Thank you, Mr. Ambassador, for those kind words. Now I feel as if I should be running for president.
Thank you, everybody, for inviting me here. It is a privilege to be a part of this historic occasion, in the midst of a presidential campaign in which there are three strong candidates, all of them here at this Amcham meeting. This is a tribute to the new and more open politics of today's Mexico and to the prestige of this organization.
I appreciate the opportunity to share some thoughts about the competition for capital investments in the 21st century. As you may know, DuPont has been investing in business in Mexico for most of the current century. The focus of our investment has, of course, changed over time and has been dictated to some extent by the nature of the economy. Our earliest investments reflected the fact that the Mexican economy was based on mining and other extractive industries, and our business here included blasting powder.
As many of you may know, black powder was DuPont's original and only business for most of the 19th century, but over the past 100 years we have diversified enormously and continue to change. Just this year, we sold a major oil company (Conoco) and bought the world's largest seed company (Pioneer). We have substantial investments in a range of industries in all regions of the world. These include traditional businesses and leading-edge involvement in biotechnology.
We're looking to biotechnology to provide new products to fight disease and hunger and also new fibers and other materials based on renewable resources. What we don't have anymore is a direct involvement in our original business. Our last tie to explosives was our facility at Dinamita, Durango.
We made the initial investment at Dinamita in 1925 and it was our first investment outside the United States. With the sale of our interest in 1997, we closed the door on the explosives chapter of DuPont's long history. By that time, Mexico's economy was also diversifying and growing quickly under the impetus of the North American Free Trade Agreement. Meanwile, the United States continued on its longest period of sustained economic growth in history. So much for the "giant sucking sound" of jobs being vacuumed out of America!
DuPont vigorously supported the campaign for the North American Free Trade Agreement because we believed in Mexico's enormous potential and felt that isolationism was one reason why Mexico's economy had not fully blossomed.
We also supported NAFTA because we thought it would be good for DuPont. And we believed it would be good for our industrial customers - primarily to have more access to this large and potentially affluent market, and to achieve regional logistical efficiencies.
So that you understand our position in this, let me explain that DuPont today is a science company, focusing on research and development and the creation of new products in partnership with our customers. Our slogan is The miracles of science™ - or, as it says on DuPont Mexico's web site, Los milagros de la ciencia. By the way, for those who like to browse, that's at www.dupont.com.mx. You'll see we have thousands of products, which help people in every aspect of their lives.
But for the most part, DuPont products are invisible to consumers. We sell crop protection products and products such as the Sustiva® anti-HIV drug in their end-use forms. But we interact mainly at the industry-to-industry level, developing ingredients that are used by our customers to make end-use products and providing scientific and technological support.
This gives DuPont a broad perspective on the requirements of industry as a whole and perhaps gives us a better understanding of global and regional markets across industry. What we see from this perspective is a closing of the gap between maturing and developing economies, and a growing global appetite for financial and other resources.
Throughout the world there are rapidly developing economies that are leap-frogging whole generations of technologies. At the same time, some display astonishing anachronisms. The picture of an old Asian gentleman driving up to an ATM machine in an ox cart provides a graphic example.
But for the most part, new technologies are changing the economy and way of life all over the word and especially in Asia - and doing it rapidly. The cell phone is a case in point. Developing nations don't need to make huge investments in wire-based systems as we did. They just buy cell phones.
As countries leap-frog from the primitive technologies of earlier centuries straight into the 21st century, their economies grow and the demand on capital markets grows too. Also, trade barriers are coming down and more developing countries are opening their doors to foreign trade and capital. So, the competition for investments increases.
What makes one country more attractive than another as a point of investment obviously depends to some extent on who is doing the investing. But, as you know, there are factors that are of interest to everybody.
For instance, most companies take into account a fairly standard list of considerations in making investment decisions. DuPont is no exception. We look at taxes, the general business climate, political and social stability, and infrastructure - in other words, the prospects for profitability and security.
At this point, it may be appropriate to pause and challenge you to think about some of these considerations as they might apply to Mexico. Let me ask these questions:
Is the country's infrastructure in good repair? Are the streets safe? Are Mexico's police, government and other institutions more free or less free of corruption than those in other countries? Is there respect for intellectual property rights?
