Opportunities abound in Mexico’s security market.
Mexico’s economy has steadily grown over the past decade; especially its security sector, which is estimated to have a market share of approximately 23 percent, the second largest in Latin America after Brazil. In 2007, Mexico’s security market had estimated sales of $257 million and is expected to grow at the rate of 8 percent in the coming years. However, its growth will be determined by several factors that have recently come into play, including the approaching U.S. economic deceleration.
The Mexican security market is split 20 percent towards national security, 69 percent for private security, and 0.3 percent for computer security. The equipment and service market, representing approximately 10 percent of market share, also provides opportunities for suppliers of competitively priced technology.
Demand for creative and innovative technological responses to threats of insecurity and crime has increased dramatically. Several factors are responsible for the growth of the security sector, including:
• high crime rates;
• anti-terrorism policies and programs implemented in ports of entry (primarily border crossings and airports);
• stricter local ordinances, regulations and insurance company policies requiring or providing incentives for homeowners and businesses to install smoke detectors, fire detection systems and antitheft systems; and the spread of organized crime and drug trafficking.
There is no question Mexico is committed to continuing its economic expansion. The government has released an economic stimulus package to counter the possible effects of U.S. economic deceleration and to maintain current growth and expansion levels, including tax breaks, easier credit and reduction on other business costs. Still, it is difficult to believe security industry growth will not be affected.
Vertical markets are key for the industry to determine the type of products and solutions offered and to determine how the market will develop. The Mexican economy is based on four major industries: mining, manufacturing, construction and energy (electricity, gas and water). All of these industries have new, imminent development plans fueled by national and international investment. This economic environment creates an ideal scenario for even greater expansion of the existing market.
Further, Petróleos Mexicanos, or PEMEX (the government-owned petroleum company) has undertaken a Mexican National Infrastructure Program for 2007-2012 which includes a $14.5 billion budget for drilling projects on the State of Veracruz, and construction of a new port in Punta Colonet, Baja California. The new port, estimated to cost $4-$5 billion with an anticipated construction period of three years beginning in 2009, will certainly promote private and public housing to power plants and airports.
We have also seen an increased demand for IP Platforms worldwide, and Mexico is not an exception, with end users demanding additional features and channel partners clamoring for products to help fulfill those needs.
The market demands IP platforms that lead towards integration, presenting end users eager to develop their old infrastructures to be able to migrate to IP. In this case, the hybrid digital recorders and network digital video recorders are a big step forward and indicate potential for the future market landscape. However, several restrainers keep the market from opening up, primarily costs: IP projects require higher investments and the Mexican market is very price conscious.
Increased competition of low-end brands in both video and intrusion also exists. China, as well as other Asian countries with very low production costs, is pushing its products into the market. As a result, the end user is not able to fully differentiate among good quality products with a solid company and warranty to functional products that do not share the same benefits as other international brands. In addition, Asian countries’ distribution channels are normally small integrators that do not have the proper training and skills to install the solutions, ultimately harming the end user and the rhythm of their businesses.
Globalization is creating a market with few boundaries to deliver a fair working device, apart from the price-driven factor. At this point, increased regulatory requirements can help the industry. Regulations in Mexico are very strict, having the “NOM” (Official Mexican Norms) to ensure quality products and consumer rights. These norms require product certification and Spanish documentation for all products sold directly to end users. It also covers strict regulations on packaging and warranties offered by the manufacturer. But it seems these regulations are not doing enough to protect end users from acquiring low cost, low quality technology security equipment and solutions.
The security industry should seek to regulate acceptable quality standards and proper regulatory requirements to protect the well being of all end users, communities, and of course the future of the industry itself. Demanding excellence within channels and fighting for process certification should be an industry effort that shares common objectives. Industry trade associations, such as The Security Industry Association (SIA) in the United States, can take the lead on this issue. By leveraging their knowledge and resource base we can realize the true growth expectation of the security industry, not only for the Mexican market, but all of Latin America.
Pedro Duarte is president of GE Security, Latin America, and chair of The Security Industry Association (SIA) International Industry Group. The SIA is a nonprofit international trade association representing electronic and physical security product manufacturers, specifiers, and service providers. For more information visit www.siaonline.org.