As the U.S. economy emerges from Covid-19-related lockdowns and subsequent supply chain disruptions, business leaders are beginning to develop a roadmap for redesigning their global supply chains with the aim of making them more resilient, environmentally sustainable, and agile. This endeavor, combined with the Biden administration’s goal of making critical sectors of the U.S. economy more self-reliant and less dependent on China, will require public-private partnerships and hundreds of billions in government investments, subsidies, incentives, and sourcing mandates.

But the United States can’t achieve these goals alone. They will require it to collaborate and strengthen trading partnerships with countries in North America, Central America, and South America and build a reliable, cost-effective land-based transportation network that connects the three Americas. Only with strong partnerships and a Pan-American transportation network will the United States be able to bring manufacturing home from Asia. This reconfiguration would benefit all involved: Creating jobs and promoting political stability in poor countries in the Americas would also build wealth in these nations and slow migration from them to the United States.

In a slew of sectors, the only way to develop cost-effective manufacturing in the United States is for those factories to be fed by an ecosystem of low-cost suppliers located in Central and South America rather than Asia. Given the long transit times from suppliers in Asia, it’s unrealistic for U.S. factories to depend on them. Nor is it realistic to expect a major chunk of the supply base now in Asia to relocate to the United States. That’s because the United States doesn’t have the population needed to support a large-scale factory and logistics infrastructure: The average age of its population is 38.5 — much older than that of the labor force in emerging economies — and more flexible service-sector options would make it difficult to find the huge amount of workers to consistently fill factory and logistics jobs such as trucking.

Leveraging Mexico’s and Central America Younger Populations

Mexico and countries in Central America do have the population and demographics to support a large-scale manufacturing and logistics sector. Their workforce is much larger and younger — the average age across Central America is 24 to 28. The labor cost of manufacturing in Mexico is now equivalent to that of China, and in parts of Central America, such as Honduras, it is even lower. Millions of poor Central Americans are desperate for legal job opportunities, and local manufacturing work would be welcomed, especially by communities now plagued by drug trafficking and production. The establishment of a robust manufacturing sector in these countries would also provide their governments with the resources to build professional security forces with the capability to root out drug cartels.

Creating better economic opportunities and reducing crime and corruption would undoubtedly reduce the emigration from those countries to the United States. And a thriving large middle class with spending power would present U.S. companies with a large market close to home.

Finding Sources of Renewable Water

Another consideration in building a robust manufacturing system that encompasses the Americas is the availability of water — an existing problem that seems certain to grow worse due to global warming. Manufacturing requires large amounts of renewable water, and in many parts of the U.S. West and Southwest, water availability is severely constrained.

Canada and the U.S. Great Lakes region have significantly more water. South American countries such as Brazil, Colombia, and Peru rank among the top water-rich countries in the world. According to the Global Water Partnership (GWP), nearly a third of the world’s renewable water resources are in South America.

In addition to their water resources, many South American countries also have stronger economies than those in Central America, decent infrastructure, and large talent pools (they have high literacy rates and excellent universities). They also are major food exporters and have established companies in a wide range of industries, including autos, steel, chemicals, electronics, pharmaceuticals, apparel and footwear, and appliances. And last but not least, they are also important sources of commodities such as lithium, copper, iron, silver, zinc, tin, lead, manganese, and bauxite.

Constraining China and Russia

A final reason for the United States and its allies in the Americas to build a strong Pan-American manufacturing ecosystem is to constrain the growing economic, political, and military power of China in particular but also Russia. It’s a goal that President Joseph Biden emphasized in the recent G7 Summit, where he called on the world’s richest democracies to offer developing countries an alternative to China’s Belt and Road initiative, which has made major inroads in Asia, Africa, and the Middle East and has large port and road construction projects in the works in Central American countries.

Russia and China have donated millions of Covid-19 vaccines to countries in South America in a bid to increase influence in these regions and gain preferential mining rights and bids on infrastructure projects. At their summit, the Group of Seven countries pledged to provide one billion doses of Covid-19 vaccines to poor countries over the next year and take other actions to increase supplies.

Modernizing the Pan-American Transportation Network

The existing Pan-American Highway is a 19,000-mile network of roads throughout North, Central and South America. The only major break in it is the Darién Gap, the 100-mile marshy and forested region separating Central and South America. To link major industrial regions across the continents in the near term, the roads would need to be expanded and upgraded, and the Darién Gap would have to be bridged, which new tunneling technologies could help achieve. In the medium to long term, a modern rail transportation network would have to be built. This road and rail network would allow goods to travel seamlessly and swiftly over land across the three Americas without spending weeks on the ocean.

