Lewis Hamilton, Mercedes, Autodromo Hermanos Rodriguez, 2019

How F1 almost lost its most popular race on the calendar

2020 F1 season

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With a reported weekend attendance of over 340,000, last weekend’s Mexican Grand Prix was another roaring success for promoter Alejandro Soberon and his team at CIE, the event’s holding company and the primary concert and spectacle producer in Latin America.

Yet the latest edition was almost the last grand prix to be staged at the Autodromo Hermanos Rodriguez following last year’s change of government. The incoming administration, headed by left-wing politician and former Mexico City mayor Andrés Manuel López Obrador, had decreed that no public funds would be allocated to the race after the existing contract expired, effectively after Sunday’s race.

The event is, of course, vital to the country and city’s image – and, by extension, their tourism industries – and Formula 1’s North American footprint. In addition, twinning the event with Austin enables both commercial rights holder and teams to combine costs over two flyaway races scheduled a week apart and in relatively close proximity to each, yet separated by a hard border – in turn reducing pressure on hosting fees.

Economic impact studies can be notoriously subjective – they are, after all, commissioned by investors to justify their activities. But, whatever the measure, there is no doubt that the direct benefits of the grand prix are in the region of $200m. Not a bad return for an event with a budget of around $60m – based on present exchange rates.

Sergio Perez, Racing Point, Autodromo Hermanos Rodriguez, 2019
Sergio Perez enjoys his strong home support
According to sources with knowledge of the situation, plus information imparted by Soberon during a select media briefing on Friday, the latest budget was derived from three main sources: government support (50 percent), which effectively guaranteed the hosting fees, with the balance split roughly 25 per event each ticket revenues and sponsorship/commercial activities.

However, the budget also included a provision for circuit refurbishment of $50m, defrayed over the course of the five-year contract, so approximately $10m per annum.

Following the presidential decree, Soberon and team clearly faced a major challenge: how to extend the contract and retain the race without state support? True, facilities are broadly up to scratch, reducing budgets by around $10m, but that would still leave a shortfall of $20m. Equally, increasing sponsorship or ticket prices would likely push them over the edge, particularly in a country with a per capita income of $10,000.

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Fortunately, though, the mayor of Mexico City, Claudia Sheinbaum (who, intriguingly, was the joint recipient with former US vice president Al Gore of the 2007 Nobel Peace Prize for her contributions to the United Nations Intergovernmental Panel on Climate Change) was equally perturbed about the effects of the possible loss of the event on the city, and thus she created a trust fund targeting local and national business communities, and patriotic Mexicans.

Autodromo Hermanos Rodriguez, 2019
Stands are consistently packed on F1 race day
Secrecy surrounds the identity of donors and whether tax incentives are provided – or whether public funds are channelled into the trust – but clearly sufficient revenues were raised for hosting fees to be guaranteed for three years.

Liberty is thought to have reduced its fees rather than risk losing a North American round, one that is extremely popular amongst television viewers, helps spread costs and – particularly as Brazil is believed to be on a freebie after Bernie Ecclestone struck rather favourable terms with the Interlagos promoter – while construction costs have now largely been defrayed, further reducing annual budgets.

The bottom line is that the Mexican Grand Prix will return on the 2020 F1 calendar and a further two years thanks to the persistence and promotional skills of the extremely impressive Soberon, who has spent his entire professional life in the entertainment business, the political nous of Sheinbaum and the patriotism of the business leaders.

While the event’s promotional activities are regularly trotted out as an example for other promoters, the business model created for Mexican Grand Prix by CIE, too, should be studied by those grand prix organisers whose events are on the endangered list. As the record shows, there are more than a few of those.

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17 comments on “How F1 almost lost its most popular race on the calendar”

  1. Great article – the Mexican race should be studied, they put on a hell of show.

  2. One of the best races on one of the best circuits I’m glad Liberty seen the financial sense of reducing fees. This is a case of a bird in the hand being worth more than two in the bush.

  3. Jonathan Parkin
    29th October 2019, 11:40

    ‘Brazil is on a freebie due to Bernie Ecclestone striking favourable terms with the Interlagos promoter’

    That sticks in the gut given that Bernie gave the BRDC endless crap over Silverstone

  4. Great article on a very interesting topic and race, and good to know that a lot of people made a reasonable and measured, effective deal to continue an event that provides a good number of positives for all stakeholders.

