WASHINGTON – In a bid to counter China’s growing geopolitical influence, a bipartisan team of U.S. senators is spearheading efforts to broaden the scope of the acclaimed U.S.-Mexico-Canada Agreement (USMCA) to include select Latin American nations.
Expanding the USMCA: A Bipartisan Effort.
Earlier this year, Senator Bill Cassidy of Louisiana enlisted the support of his Democratic counterpart, Senator Michael Bennet of Colorado, to jointly introduce the Americas Trade and Investment Act.
This legislation aims to expand the USMCA, often referred to as CUSMA in Canada, to forge a more robust economic alliance.
Benefits of Investing in Neighbors.
“From a U.S. perspective, investing in our neighbors provides a higher return on foreign expenditure compared to overseas investments,” Senator Cassidy emphasized during a USMCA panel discussion. “As Mexico prospers, so does the United States, and vice versa. That’s the beauty of capitalism – it’s a win-win for everyone. That’s precisely what I’m striving for – a victory for all.”
The Council of the Americas Report.
The recent launch of a new report by the Council of the Americas, which delves into the concept of “accession” to the USMCA, underscores the importance of reinforcing economic strength throughout the Western Hemisphere.
White House’s Commitment to Hemispheric Trade.
This notion of hemispheric trade has not escaped the notice of the White House. During last year’s Summit of the Americas, President Joe Biden introduced the Americas Partnership for Economic Prosperity, one of several trade “frameworks” designed to enhance economic and geopolitical bonds among key U.S. allies.
A Pragmatic Approach: “Docking” Partners into USMCA.
The report advocates for “docking” current or future U.S. trading partners into the USMCA as a more pragmatic and effective approach to bolstering regional integration.
The success of the USMCA.
Juan Carlos Baker, one of the report’s co-authors and a lead negotiator for Mexico during the NAFTA talks that led to the USMCA’s creation in 2018, hailed the agreement as a resounding success for all three countries.
He stated, “Canada and Mexico are now the preferred partners of the United States, and vice versa. Given the high levels of uncertainty and volatility globally, aligning potential allies around shared values and objectives is a sensible approach for North American countries.”
Challenges of Reopening the Agreement.
However, former diplomat Louise Blais, an advisor for the Business Council of Canada, cautioned that reopening this hard-won agreement may face resistance due to political uncertainties and volatility.
She noted, “There is no consensus in the U.S. government on this issue. I would not even qualify this discussion as having hit Main Street, despite Sen. Cassidy’s efforts.”
Mandated Review in 2026.
The USMCA mandates a review involving all three parties in 2026, with a requirement to maintain the agreement. Most Canadian advocates prioritize successfully navigating this process.
While the Council of the Americas champions trade and investment across the Americas, Blais emphasized that the immediate priority should be renewal, not amendment.
Canada’s International Trade Minister, Mary Ng, has been actively advocating for prompt trilateral endorsement, reiterating that the current agreement lacks mechanisms to allow new countries to join.
Potential Latin American Candidates.
The report does not delve into the specific Latin American countries that should be invited to join the USMCA, but there are evident candidates with robust trade connections to the U.S. These candidates include Barbados, the Dominican Republic, Chile, Colombia, Panama, Peru, Uruguay, Ecuador, and Costa Rica, which has outgrown its existing Central American trade agreement with the U.S.
Costa Rica’s Aspiration.
Costa Rica’s Minister of Foreign Trade, Manuel Tovar Rivera, highlighted the nation’s burgeoning medical devices and semiconductor industries, as well as growth in aerospace and automotive sectors, areas of particular interest to North America.
He stressed that Costa Rica is a different country with different challenges and aspirations.
A Strong Message on Labor and Environmental Standards.
Furthermore, accession to the USMCA would signal the importance of strengthening labor and environmental standards, offering a potential reward to countries seeking reform.
However, these proposals come at a politically sensitive moment in the U.S., with former President Donald Trump leading the race for the Republican nomination in 2024. Additionally, Mexicans are preparing for upcoming elections, while Canada faces a federal election within the following year.
Considering Domestic Politics
The report acknowledged these political complexities, stating, “Expanding the USMCA will demand an articulated strategy that considers the domestic political situation in Mexico, the United States, and Canada, since the three countries will have general elections in 2024 and 2025.”
*This article by The Canadian Press was first published on September 14, 2023.* All Information presented here, was redacted by NAI Mexico’s Corporate Communications Team, based on the original article published by “The Canadian Press”.
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MEXICO – Mexico remained in 11th position among the main recipients of Foreign Direct Investment (FDI) in the world in 2022, with US$35 billion, an annual increase of 12%, informed the United Nations Conference on Trade and Development (UNCTAD).
In its World Investment Report 2023, UNCTAD indicated that this classification was led by the United States, with US$285 billion, followed by China, with US$189 billion.
With these results, flows to the United States fell by 26.5% and those to China increased by 4.4%.
This was followed by Singapore ( US$141 billion), Hong Kong (US$118 billion) and Brazil (US$86 billion).
Globally, FDI declined 12% in 2022 to US$1.3 trillion, after a strong rebound in 2021 following the sharp Covid-19 pandemic-induced drop in 2020.
The decline was mainly due to lower financial flows and transactions in developed countries. The slowdown was driven by overlapping crises: the war in Ukraine, high food and energy prices, and debt pressures.