In supply chains, speed translates into cash and flexibility translates into resilience. A regional, “near-shored” supply chain would accelerate movement between industrial hubs across the Americas, substantially reducing transit times from raw material to finished goods to final point of sale by weeks. Less time spent in transit would mean less cash tied up in inventory. Consequently, manufacturers would have reduced working capital requirements and healthier balance sheets.

Making It Happen

Of course, a strategic reset of this magnitude will take time and come with a hefty price tag. The best comparison is the Belt and Road initiative, which China launched in 2013. It is aimed at improving the infrastructure between 70 countries across Asia and Europe and into Africa. The estimated cost of this Chinese-financed mega-project is $8 trillion. The United States is in the best position to lead the Pan-American initiative, but it is highly likely that other countries in the Americas would be willing to help share the costs given the clear economic, political, and social benefits that they would reap. Indeed, the creation of the U.S. Interstate Highway System, which was originally championed by President Eisenhower in the 1950s, provided a huge economic boost and helped turn the United States into a global economic powerhouse.

In addition to public outlays, other means could be used to help finance the construction of the network. They include the cash flow from usage fees and tolls, offtake contracts or preferential-rights agreements that would obligate users of the transportation system to buy goods from a company or country making the initial investment in the network, and privately financed build-operate-transfer (BOT) projects, where a private party helps pay for infrastructure in return for the right to operate and collect fees from it for a set period.

Admittedly, the current security, political, and infrastructural problems plaguing countries in Central and South America pose enormous near-term challenges in building a Pan-American manufacturing ecosystem. However, industries like apparel and food already operate in these countries, and there is a budding medical-devices-manufacturing sector in Costa Rica. Other companies could apply the lessons that players in those industries have learned about how to build and ship from factories in Central and South America.

It would be up to more-developed countries like the United States, Canada, Mexico, and Brazil to persuade other countries to embrace the vision and join this ambitious endeavor. Most countries in the Americas aspire to work closely with the United States. And given the better future that a robust Pan-American manufacturing ecosystem could provide for their populations, many would undoubtedly be willing to support the infrastructure projects with guarantees and exclusive market-entry agreements and rights.

To remain competitive in the global landscape, the United States and other countries in the Americas need to revamp their economic ties. They should set their sights on designing the supply chain for the next 50 years that can bring prosperity to all of them.

SEE ORIGINAL SOURCE HBR.ORG

(Article in spanish) by Ana De León / QuerétaroFebruary 2019

Con el objetivo de dar a conocer al sector industrial y a las entidades relacionadas con la industria aeroespacial en Querétaro y la región, el AeroClúster de Querétaro presentó su informe anual sobre las actividades realizadas en el 2018 y su plan de trabajo para el año 2019.

Juan Carlos Corral Martín, presidente del Aeroclúster de Querétaro, indicó que se siente satisfecho con los resultados obtenidos durante los primeros dos años que ha dirigido la institución.

“Cambiamos estatutos, hemos duplicado el comité directivo dando participación a más empresas, gracias a los trabajos llevados a cabo, el sector en general se ha dado cuenta de la importancia del AeroClúster”, destacó. La industria aeroespacial en Querétaro está integrada por 80 empresas; sin embargo, la membresía cerró el 2018 con 61 socios, de los cuales, el 68% corresponden a empresas, 47.5% grandes y 52.5% pymes, el 24% a la academia y el 8% a gobierno.

“Nuestro objetivo es que el 100% del sector participe, hemos presentado incrementos importantes, para este 2019 esperamos superar la cifra y llegar a un total de 70 agremiados”, detalló el presidente del AeroClúster de Querétaro.

Por su parte, Jorge Gutiérrez de Velasco Rodríguez, secretario del AeroClúster de Querétaro, mencionó que continuarán trabajando en la atracción de nuevas inversiones de la mano del gobierno federal.De acuerdo con la información publicada por la Secretaría de Desarrollo Sustentable, Norteamérica y Europa se posicionaron en 2018 como los principales destinos de exportación en el Estado. Además, indicaron que el 72% de la industria instalada en la región realiza procesos de manufactura, mientras que el 13% trabaja en diseño e ingeniería y el 11% en mantenimiento y reparación.

Entre los principales productos y servicios que ofrece se encuentran: aeroestructuras, tratamientos especiales, maquinado de componentes complejos de aeroestructuras, trenes de aterrizaje y motores, materiales compuestos, diseño e ingeniería, mantenimiento y reparación de aeronaves, así como motores, componentes y materias primas.

Querétaro se encuentra en el top 10 de ciudades aeroespaciales por el mejor desempeño en atracción de inversión extranjera directa, así como en el ranking mundial de ciudades aeroespaciales del futuro 2018/19 elaborado por la publicación fDi Intelligence.

