The new crossing aims to cut waiting times to 20 minutes but will charge a toll

A new crossing on the Mexico-U.S. border is set to open by late 2024 after an agreement was signed between officials from the two countries Monday.

The US $1 billion Otay Mesa East crossing, also known as Otay Mesa II, between Tijuana, Baja California, and Otay Mesa, California, will have five interchangeable lanes for vehicles and five more for commercial trucks. It aims to reduce waiting times to 20 minutes, representing a significant reduction and will charge travelers a toll. Toll revenues will be divided between the two countries.

The agreement commits both countries to complete their construction projects, resolve policy issues and establish a framework to share toll revenues.

In Tijuana, a US $186 million investment is contemplated for construction, which is set to begin next year. In the U.S. construction has already begun and the project has received US $565 million in funding.

Deputy Governor of California, Eleni Kounalakis, listed some of the benefits of the new crossing. “This new port of entry will not only spur economic activity, but it will also improve the quality of life for the millions of Californians and Mexicans who frequently cross one of the busiest borders in the world,” she said.

The Mexican Foreign Ministry’s North America representative, Roberto Velasco, said the crossing was symbolically important for the two countries’ relationship. “We believe in building bridges, not in building walls, and this is important for us in that sense,” he said.

“This is the future of the U.S.-Mexico relationship that we want. A future where we are more connected, and we allow for the many different possibilities that life on the border offers to both of our countries,” he added.

Plans for Otay Mesa East were first announced in 2014 during the Peña Nieto administration for completion in 2017. Last year, President López Obrador included the crossing among his infrastructure projects.

The area has long been an essential route for cross-border traffic. The Tijuana-San Ysidro crossing, only a short distance from where Otay Mesa East will be constructed, is the busiest crossing in the Western Hemisphere, according to U.S General Services Administration.

From MEXICO NEWS DAILY

RAIL FREIGHT TRAINS

 

One of the lessons of the coronavirus pandemic is that shorter supply chains are vital. This is especially true as global supply chain bottlenecks have choked the flow of everything from computer chips to breakfast cereal. The urgency of the issue was highlighted when President Biden earlier this month convened an emergency task force to study this supply chain problem that “threaten[s] America’s economic and national security.”

While there are a wide range of solutions under consideration, it is clear that one of them will be reducing the United States’s dependence on distant supply chains in Asia and relocating many of those closer to home. In other words, “offshoring” increasingly will be replaced by what has come to be known as “nearshoring.”

As the CEOs of two of the continent’s leading railroads, Canadian National (CN) Railway Company and Kansas City Southern (KCS), we are committed to making nearshoring a more viable option for American business. The proposed combination of our companies, we believe, would create the first truly North American railroad with new direct connections that would give companies in America’s heartland faster, more reliable and less expensive reach into both Canada and Mexico.

We would supply the critical infrastructure that will allow the US-Mexico-Canada Agreement to reach its full potential. This would be possible because our complementary combined footprints would extend from the Pacific and Atlantic coasts of Canada, down through 18 states in the center of the U.S. to the Pacific and Gulf coasts of Mexico. We also have made a commitment to provide new levels of pricing transparency and optionality that would increase the route choices, supply chain resiliency and bargaining power of shippers.

The benefits of a combined CN and KCS railroad would be widespread across the economy. Consider an auto manufacturer in Michigan: with this combination, it would have increased ability to rapidly and reliably source car parts from elsewhere in the U.S. or Mexico rather than from Asia. Our track would directly connect Detroit to the heart of Mexico, giving U.S. manufacturers more competitive routes and the ability to create U.S. jobs as they meet new domestic and regional content requirements under the USMCA. Other potential beneficiaries include grain farmers in Illinois, Iowa and Wisconsin who would have expanded reach into global markets, as well as ethanol producers in Iowa who would have direct access to markets in Mexico; home-builders in Texas and poultry farmers in Arkansas would benefit from expanded supply networks of lumber and source feed ingredients.

