscious of our social contribution and our role with communities.

How is the APLA conference useful and important for industry?

The APLA meeting allows us to better understand our common challenges at a regional scale. There are fluctuations in politics and economics that are not good for investment and result in uncertainty. APLA serves to dissipate that uncertainty and make sense of current affairs. It is great to connect with a diversity of players and provides a platform from which we can defend common interests. For example, in participating in the political agenda locally and as a region.

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