Looking East

MEXICO CITY – About four years ago, one of Mexico’s largest companies began looking East as it aimed to expand its reach beyond Latin America.

Naturally, FEMSA (Fomento Economico Mexicano, S.A.B. de C.V.) looked at the top foreign investment destination in Asia: China. But Coca-Cola Company’s largest franchise bottler also looked at a country named after a Spanish king, which had robust trade ties with Mexico during the Spanish colonial period. The company liked what it saw and picked the Philippines for its Asia-Pacific foray.

FEMSA bought Coca-Cola Philippines and opened for business in January 2013 – a year that saw the country struck by a powerful earthquake and Super Typhoon Yolanda.

Natural calamities are just among the challenges faced by investors in the Philippines. But the Mexican company is unfazed.

“We’re very excited about the progress we’ve been making,” chief corporate officer Javier Astaburuaga told Filipino journalists last week in Monterrey, north of Mexico City. “I think the Philippines was always there… we always put our bet behind the Philippines.”

That should be music to the ears of the daang matuwid administration, which has been criticized for failure to translate the Philippines’ investment grade into actual job-generating investments.

FEMSA, founded in 1890 in this city, is the second largest listed company in Mexico, after telecommunications giant America Movil owned by Carlos Slim, Bill Gates’ rival as the world’s richest man. Last month Mexico received its first-ever A-grade rating from Moody’s, from Baa1 to A3, following structural reforms in several areas. The Philippines is not yet in the A level.

In its first year of operations in the Philippines, Coca-Cola FEMSA earned $200 million, all of which will be reinvested this year as the company expands.

“We’re new to the Philippines and we’re very very excited to be there,” company CEO John Santa Maria told us in this city. “The country is starting to grow… the market is there. I see ourselves ramping up our growth in the next two to three years.”

The company’s operations can also ease criticism of jobless growth under the Aquino administration. Coca-Cola FEMSA directly employs about 10,000 in its Philippine operations, and expects to create about 2,000 more jobs mostly outside Metro Manila.

“We will become one of the biggest provincial employers in the Philippines,” said Juan Dominguez, the company’s Colombia-born corporate affairs director for Asia.

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The reasons for the company’s selection of the Philippines should encourage the government to try to lure more investors from Latin America, with which we have a shared history of Spanish colonial rule.

“Latin America is very much similar to what we have in the Philippines,” Santa Maria told us. “There’s nothing more culturally attuned (in Asia) to Mexico and Latin America than the Philippines.”

The bonds between the two countries, which some believe go back to prehistoric times, were reinforced during the Spanish-era galleon trade between Manila and Acapulco.

Santa Maria says it’s hard to find anywhere else “the amount of enthusiasm that Filipino people have for everything we do.”

Dominguez, a 41-year-old lawyer who is now based in Manila, is quickly learning Tagalog and imbibing the culture.

Expats from other Latin American countries have told me their businessmen find the Philippines too far for trade. But their investors can be lured to set up shop in the Philippines, with shared cultures among the come-ons.

Even investors from former colonial ruler Spain have told me they are looking at Asia for business opportunities, considering the region among the most economically dynamic.

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FEMSA officials are aware of the challenges in the Philippines, which ranks low in international surveys on ease of doing business.

Logistics, the weather, connectivity and the many other problems mentioned by investors who have been in the country for a long time are among the challenges.

Santa Maria considers it a challenge that “we’re not growing fast enough.”

The company, which has 21 bottling plants in the Philippines, is setting up one of its largest plants in the world in Canlubang, Laguna.

It is also modernizing its distribution system to make it community-based, with the company collecting consumers’ profile, according to corporate communications director Carolina Alvear.

Martin Arias, strategic planning head, said they would start pre-selling Coca-Cola products to cut waste.

FEMSA also owns 20 percent of Heineken, making it the Dutch brewer’s second largest investor, and has a chain of 11,700 convenience stores called OXXO – Mexico’s version of 7-11. OXXO is still working on a distinctive image, and may soon start selling tacos and tamales along with US hotdogs.

OXXO outlets may soon be found in the Philippines, along with Coca-Cola FEMSA cappuccino machines in sari-sari stores.

The company is also bringing its commercial refrigeration business – the largest in the Americas – to the Philippines. FEMSA sells about 400,000 refrigerators every year.

Like other corporate giants, Coca-Cola FEMSA is active in corporate social responsibility programs. One, undertaken together with the Technical Education and Skills Development Authority (TESDA), teaches women to run sari-sari stores like a regular business, training them in accounting and management skills. Dominguez said they aim to train five million women by 2020.

“We’re big believers in the mom and pop,” Santa Maria said.

The FEMSA Foundation is also taking its “Coordinates for Life” to the Philippines, to provide cognitive, emotional and social “life skills” to the poor so they can make informed decisions on matters as diverse as peer pressure and proper hygiene.

Coordinates for Life will be piloted this year in Quezon City in coordination with the local government and the education department.

Astaburuaga said they found the Philippines to have “the right character,” a “very good” labor environment, and capabilities similar to Latin America.

Surely there are other companies in that part of the world that may be enticed to invest in the Philippines, especially with the Mexicans bullish on our country.

“Our story does not end in the Philippines,” Santa Maria told us. “We begin it there.”

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CORRECTION: The Aztecs found and gave names to the city of Teotihuacan and its pyramids, but this was centuries after the pre-Columbian Mesoamerican city was built around 100 BC. The ethnicity of the builders has not been determined with certainty.