BMW and Hyundai in Talks for Mexico Plants, Guajardo Says

Mexico’s record auto production may get another boost from Bayerische Motoren Werke AG (BMW) and Hyundai Motor Co. (005380), which are considering building factories in Latin America’s second-largest economy, Economy Minister Ildefonso Guajardo said.

The government has held talks with both companies and at least one of them may announce plans for a new plant next year, Guajardo said in an interview in New York today. That would mark Mexico’s first new car factory since April 2012, when Audi AG revealed plans for a $1.3 billion plant it started building this year to produce its Q5 sports-utility vehicle.

A BMW or Hyundai factory would further bolster Mexico’s auto industry, which set production and export records in 2012 and has continued to expand this year even as the nation’s economic growth has slowed. Nissan Motor Co., Honda Motor Co. and Mazda Motor Corp. (7261) are building plants in central Mexico, while U.S. automakers Ford Motor Co. (F) and General Motors Co. (GM) are investing in additional production.

“With both of them, there have been conversations with us for future plants,” Guajardo said in reference to BMW and Hyundai. “I cannot talk for them, but I think that starting 2014 we’ll have new announcements. At least for one.”

Elizabeth Solis, a spokeswoman for BMW in Mexico, did not immediately respond to a telephone message and e-mail seeking comment. Meeyoung Song, a spokeswoman for Hyundai in Seoul, did not respond to an e-mail for comment outside normal business hours and a phone call to her office went unanswered.

Mexico Confidence

Mexican auto output rose 4.4 percent in the first eight months of the year from a year earlier to 1.99 million vehicles, according to the Mexican Automobile Industry Association. Production last year climbed 13 percent to a record 2.88 million.

Autos, aerospace and electronics are “the leading industries in terms of foreign direct investment,” which is on target to more than double to $35 billion this year, Guajardo said. Exports may rise 5 percent to $390 billion, he said.

Even discounting Anheuser-Busch InBev NV (ABI)’s $20.1 billion purchase for full control of Corona brewer Grupo Modelo SAB, Mexico is set for a “dramatic” increase in foreign direct investment, Guajardo said.

“Investors are confident of Mexico’s future, regardless of the slowdown in the first semester” he said. “There is a lot of trust in the future of the Mexican economy.”

Diminished Forecast

Mexican exports increased just 1.4 percent this year through July to $217 billion, the worst start to a year since the end of the 2009 recession. Mexico sends about 80 percent of its exports to the U.S.

“We are hopeful by the end of the year the U.S. economy will pick up and that will help the behavior of the Mexican economy,” Guajardo said.

Mexico’s central bank on Aug. 7 cut its growth forecast for 2013, projecting the slowest expansion in four years amid stagnant exports to the U.S. and a first-half drop in government spending. Gross domestic product will expand 2 percent to 3 percent, as little as half of last year’s pace and down from the 3 percent to 4 percent previously forecast, the bank said.

Policy makers unexpectedly cut interest rates on Sept. 6 by a quarter percentage point to a record-low 3.75 percent, their second move this year after a half point cut on March 8.

Hurricane Impact

Guajardo, 56, an economist who got his doctorate from the University of Pennsylvania, became economy minister in December when President Enrique Pena Nieto took office. He previously served as a legislator in Mexico’s lower house and also worked in the Foreign Ministry as a negotiator on the North American Free Trade Agreement and as an economist at the International Monetary Fund.

The economic effects of two hurricanes that left 139 dead in Mexico this month will be limited as the storms did not cause significant damage in leading manufacturing areas, Guajardo said.

“The impact on the economy will not be as severe as you may think,” he said. “The three main tourist spots, Cancun, Puerto Vallarta and Los Cabos were not touched by the hurricanes, therefore the main tourist centers of Mexico are strong.”

To contact the reporters on this story: Jose Enrique Arrioja in New York at jarrioja@bloomberg.net; Brendan Case in Mexico City at bcase4@bloomberg.net; Eric Martin in Mexico City at emartin21@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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