We have detailed in our filings with the Surface Transportation Board (STB) how our combination would help several major sectors, including grain, lumber, auto, plastics, petroleum and intermodal importers and exporters. The efficiencies of our combination would enhance competition and boost the economies of all three countries. The combination would allow us to continue our high-level investment in our tracks and associated freight infrastructure.

Our combination would also be good for the environment, we believe. One of the premises of this transaction is our bet that we would be able to convince many shippers, who now rely on long-haul trucking, to convert their business to trains. If successful, the CN-KCS combined network would help relieve the chronic shortages of long-haul truck drivers and reduce the carbon footprint of long-haul truck traffic heading up and down Interstates 35, 55 and 94 between Mexico, Texas and the Midwest. We have calculated that for a single route, from San Luis Potosi, Mexico, to Detroit, Mich., moving freight from trucks to trains would save 260,000 tons of carbon dioxide per year, the equivalent of the average annual emissions of more than 300 long-haul trucks. Multiply that across multiple routes and years, and the impact would be significant.

We believe in the power of a more connected continent to drive economic growth and prosperity, but we can only achieve this goal if the Surface Transportation Board approves our voting trust and allows us the opportunity to make our case for linking these two North American railroads.

Jean-Jacques Ruest is the CEO of Canadian National Railway Company. Patrick Ottensmeyer is the CEO of Kansas City Southern.

source THE HILL

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

Durante el quinto mes de 2021, la demanda bruta de espacios inmobiliarios industriales en México fue de 354,000 metros cuadrados (m2), lo que da un acumulado de 804,000 m2 para el periodo abril-mayo, de acuerdo con cifras de Solili, plataforma de información inmobiliaria.

Durante el primer trimestre de este año (1T21), la demanda total fue de 1.2 millones de m2, por lo que se espera que para el segundo trimestre las cifras sean superiores y reporten incrementos entre 10 y 15 por ciento, resaltó en su reporte mensual.

El mercado de demanda inmobiliaria de Ciudad de México concentró la mayor parte de la demanda nacional y para el periodo abril-mayo representó 21% de la demanda total. Entre los corredores que más destacaron se encuentra Tepotzotlán que agrupó el 68%, seguido por Cuautitlán y Toluca.

Mercados importantes a nivel país como es el caso de Monterrey y Tijuana, registraron al cierre de mayo una demanda bruta de 56,000 m2 y  44,000 m2, respectivamente. Los sectores automotor, manufacturero y retail son los de mayor actividad en la demanda industrial de estas ciudades.

Apenas esta semana, Terrafina, un fideicomiso de inversión en bienes raíces industriales (Fibra), anunció que firmó un contrato de arrendamiento para un edificio build-to-suit en Tijuana de 32,887 m2 con un “participante líder en el segmento de comercio electrónico”.

“Complementando este nuevo proyecto de desarrollo, se cuenta con una carta de intención por 18,580 m2 adicionales para una empresa de empaques que busca atender sus actividades relacionadas con el comercio electrónico. Se espera que estos proyectos de desarrollo requieran una inversión total de 43.5 millones de dólares y generen un estimado de 4.1 millones de dólares en ingresos operativos netos (ION) al año. Ambos proyectos se estiman concluir para el tercer trimestre de 2021”, de acuerdo con un comunicado de Terrafina.

En el reporte de Solili también se mencionó que uno de los mercados que a nivel nacional reportó durante mayo una actividad de arrendamiento destacada fue Saltillo, que totalizó un poco más de 85,000 m2. La demanda de este mercado está siendo impulsada por desarrollos hechos a la medida para empresas manufactureras.

Así mismo, el mercado industrial de Guadalajara durante el 1T21 mostró niveles históricos de demanda, sin embargo, durante los siguientes 2 meses los números se mantuvieron activos, pero sin llegar a lo reportado durante el primer trimestre.

De acuerdo con Solili, este mercado alcanzó en mayo poco más de 19,000 m2 de demanda industrial, pero al sumar valores del periodo abril-mayo la cifra es de casi 50,000 m2.