These are issues that must be resolved in order for Mexico to achieve a top investment rating and fulfill its destiny as an economic powerhouse. I think we all understand that, and that we need to press these issues in public debate.
Now, to return to DuPont's investment strategy, I must tell you frankly that our strategy does not include the type of investments that we were making in the 1970s and even as recently as the 80s.
It no longer makes sense for us to routinely make large investments in new capital equipment, in order to increase market share. Big, shiny new factories that do not make a competitive rate of return on capital are things of the past. We look very, very hard at current and future demand and return on capital before we make a decision to build a new facility. And when we do, we usually build to serve regional and global markets, not just single-country markets.
We also look to share costs. Through October of this year our investments on the ground in Mexico totaled about $600 million and half of that was represented by joint ventures. By the way, the total investment has grown by about $130 million since 1996.
But wherever we operate in the world, we have found that some of our greatest gains in product innovation, operational efficiency and productivity come from doing a better job with current assets. Some of these gains stem from new science and technology, developed in the laboratory. But many also come from improvements by DuPont people in the plants and this is true of our Mexican operations. Here in Mexico, the people in our plants and in our offices are Mexicans, with just a handful of expatriates. And our Mexican operations are as good as any in the world.
My point: much of our investment today is in improving the assets that we have in place and, most importantly, in developing the skills of our people. Our emphasis is on knowledge intensity rather than capital intensity. I believe that the most valuable resource that we export today is knowledge.
Knowledge intensity is becoming the key factor in competitive advantage, and we see that across all industry. That means increasing international competition for people who have the capability to add value through knowledge. A walk around DuPont's Central Research & Development campus in Delaware, proves this point. Over the past two years, only 20 percent of the new Ph.D. researchers we have hired into CR&D cited the United States as their country of origin. The other 80 percent were from China, India, Korea, Western Europe, Canada, Russia, Romania, Lebanon and Brazil. Not one from Mexico, but one way of looking at this, is that countries that have much to offer tend to keep their talented people at home!
Also, although DuPont has among the highest proportion of postgraduates of any manufacturing company, we just don't need a Ph.D. in every job. The same is true, only more so, in industry as a whole. For most jobs, what industry needs are literate high school graduates with the skills to figure things out and the ability to keep on learning new processes and procedures.
My point: all work that adds real value is knowledge work - from people on assembly lines to people in the executive offices.
A strong core of knowledge workers can transform a plant and a community and the transformation is not just economic. When competent, motivated people take hold in a plant, many good things happen. People earn more, spend more, and enhance their communities in many ways. For instance, I heard recently that a group of people at our Altamira white pigment plant took the initiative to establish a wildlife habitat and environmental learning center at the site, for the benefit of the local community. Multiply this kind of good neighbor, good citizen effect in communities nationwide and the result can be amazing. Knowledge workers in higher-value jobs are the key to general prosperity and social health.
So, along with other government policies that provide an attractive business climate, a successful, broad-based education system is the key to a reinforcing cycle of economic growth.
In such a cycle, businesses obtain a favorable return on capital and people and businesses have a greater sense of security. When these things take place, businesses invest more, high-value jobs multiply, the consumer economy grows and more tax revenue flows to government. This should lead to investment in improved infrastructure and lower crime, making the business environment even more attractive, leading to yet more investment.
This is sustainable growth in the economic and social context. We all know that it must take place in a way that leaves little or no environmental footprint - the third key element of sustainable growth.
I believe Mexico will achieve this reinforcing cycle and achieve sustainable economic growth and general prosperity. I have always been a great admirer of Mexico and the Mexican people.
So, I can visualize a wonderful future. With all the elements that I have touched on in place, I see clean, orderly well-run cities and countryside, strong, ethical, principled leaders, broad uncongested streets, a superb infrastructure and an energized workforce, led by some of the greatest engineers the world has ever known.
1,000 years ago, the ancestors of those engineers built civilizations that were far beyond anything else on this continent and in much of the rest of the world. I have visited Mayan sites. I was amazed at the architecture, and I wondered about a people so far advanced so long ago.
So I find it easy to believe that Mexico will repeat the best of its past, and surprise the world in the next millennium. And DuPont will be able to say, we knew it all along.
Thank you.
11/30/99
Richard R. Goodmanson