  5. I am not a fan, sorry.

    The race we had this year – yes, it was really nice, in other years – I wouldn’t say so (and Hamilton not finishing first doesn’t play any role in such my opinion).

    If we need to drop some races, Mexico is definitely in my top 3 to be scrapped. Along with Sochi and US.

    1. I believe you have mentioned this multiple times before. So is it the race on the track that you object to or a dislike of the Americas?

      The tracks are fine. It is the cars that need improving.

  6. Great write up @dieterrencken. I wholeheartedly agree that what the Mexican GP brings is worth looking at with great interest.

  7. Great article. Does Liberty have any plans to have Soberon and crew give a symposium to the other promoters? I recall Liberty getting the promoters together. It would seem a natural to have them consulting the other races. Maybe Soberon could even be hired by Liberty.

  8. This article is very informative, but on the other hand also strikes me as uncritical and self-serving.

    It basically treats it as a given that the benefits of hosting a race outweigh the costs. You write “The event is, of course, vital to the country and city’s image – and, by extension, their tourism industries.” This is just arrogant – as if Mexico was some podunk backwater that desperately needs F1 to even put it on the map. And the use of “of course” makes this sound more like advocacy than journalism.

    As evidence for your argument, you field the fact that $200m is greater than $60m. I think that by doing that, you’re making it a bit too easy on yourself.

    Most importantly, the Mexican NATIONAL government, responsible for the well-being of all Mexicans, would be using $60m of PUBLIC money for a return of $200m in PRIVATE benefits, which are also concentrated on Mexico City and not the rest of the country. The charge that national governments tend to favor urban and affluent areas over rural and impoverished ones in their use of public funds is a very common grievance in many countries, and I’m sure that Mexico is no exception. Add to this the fact that the hosting fees are not the only outlay the government faces — accommodating hundreds of thousands of people in a crowded metropolis is not trivial — and this is not the no-brainer you portray it as.

    Finally, through the use of the term ‘patriotic’ (which should be used with caution anyway, given that what is and what isn’t patriotic is always a matter of perspective) the article again takes a very uncritical position.

    Personally, as an F1 fan, I am of course happy that Mexico is hosting a Grand Prix, and I am sure the same is true for millions of Mexicans both in and outside of Mexico City. But we should be conscious of the fact that we as fans are hardly the most objective observers in what is not a straightforward decision.

    1. Please don’t level assumptive accusations: first off, Mexico thrives on tourism and the fact that there were still hotel rooms available despite a full house Grand Prix suggests that it could do with the visitors, car rentals, flights in local airlines, etc

      You clearly have not heard of tax: the profits made by private enterprise will be taxed – which flows into govt coffers. If you care to check, the president said that the money saved by not supporting the Grand Prix would be allocated to road construction for tourism area. Does he think his country is a backwater in desperate need of tourism? I don’t believe so…

      Finally, if you care to read what I wrote, I said the TOTAL budget was $60m of which 50% came from the state. So that’s 50% of your argument blown away before you even start.

      1. Fair enough, I had indeed missed the part about the government funding only 50% of the fees. My bad. Seems like it’s not really about the money in terms of pure cost/benefit for Obrador then – and more about who he wants to bee seen given money to, and to whom he doesn’t.

        1. Profit made from the GP would have been put to a better use than a railroad that will destroy the Mexican rainforest I assure you.

    2. I agree completely. It seems strange that when governments seek to wean companies off the teat of corporate welfare they’re accused of being left-wing … In the end Obrador’s policy has produced results. A larger part of the cost of the Grand Prix is now being picked up by those who directly benefit from it, though I’m sure there are still a number of tax breaks and sweeteners involved. It looks like a win-win all round.

  9. Being there twice. The atmosphere in the track and in the city is great, but the grandstand viewing is not that spectacular because they are all located in the low Speed parts (Wich is almost all the track) Actually watching the cars in foro Sol they look VERY SLOW! And There’s no grandstands in the esses!

    1. petebaldwin (@)
      29th October 2019, 20:01

      I always think that when I’m watching on the TV. The majority of the crowd are sat there watching one of the most boring corners in F1….

  10. Definitely a race that should be seen in person. Such a colourful party.

  11. Unfortunately Mexico is now governed by a bunch of incapable people that are more focused on giving populism to the potential voters.

    Fortunately the GP will continue despite our mediocre administration.

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