San Luis Potosí y Aguascalientes, 2 de los mercados que tradicionalmente tienen menor actividad en la región del Bajío, continuaron dentro de la preferencia de capitales extranjeros para invertir. Durante el mes de abril tuvieron un repunte en su demanda y en mayo continuaron con esta tendencia, tan solo en el último mes San Luis Potosí alcanzó una cifra superior a los 19,000 m2, mientras que Aguascalientes un poco más de 13,000 m2. Los montos de demanda estuvieron impulsados por inversiones asiáticas y norteamericanas con proyectos hechos a la medida en el área de robótica y automatización.

La demanda inmobiliaria en Reynosa alcanzó en mayo una cifra de demanda de 33,000 m2 en naves especulativas existentes, además se espera que en el próximo mes se concreten algunas transacciones adicionales, por lo que se estima un repunte en la demanda de este mercado. La demanda inmobiliaria en Mexicali a la par de Reynosa, fue uno de los mercados cuya demanda en mayo superó la del mes anterior y cerró con una cifra superior a los 8,000 m2 en el corredor Mexicali-San Luis Colorado.

En mercados como Ciudad Juárez, Querétaro y Chihuahua se registraron escasos movimientos en la demanda, sin embargo, hay un importante número de negociaciones avanzadas especialmente en Ciudad Juárez, en donde se espera que durante junio se concreten y coloquen a este mercado como uno de los más activos en este indicador a nivel nacional.

Cabe recordar que recientemente la Secretaría de Economía informó que el país captó un total de 11,864 millones de dólares (mdd) por concepto de Inversión Extranjera Directa (IED), en cifras preliminares, un monto 14.8% mayor que el del mismo periodo del año pasado e igualmente la mayor cifra para un primer trimestre desde que la dependencia federal lleva el registro (1999).

La nueva oferta industrial, es decir, lo que pasó de estar en construcción al inventario existente, durante mayo fue de casi 123,000 m2 a nivel nacional. Cerca del 80% de esta nueva oferta se sitúa en los mercados de Querétaro, Ciudad Juárez y Monterrey.

Destaca Guanajuato que finalizó el mes con la culminación de 2 proyectos hechos a la medida con 12,000 metros cuadrados en total, correspondientes a empresas de manufactura. Saltillo, Tijuana y Mexicali son mercados que registraron incorporaciones de nuevas naves a sus inventarios en cantidades poco significativas, menores a 5,000 m2.

Se inició la construcción de 126,000 m2, lo que sumado al mes de abril da un total de 358,000 m2. En mercados con fuerte vocación manufacturera como es el caso de Saltillo, San Luis Potosí o Aguascalientes, el tipo de construcción en su mayoría fue de proyectos hechos a la medida, mientras que la demanda inmobiliaria en Monterrey, Tijuana, Ciudad de México y Guadalajara predominó la construcción de proyectos especulativos.

El indicador de desocupación durante mayo reportó un fuerte incremento, al pasar de 45,000 m2 en abril a 200,000 m2 al finalizar mayo. Este indicador fue favorecido por el incremento de espacios desocupados en el mercado de Ciudad de México, que concentró casi el 50% de la cifra total.

En términos generales, al cierre de mayo 2021 los mercados de Monterrey, Tijuana y Guadalajara consiguen demandas netas positivas con valores significativos, lo que garantiza la misma tendencia hacia buenos resultados en torno al próximo cierre trimestral.

La capital seguirá liderando en cuanto a cantidad de demanda y como una de las principales ciudades donde se inicien nuevas construcciones al igual que Guadalajara y Ciudad Juárez. Esto asegura una amplia oferta industrial con múltiples opciones de ubicación geográfica, diversidad de tamaños y oferentes, lo que maximiza la posibilidad de negociación para el potencial demandante de espacio industrial, de acuerdo con Solili.

Revisa aquí la programación de: Diálogos Empresariales de Logística.

