Selling baby wipes amid drug wars: Kimberly Clark on business in MexicoMarch 13, 2012: 1:53 PM ET
The Mexican subsidiary of the consumer product conglomerate Kimberly Clark is doing well despite challenges in the country today.
By Caitlin Keating, reporter
FORTUNE -- The United States has always had a complicated relationship with Mexico. We receive about 80% of the country's exports, we debate over how to handle Mexican immigrants who make up an increasingly important part of our workforce, and we travel to our southern neighbor's pristine beaches for winter vacations.
It became more complicated last month, when the Department of State issued a travel warning about the security situation in Mexico. For decades, the country has been mired in crime, but the drug war has intensified there in the past year. Millions of U.S citizens safely visit Mexico each year, but the U.S. government is sounding alarms on the number of Americans murdered in Mexico recently: 120 U.S. visitors were killed there in 2011, up from 35 in 2007.
So what is it like to do business there today? Claudio X. Gonzalez Laporte is the Chairman of Kimberly-Clark de Mexico, a subsidiary of Kimberly Clark (KMB) that's headquartered in Mexico City. The company sells everything from toiletries to hand towels and infant care.
Gonzalez spoke with Fortune about the state of affairs in Mexico, the country's dependency on the United States, and how the drug war is affecting local businesses.
How is Kimberly Clark de Mexico performing in this economy?
Mexico has continued to perform very well despite the economic situation in Europe. We haven't gotten out final numbers for 2011, but I'm quite certain that we will end up growing around 4%, or a little better than 4%, so things have held together quite nicely despite the European turmoil that was affecting everyone including the United States. We are planning to have another year in 2012 where we can have growth around 4%, if the U.S. economy continues to give the good signals that it has also started with in 2012.
How dependent are companies in your country on the United States?
The country as a whole has a certain dependency on the U.S. but we are working very hard to bring it down. As long as Mexico has such a high dependency on its exports to the U.S., anything that happens in the U.S. will also affect our company. If the economy in the U.S. is doing poorly, Mexico's economy would also grow less. This would create fewer jobs and lead to less purchasing power for our products.
We want to be tied to the U.S. If you look at all of the countries around the world, and you had to pick your neighbor, there is no other neighbor that I would pick than the U.S. But, we also have to take into account that we are exposed to whatever happens to our neighbor. How do we bring that exposure down somewhat? Mexico has to slowly but surely grow its middle class so we can find ways of making its internal market grow more so that we have less dependency on the U.S. We would still like to export as much as we possibly can to anyone that will buy our goods.
What would these other export markets be?
In the automobile industry, our dependency on the U.S. market is now down to about 60%, when it used to be close to 100%. We are starting to export a lot of products to South America, practically in Brazil, Argentina, and Chile, and believe in or not, we are exporting a substantial amount of product to Europe and some product to Asia.
Even though reports are showing how well the economy is doing in Mexico, we hear about how the violence is worse than ever. Are businesses in your country being affected by the drug war?
You have to conclude that there must be some effect, despite the very good numbers of economic growth in Mexico. You have to logically say to yourself, if we didn't have this violence, how much better could it be? When you talk about tourism, you know there has to be some effect. But, tourism still continues to grow. In 2011 tourism revenues were up something like 2% to 3% in total.
As far as our company is concerned, the effect has been quite minimal, so we are very pleased about that. We fortunately have no violence problems that we know of across our 7,000 plus workers in the country, and our rate of theft on highways has not moved from what it has been for several years now. We obviously would like to have that down to zero, but there is no trend showing that we are being impacted by the situation.
You earned a chemical engineering degree from Stanford University. Could you elaborate on why you started a fellowship under your name at Stanford University's Engineering and Education School?
I strongly believe that education and equality in education is absolutely key in Mexico. In order to achieve it, we also have to give students the opportunity to go to the top universities in the U.S. They can get trained, come back to Mexico, and help us to achieve a higher degree of quality in our education system. So I invested in putting up scholarships for Mexican students in the engineering school at Stanford and in the education school.
Do most students come back to Mexico after they graduate?
Yes. Some would work for companies similar to mine, and I have a couple graduates. We are always looking for talent.
Do you ever see Americans coming to work in Mexico?
We have had some come through, but not as many as I would hope in the future we might have.