It seemed odd to me that the Kauffman Fellows would choose Mexico City for the recently concluded annual summit. When one thinks of Mexico, venture capital rarely comes to mind. Well, I was in for some big surprises.
Robust Economy: Mexico seems to be enjoying robust economic health. Despite its heavy reliance on the northern neighbor (US accounts for 80% of its exports which are 40% of its GDP), the economy is growing about 5% a year. The peso is stable and the country has recovered all the manufacturing jobs it lost during the recession. One can also see a rise in Latin American pride – a sense that the country can emulate the success of Brazil, Chile and Peru, and that entrepreneurship holds the key to success.
Young VC: Naturally, PE/VC is nascent in the country. Regulations that permitted the insurance companies to invest in venture firms were put in place as recently as 2001. There are only 5 or so VC firms that invest in small entrepreneurial companies with high growth potential, and they are typically small with less than $100 million of capital. Many VC-funded companies incorporate in Canada to avoid double taxation. A lot more can be done to promote innovation (here is a nice article), but that has not prevented gritty entrepreneurs from bootstrapping very high performing businesses with global ambitions.