José Antonio Velázquez Solís, director general del AeroClúster de Querétaro, indicó que durante el 2018 se logró la atracción de tres proyectos aeroespaciales que sumaron inversiones por 300 millones de pesos, así como la creación de 200 empleos en el Estado de Querétaro.

Durante su participación, Itziar Larrañaga, tesorera del AeroClúster de Querétaro, compartió estadísticas sobre el desempeño de las pymes que forman parte de la membresía.

 

Ventas anuales: $1.3 musd en 2017, y $1.87 musd en 2018 (+44%)

Exportaciones: 31% en 2017, 36% en 2018

Empleos directos: 58 en 2017, 82 en 2018 (+41%)

Certificaciones: 6 en 2017, 12 en 2018

Inspección de primer artículo: 27 en 2017, 158 en 2018.

Inversión en capacitación: 250 mil pesos (50% con apoyo de la SEDESU)

 

Perspectivas para 2019-2020

El AeroClúster anunció que espera lograr un crecimiento en la membresía, llegando a 70 miembros activos este 2019, además de aumentar a 30 el número de reuniones de comisiones.

“Uno de nuestros objetivos es continuar con el aumento de la facturación por encima de dos dígitos en porcentaje, contando con un crecimiento en el número de empleos directos que genera la industria aeroespacial, así como la atracción de nuevas inversiones aeroespaciales al Estado de Querétaro”, detalló José Antonio Velázquez Solís, director del AeroClúster de Querétaro.

Antes de concluir, Germán Borja Garduño, director de Desarrollo Industrial de la SEDESU, declaró que “este año trabajaremos para traer nuevas empresas a Querétaro, a nivel de Pymes queremos seguir creciendo buscamos mayor competitividad, incrementando el nivel de proveeduría, la generación de empleo, además de exportaciones a países en América del Norte y Europa”.

Original article: www.mexicoindustry.com

by Luis Rojas

MEXICO CITY, Jan. 23 (Xinhua) — With a growing number of international tourists, Mexico’s aeronautics industry is poised for record growth, experts say.

Relatively a “young” industry in Mexico, the aeronautics industry has seen a sustained annual export growth of about 15 percent since records began in 2004, when exports brought in 1 billion U.S. dollars, according to the Mexican Aerospace Industry Federation (FEMIA).

The export revenue of the sector, which employs some 60,000 people, amounted to about 8.5 billion dollars in 2018, while in 2017, the figure was 7.6 billion dollars with 50,000 employees, attesting to the dynamic growth of the industry, said FEMIA’s Director General Luis Lizcano.

“In less than a decade, Mexico has succeeded in consolidating a competitive structure in this sector… Mexico now ranks the world’s 12th in exports and the exports will continue to grow in every area of an airplane, from the interiors to structures, landing gear, turbines, design and maintenance,” said Lizcano.

Mexico is home to more than 300 industrial plants operated by about 100 domestic and overseas aeronautics companies, most concentrated in its northern states. And as much as 80 percent of its aeronautic products goes to the United States.

“The industry proved to be much more resistant to global ups and downs, and is more stable in economic and financial aspects” than other industries, said FEMIA’s President Felipe de Jesus Sandoval.

“There is an immense, impressive opportunity for the aeronautics industry to develop its capacity as the automotive industry has successfully done,” Sandoval said, adding that the aeronautics industry only takes up 5 percent of the manufacturing chain, compared with 65 percent for the automotive industry.

Daniel Parfait, president of the Mexican branch of Safran, a French multinational aircraft engine maker, said his company is allotting more investment each year to expand capacity, given the solid demand for products. “The outlook is absolutely excellent,” he said.

“We haven’t felt any impact from the trade negotiations between Mexico and its partners, and I think it will stay that way,” he added, referring to last year’s renegotiation of the North American Free Trade Agreement (NAFTA), now called the United States-Mexico-Canada Agreement (USMCA).

Safran operates 20 facilities in Mexico and now employs 13,000 people, up from 4,000 in 2012. The company’s global sales grew 26 percent last year, a percentage that also applies to Mexico, said Parfait.

“The aviation industry is going to double. There is a lot of growth in terms of the number of passengers and production is going to increase,” said Edward Tobon, regional director for Boeing Latin America.

“The biggest supplier for us is Mexico, and in terms of aviation growth, Brazil is also important, but the region is good in general,” he added.

In Mexico, Boeing acquires around 1 trillion aircraft parts each year. The demand from Latin America for Boeing airplanes stand at 1,500, a figure Tobon expects to double over the next 15-20 years.

Latin America expects an annual growth of 3.6 percent in tourism flow to reach 731 million by 2037, up by 371 million from the current figure.

 

SOURCE: http://www.xinhuanet.com/english/2019-01/23/c_137768011.htm