 

FUENTE T21.COM.MX

FROM YAHOO NEWS

MEXICO CITY, May 25 (Reuters) – Mexican Deputy Finance Minister Gabriel Yorio said in an interview posted online by the finance ministry on Tuesday that upcoming midterm elections in Mexico may cause “noise” but the peso exchange rate was expected to remain stable in the range of 19.9 to 20.1 to the dollar.

On June 6, Mexicans will elect 500 lawmakers, 15 governors and more than 20,000 local officials.

CHINESE IMPORTS INTO MEXICO

SOURCE RIVERA MAYA NEWS

 

Port of Manzanillo, Colima — China imports into Mexico have seen a significant increase over the past year due to a global mismatch of supply and demand due to the pandemic. Those involved in the container shipping business say containers from Asia at the Port of Manzanillo have reached levels not seen in the last decade.

Manzanillo is the main port in the reception of goods from Asian factories, but last year, the arrival of containers (TEUs) shot up to 2.9 million, equivalent to 45 percent of the 6.5 million received in total in the country, said Héctor Ayala, Ferromex intermodal manager. He says the increase is a result of the instability of supply and demand for imported items caused by the pandemic.

In 2019, the port received just over 1.5 million TEUs of China imports into Mexico, according to data from the Ministry of Communications and Transportation (SCT). Between January and February of this year alone, the port saw 282,000 containers, 11.6 percent more than in that same two-month period in 2020.

“These are records that have not been seen for at least 10 years in terms of container volume in Manzanillo. It is a totally atypical situation,” said Ayala.

“Industrial production in Asian countries was reduced at the beginning of the pandemic, but when activity resumed, ports opened and maritime travel restarted, there was a greater than usual flow of containers,” Ayala added.

When Mexico decreed that only essential activities would remain open from April, Asia was already recovering from the blow of the health crisis, so all the purchase orders that had been placed in Mexico in February and March began to arrive in April and May, explained Luis Aguirre Lang, president of export company Index.

It is estimated that what began as an effect of the health situation will become a trend, and that the number of containers received in Manzanillo may break the 3.8 million barrier during 2021.

Due to the growing flow of cargo arriving in Manzanillo, federal authorities have made investments in the port to expand maneuvering capacity and railway companies plan to carry out a broader and faster evacuation of cargo, since for now, they continue to be overrun.

Ferromex and its clients, shipping companies and customs agencies, as well as the Manzanillo Port authorities, predict that the high volumes operated by the port will be the constant from now on, Ayala said.

“Today (the containers) are on the floor of the port, waiting to be moved by the motor transport or the railroad. The area of opportunity is in the moving of containers,” Ayala pointed out. “That challenges Grupo México Transportes to have the resources and make the necessary efforts to meet this volume demand that has materialized in the port, and we are betting that it is a constant flow that we have to mobilize,” he said.

About 60 percent of the cargo that Ferromex moves from Manzanillo are non-food consumer products that reaches the shelves of self-service and convenience stores across Mexico. Ayala said these products change with the seasons and holidays such as Day of the Dead, Easter, Christmas and even summer vacation periods.

Review our latest BI Reports for more market intelligence

Article by Julian Resendiz originally published on September 30,2020 for Fox40.com

 

EL PASO, Texas (Border Report) – Border industry is poised for explosive growth in the next few years, as companies take heed of lessons learned in the COVID-19 pandemic and relocate more production to North America, trade experts say.

Many U.S. manufacturers who get supplies from China experienced delays during the pandemic, which added to brewing concerns over already tense trade relations between both countries.

“We have a huge number of U.S. companies doing business with China. […] Any number of consumer goods come from China but all those companies are coming under the realization that there is trade tensions that are going to continue regardless of who wins the (U.S. presidential) election,” said Alan Russell, CEO and co-founder of Tecma Group, which runs 50 manufacturing facilities in Mexico and the U.S.

The specter of trade tariffs or another pandemic cutting into Asia-based production is making many manufacturers who sell parts, materials or goods in the United States consider moving at least some of their operations closer to their target market, he and others say.

