Changes to the NAFTA: what will happen to export logistics in Mexico
Even though the debate is still open, any future changes to trade and export agreements with the United States are carefully monitored by the transportation and logistics industry, specially maquila and manufacturing in Mexico.That is why they need to be cautious, confident and manage their supply chain intelligently.
The new president of the United States withdrew his country from the Trans- Pacific Partnership (TPP). Moreover, it is expected that the North American Free Trade Agreement (NAFTA) between Mexico, Canada, and the US- which reduced customs barriers and investment restrictions- is renegotiated or eventually scrapped.
¿What does this imply for third party logistics, maquila and bonded warehousing in Mexico?
There are many opinions in Mexican logistics. Some people have uncertainty, unease, while other specialists are calm, and call not to speculate.
In one hand, according to El Financiero, the income of companies that are subject to the Mexican tax incentives to boost manufacturing and exports (IMMEX) began decreasing at the end of 2016.
At the same time, with the call of the American president to stop investing in car manufacturing in Mexico, and a potential increase in tariffs to Mexican exports to the United States has people uneasy for automotive logistics.
“The United States is our primary trade partner, as most of our exports are directed to them, where any change in the economy, even if it is little, also impacts the Mexican territory,” Proméxico recalls.
Despite the impact of these policies in import and export economics, supply chain and logistics in Mexico, many are asking to be calm.
T21 underlines that during the World Economic Forum, PricewaterhouseCoopers (PwC) showed that Mexico is 8th as an investment destination for CEOs.
Changes in treaties will reorganize the Mexican market, but many expect that they maintain a rate of growth, José Navarro López, chief executive officer of TJ Krausse de México said.
The challenge for 2017 in Mexico “is diversity the markets, especially looking at Central America, Europe, and Asia, as this industry contributes 20 per cent of local Gross National Product and 4.5 million jobs depend on them”, he tells T21.
Mexican Logistics: installed capacity
Mexico is still an asset for manufacturing, due to its location, workforce, infrastructure and supplier base.
Víctor Yanar, a specialist in foreign trade for consultant BéndiksenLaw, told Diario that “there mustn’t be any panic, as the maquila industry exists from way before NAFTA, and they have their own legal reason to exist through the IMMEX Decree.”
That is how, for example, car companies such as BMW, “Europeans arrive with a different business strategy and they use Mexico as a global platform, not just to export to the United States,” told Vanguardia the president of Grupo Amistad, Marco Ramón Aguirre.
In Mexico, along with their workforce, manufacturing a vehicle for an Audi or a BMW saves from 3 to 4 thousand dollars a unit, he said.
That is why it is no wonder that automotive companies such Toyota and Honda have stated that for the time being, they do not expect to change their planned investments in Mexico and the production levels in the country, as their local manufacturing is exported both to the US and Europe.
Mexico looks to the rest of the world
The Mexican standing as a logistics hub projects to a range of trade agreement with other nations and groups
The Mexican president, Enrique Pena Nieto, stated that “even though the Untied States concentrates or largest economic exchange, we need to nurture the opportunities that today, more than ever, Mexico has around the world.”
“Mexico is becoming a logistics center for global trade flows and a natural bridge between different regions in the world. That is why Mexico can and must increase the diversity of its economic and political relationships.”
12 treaties with over 40 countries (including NAFTA).
32 investment agreements.
9 limited accords.
This trade network extends to countries and cooperation treaties such as:
European Free Trade Association
Francisco González, director of Proméxico, told El Economistathat countries such as China and Russia wish to invest in Mexican manufacturing, when he met representatives at the World Economic Forum in Davos, Switzerland.
Looking for confidence in logistics suppliers
In this scenario, manufacturing, importers, and exporters must look for third party logistic providers that are especially trustworthy. They need partners to support them in cargo consolidation, warehousing services, transportation, and distribution.
What’s more. If you have doubts with the volumes or freight capacity projections, look for 3pl companies in Mexico that can be scalable and have an integrated supply chain management. That way, their capacity and costs can adapt quickly to any rise or fall in your demand.