MEXICO CITY — Mexico City-based consultant Ricardo A. Ric rdez recognized early that Mexican businesses would have to change quickly and dramatically to compete in the post-NAFTA global trade environment.
The 52-year-old chemical engineer formerly served as manager of Ciba-Geigy's plastics additives unit in Mexico and as managing director of polyester molding compound manufacturer Premix de Mexico SA de CV. In 1984 Ricardez set out on his own, and two years later, set up his own consultancy, Internacional de Asesoria y Suministros Industriales SA de CV. He also assisted the Mexican government's plastics sector in negotiations of the 1994 North American Free Trade Agreement.
In 1993 he started a second company, Prode SA de CV, dedicated to helping firms manage the process of cultural change. In a Feb. 9 interview in Mexico City with Plastics News Editor Robert Grace, Ricardez discussed the challenges and opportunities confronting Mexico's plastics and chemicals industries.
Plastics News: How has the Mexican business landscape changed since you started your company, IASI?
Ricardo A. Ricardez: In 1986 when Mexico entered the [General Agreement on Tariffs and Trade], that was a real opening. Globalization is a fact. This is a new game. You cannot play new games with old rules.
This [opportunity] under the NAFTA umbrella has to be understood not just as a commercial vision but as a cultural merger. ... People who have been understanding that basic element have found a faster way to get into the domestic market.
Plastics News: For foreign-owned companies to operate effectively in Mexico, is it important for them to rely on local management talent?
Ricardez: [Yes], and this is already happening. McDonald's, for example, said it is really impressed with [Mexico's] local labor, including local management. There is one company I know, and the manager said to me: ``When I came in, I brought my USA management. Six months later, I was having big problems. Then I understood that I had to move into local culture. When I moved into local culture, things started happening differently. I had more success.''
Plastics News: What were the major effects of the December 1994 peso devaluation?
Ricardez: Well ... it always supports your exports. For internal costs, it's a problem. A lot of the companies that [understood this change] process have invested in new technologies. That's the only way to drop your fixed costs.
Plastics News: Is this, in effect, the market's way of correcting itself?
Ricardez: Yes, an entrepreneur will always find a way — that's why he is an entrepreneur. There are a lot of very good entrepreneurs in this country.
Plastics News: With the implementation of NAFTA and all, tell us how you managed change.
Ricardez: When all this started, we had not imagined how big the change could be. ... What we have learned from this is that we have to move very quickly and very smartly to understand the changing process itself.
Businesses have to understand what we have to change and what we have to keep. [This runs] a little bit against this re-engineering theory, that you go and change everything. There are a lot of things you should not change — for example, your values. Because when you are talking of a cultural merger, what you really merge is values. It takes some time. Success doesn't come the next day.
Plastics News: You've noted that some companies manage to make money despite being poorly run or badly prepared for the future. How do you convey the need to change to the managers of such companies?
Ricardez: If you were making money with a low investment because your machinery was not the most modern ... your days are numbered. You can predict that. You will disappear in so many months, if you don't move. So then, all you have to do is change your strategy, but [you must understand] how to conduct this process of changing.
Then you understand why you have to use a mission and your values, and all these other ideological parts of the company. They become alive. They become useful. The mission will move you to where you want to go. And your mission is always your reason for living, your reason for existence.
Plastics News: How will Mexico's processors fare in this process?
Ricardez: The big timers [large original equipment manufacturers] are actually the driving forces. [Processors probably] will do the same ... because they will understand this is good. It gets results. But the first to move are those who have the resources and the understanding that they have to change rapidly. And they use those resources to support that change. But as they move, they actually create a vacuum. [Processors] have to move into that vacuum. You can see that — those companies in the plastics sector that have understood this process and are moving behind this vacuum. Once you understand the dragging force, you follow it.
Plastics News: Who is leading the way in Mexico?
Ricardez: Those serving the automotive parts, electrical and electronic appliances. They are requiring you to be ISO certified in order to play.
Plastics News: What's next?
Ricardez: What you should expect in the coming 10 years, is a massive movement toward total quality management, quality systems and quality assurances. Today, there are probably only 1,000 companies [in all industries] in Mexico that are ISO certified. But many companies, in many different industries, today are moving toward a quality assurance system.
You have to continuously go through a transition stage. Getting rid of your old practices is very hard.
There are a lot of variables that you have to control today — much more than 10 years ago. You have to be more cautious and accurate in your decision processes.
Plastics News: What advice would you have for U.S. or Canadian companies considering getting a foothold in the Mexican market now?
Ricardez: The winners start earlier. They smell the business. They probably don't even know how to do it, but they smell it, they start moving faster. And this you can see now. There are people moving, not as much as we'd like them to move, but there are people moving. ``He who hits first is he who hits twice,'' as we say here.