“So, if you are going to supply North America with a product, you need to have a significant portion of your production in North America,” Russell said. “And where are you going to go? You are going to go to a border city. So, for the next three to five years, I unconditionally see an unprecedented growth in opportunity at these border zones.”

Alan Russell (courtesy Tecma Group)

Russell spoke Wednesday at a virtual U.S.-Mexico trade forum sponsored by Sister Cities International. Experts from both sides of the border say the economic recovery in the manufacturing sector amid the COVID-19 pandemic has been surprisingly  swift.

“We share much more with Mexico than just a border. We share economy, workforce, consumer markets, and integrated supply chains,” said Paola Avila, vice president for international business at the San Diego Regional Chamber of Commerce. “The recovery is also interdependent. Supply chains have really shown their strength. (Manufacturing) is bouncing back.”

Cities like San Diego, where thousands of trucks carrying components and goods manufactured in Tijuana cross into the United States, and El Paso, which shares a border with Juarez and its 300 or so U.S.-run factories, are riding the coattails of this industrial recovery.

“We have seen what appears to be a V-shaped recovery, which is quite shocking,” said David Coronado, director of international bridges for the City of El Paso. “We were expecting a slow recovery. When you look back at the Great Recession, we had a long downturn and a long recovery. Here it’s been month-to-month … a really fast recovery and positive signs for the region.”

In El Paso, commercial traffic is approaching pre-coronavirus levels. “We hit bottom in April. Since then, we’ve seen a recovery in cargo truck traffic but we’re still not back to normal,” Coronado said.

Maquiladoras leading the recovery

The key to the border’s quick industrial turnaround lies in keeping going the U.S.-run plants in Mexico that employ hundreds of thousands of workers.

“We are back to 110% from where we were before the COVID outbreak. It’s an amazing recovery that you could never guess or expect, but we’re back to 100% of our full complement,” Russell said.

The Mexican government curtailed economic activity in the spring to contain the pandemic. However, maquiladoras that make auto parts, medical equipment or aerospace components — which together account for most of the production in Juarez — were labeled as essential businesses and resumed most of their operations on June 1.

A few COVID-19 outbreaks were reported, and in Juarez at least 25 workers died. However, Russell said health issues have been resolved and production is on high gear.

“We’ve gone three months without a single case,” he said. “We have factories with 11,000 people and we have a total of 20 suspicious cases in Tijuana and 24 in Juarez. What we call a suspicious case is someone getting off a bus or coming into the factory and having a high temperature.”

Russell said he’s sensitive to the pandemic because he came down with COVID-19 himself back in March.

“We treat vulnerables in a different way. Most are still at home and we continue to pay them, provide them health education and all,” he said. “We are passionate in our way forward with (COVID-19) protocols and protecting our vulnerable. Everybody else gets back to work. […] I feel with the protocols we have proven we can go back to work full steam ahead.”

Article originally published on September 21, 2020 by Charlotte Gifford for World Finance.

There’s a reason China has been named “the world’s factory”. According to data published by the United Nations Statistics Division, China accounted for almost 30 percent of global manufacturing output in 2018.

China earned this status in a relatively short space of time. According to The Economist, in 1990, China produced less than 3 percent of global manufacturing output. It first overtook the US, previously the world’s manufacturing superpower, in 2010.

But the US-China trade war has prompted many companies to re-examine global supply chains. A recent study by the McKinsey Global Institute estimates that companies could shift a quarter of their global product sourcing to new countries in the next five years. Climate risks, cyber attacks and the ongoing pandemic are only accelerating this trend. In this uncertain trade environment, a growing number of countries are hopeful that they could replace China as the world’s next major manufacturing hub.

 

Vietnam
So far, Vietnam has been one of the main beneficiaries of the US-China trade war, absorbing much of the manufacturing capacity that China lost. As well as cheap labour and stable politics, the country boasts increasingly liberalised trade and investment policies that make it an attractive place for businesses looking to diversify out of China.

Some of the biggest names in tech have relocated some of their operations to Vietnam since tensions between the two powers soured. In early May 2020, Apple announced it would produce roughly 30 percent of its AirPods for the second quarter in Vietnam instead of China.

 

Mexico
A lesser-known beneficiary of the trade war is Mexico. In a report, the investment bank Nomura pointed out that Mexico could become a top destination for US companies, with the country having set up six new factories in a range of sectors between April 2018 and August 2019. In addition, Taiwan-based manufacturers Foxconn and Pegatron, known as contractors for Apple, are among a number of companies currently considering shifting their operations to Mexico.

Mexico’s proximity to the US poses a major advantage as US companies embrace “near-shoring”. The Trump administration is exploring financial incentives to encourage firms to move production facilities from Asia to the US, Latin America and the Caribbean.

 

India
In recent years, India has significantly stepped up efforts to attract manufacturing investments into the country. Prime Minister Narendra Modi’s “Made in India” initiative is designed to help the country replace China as a global manufacturing hub. A cornerstone of this plan involves encouraging the world’s biggest smartphone brands to make their products in India. In June of this year, the country launched a $6.6bn incentive programme to boost electronics manufacturing production in the country.

So far however, the country has seen only modest gains from the trade war. Analysts blame India’s stringent regulatory environment; on the Organisation for Economic Development’s FDI Regulatory Restrictiveness Index, India ranks 62nd out of 70 countries.

 

Malaysia
Between 2018 and 2019, the Malaysian island of Penang saw a surge in foreign investment. Much of this came from the US, which spent $5.9bn in Malaysia in the first nine months of 2019, up from $889m the year before, according to the Malaysian Investment Development Authority. US chip maker Micron Technology announced it would spend RM1.5bn ($364.5m) over five years on a new drive assembly and test facility.

However, the loss of trade from China has hit Malaysia hard. Many tech firms in Penang rely on China for as much as 60 percent of their components and materials.

 

Singapore
Singapore’s manufacturing prowess has somewhat depleted in recent years. While manufacturing contributes about 30 percent of the GDP of Taiwan and South Korea, it makes up just 19 percent of Singapore’s.

However, the trade war and the coronavirus pandemic could change this. As a trade hub with liberal trade and investment policies and a history of stable economic growth, Singapore is well-positioned to boost its manufacturing capabilities and capitalise on this opportunity.

However, like Malaysia, Singapore is also struggling with the knock-on effects of decreased demand from China. The export-dependent country has seen its manufacturing output slump as a result of the trade war – a sign that the country could benefit from greater independence from China.

Over the past five years, retail investors and developers have added a new imprint to the familiar terrain of cheek-by-jowl, mom-and-pop stores across Mexico, building U.S.-style strip and destination malls with brand name tenants.

The trend is growing across Mexico. And, at the U.S.-Mexico border, the creation of a special border economic zone that will halve the VAT sales tax, as well as cut corporate taxes, and double the minimum wage is expected by some to spur even faster expansion.

“This city is seeing right now an explosion in mixed-use projects”

said Harold Hoekstra, the Tijuana-based director of mixed-use development at consulting firm NAI Mexico.

“You’ll see it across the country, too, say in Guadalajara, Monterrey, Juarez. Companies are seeing the potential to invest in these sectors,” he said.

The increase of retail projects, often combined with offices, hotels, and residences, is exactly the opposite of what is happening in the United States, where traditional customers have largely shunned malls for online shopping. According to various articles, the number of store closings in the United States was expected to be more than 10,000 in 2018. Malls are either closing completely or have become collections of empty stores.

Horton Plaza, a San Diego project that opened in 1985 and was credited with revitalizing the city’s downtown, has become something of an eyesore. It recently was sold to Los Angeles commercial real estate company Stockade Capital, which plans to turn the shopping center into a mix of retail and office space that could appeal to Silicon Valley technology companies.

In Mexico, there has been 5% annual growth in the gross leasable area of commercial centers and an increase of 7.5% in retail sales.

“We’re still 10 to 20 years away from online operations decimating mall store operations” Hoekstra said.

“Mexicans like to go shopping. The malls are very strong. The numbers are good.”

Most of the mall developers are Mexican or South American, he said.

Plaza Sendero has built and operates 19 malls across Mexico—in addition to Tijuana and Mexicali, in Culiacan, Los Mochis and Ciudad Obregon, among other cities.

Mexican company Planigrupo, with 43 years of experience, develops, designs, builds, markets, and administers shopping centers throughout Mexico.

In Tijuana, some of the projects are in a revitalizing city center or in far-reaching areas of the city where spreading populations have become concentrated.

The Alameda Otay Town Center, located near the airport and the Otay Mesa border crossing has 163 shops, six residential towers, two hotels, and a medical center with 90 offices. Green areas are pet friendly. The mall also offers cultural events, Wi-Fi, parking and valet parking, as well as an outdoor auditorium.

Closer to downtown, the two-story Paseo Chapultepec, in addition to shops, restaurants and beer pubs, includes walkways, terraces and galleries.

Tenants at the malls include well-known brand names such as Best Buy, Costco, Applebee’s and Home Depot. Apple has stores in malls in Tijuana, Mexico City, Guadalajara and Monterrey.

South American brands also are becoming important mall tenants. Sodimac, a Chilean home improvement warehouse chain, is popping up. And Argentinian, Colombian and Peruvian stores are gaining a presence in Mexico, Hoekstra said.

Even though Mexican upscale department stores such as Liverpool and Palacio del Hierro are expanding to malls in the interior, he said, they are reluctant to establish operations in the border region because of the competition of their higher-end merchandise with U.S. retailers.

Many expect President Andres Manuel Lopez Obrador’s creation of incentives for the border economic zone to spur even further development.

“It’s a nice windfall for retailers; it will provide an incentive to the area”

said Jose “Pepe” Larroque, a Baker & McKenzie partner who chairs the law firm’s global real estate practice group.

Still, he said, the special program is scheduled to last for only two years and then be reevaluated, “so it’s hard to do long-term planning.”

Many details of the new zone are still unknown, but companies must register to gain the economic perks, companies or their branches must already be established in the zone and new companies are supposed to have new equipment in the zone for the first time.

“It might generate more investment in the border zone, but it’s still unclear,” Larroque said.

For U.S. landlords, investors and operators of retail centers, shopping malls, lifestyle centers and similar projects investing in Mexico it’s different than in the United States, said NAI’s Hoekstra.

One criterion is the same on both sides of the border, however: “location, location, location.”

But the capitalization rate (or cap rate), the most popular measure through which real estate investments are assessed for their profitability and return potential, is not the same.

“The retail sector in the United States averages a 7% cap rate,” Hoekstra said. “On the Mexican side, you have to look at 9% or higher … The interesting thing is that those deals are there.”

When acquiring a retail property in Mexico, he said, investors should want to know who the tenants are—especially the anchor tenants, what the lease terms are and their reliability to remain as tenants and keep paying rent.

With many Mexican shopping centers including brands seen in the United States and Canada, investors could start with clients they have north of the border. “Walmart has been a driver,” Hoekstra said.

Lastly, he said, is there a market?

For a landlord, there are retail centers for sale in appropriate locations with the right set of criteria and there is land for sale to develop malls or mixed-used projects, he said.

For retailers wanting to make the decision to increase their presence or undertake a project in Mexico, he added, the Mexican middle class is growing and has increased purchasing power and infrastructure has improved.

At the border, noted Larroque, the special economic zone could move more wealth to the region. With the doubling of the minimum wage, he said,

“More people will be making more money and will have cash to spend—on housing, retail, trade and commerce.”

Plus, it is more difficult to cross the border to shop in the United States, he noted.

“What newcomers are going to be investing?” he asked. “That’s where the questions lie.”

 

This article was originally written by Diane Linquist and published in the February 2019 edition of the Border Now