The fall in FDI flows was mainly due to financial transactions by multinational companies in developed economies, where FDI fell by 37% to US$378 billion.
The Report, subtitled Investing in Sustainable Energy for All, shows that much of the growth in international investment in renewable energy, which has nearly tripled since the adoption of the Paris Agreement in 2015, has been concentrated in developed countries.
Among developing countries, Mexico ranked 8th in attracting FDI in renewable energy from 2015 to 2022, with close to US$40 billion, a ranking in which Brazil was at the top, with more than US$110 billion.
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México puede ser el principal aliado de Estados Unidos en el reforzamiento de las cadenas productivas, planteó la Cámara de Comercio de Estados Unidos (AmCham México).
México puede ser el principal aliado de Estados Unidos en el reforzamiento de las cadenas productivas, planteó la Cámara de Comercio de Estados Unidos (AmCham México).
Este punto forma parte del documento Ruta 2024-2030, difundido este miércoles y en el que la AmCham México recopila 22 propuestas divididas en seis capítulos que se basan en su propia Agenda Estratégica sobre México y Norteamérica.
Trabajar en la relocalización (nearshoring) y en las cadenas productivas regionales representa una “oportunidad histórica” para México, coincidieron Daniel Baima, presidente de AmCham México, y Pedro Casas Alatriste, director general y vicepresidente ejecutivo de la Cámara.
México tiene importantes ventajas competitivas para consolidarse como el principal aliado de Estados Unidos y reforzar las cadenas de proveeduría regionales de Norteamérica”, indica el documento.
La Cámara identifica tres sectores estratégicos en donde se pueden atraer eslabones de la cadena de suministro, generando alto valor agregado para la economía del país: electromovilidad, insumos para la salud y semiconductores. Las siguientes son sus puntualizaciones al respecto.
En primer término, en electromovilidad, propone la creación de un marco regulatorio holístico que tome en consideración las regulaciones en materia de economía circular, estándares de calidad y seguridad mínimos.
Asimismo, sugiere la creación de un esquema de incentivos, fortalecer y fomentar la integración de las cadenas de valor, así como mejorar la logística de comercio, reforzar las redes de transmisión y actualizar la currícula para carreras técnicas y de ingeniería.
También sería necesario promover y generar incentivos que permitan acelerar el uso de opciones de movilidad híbridas y eléctricas de transporte público, privado y de plataformas digitales.
Por otro lado, a fin de atraer inversiones en el sector de insumos para la salud, se requiere promover la aceleración regulatoria y reducción promedio de tiempo de aprobación a través de la implementación efectiva de fiabilidad en línea con los acuerdos de equivalencia regulatoria con socios comerciales.
En especial, con Estados Unidos se necesita impulsar la convergencia regulatoria entre agencias a través de mesas de diálogo a fin de homologar o, en su caso, simplificar y/o eliminar procesos.
Finalmente, para apuntalar el desarrollo de la industria de semiconductores, la AmCham México considera que se debe promover carreras especializadas y cualificar el talento en el sector de la alta tecnología.
Además, se necesita mapear los minerales y químicos críticos para conocer las capacidades de la industria en el país.
Hay que trabajar en generar un ecosistema para incentivar a las empresas que inviertan o expandan sus operaciones en México y a los proveedores de segundo nivel a que formen parte de la cadena de suministro. Es fundamental promover acciones de facilitación comercial y logística en los aeropuertos y aduanas.
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Navy Minister José Rafael Ojeda Durán asserted Thursday that Mexico will become a “world shipping power” thanks to the construction of a trade corridor between the Pacific Ocean and the Gulf of Mexico.
In an address in Ciudad Madero, Tamaulipas, on Mexico’s National Navy Day, Ojeda noted that the government is building a “new route for global trade” between Salina Cruz, Oaxaca, on the Pacific side and Coatzacoalcos, Veracruz, on the Gulf coast.
“In the near future we will become a world power in the field of shipping,” he said.
The Isthmus of Tehuantepec Interoceanic Corridor will have a modernized railroad and upgraded highways between the port cities of Salina Cruz and Coatzacoalcos as well as 10 new industrial parks.
The government is touting the corridor as an alternative to the Panama Canal given that it will connect the Pacific and Atlantic oceans across a relatively narrow strip of land.
Once the new railroad is operational, freight shipped from Asia, for example, could be unloaded in Salina Cruz and put on a train for a journey of approximately 300 kilometers to Coatzacoalcos. It could then be reloaded onto another ship before continuing on to the Gulf or Atlantic coasts of the United States.
Ojeda described the multi-billion-dollar trade corridor undertaking, which also includes the modernization of the Salina Cruz and Coatzacoalcos ports, as “one of the projects of the century” and asserted that it will stimulate economic development in the region and the entire country.
President López Obrador, who also spoke at the Ciudad Madero National Navy Day ceremony, announced in 2021 that the navy would be given control of the trade corridor once it is completed. He said Thursday morning that freight trains will begin running on the new railroad in August and that passenger services will begin at a later date.
To facilitate the rail project, López Obrador published a decree on May 19 that ordered the “immediate temporary occupation” of three sections of railroad in Veracruz operated by Ferrosur, a rail subsidiary of the mining and infrastructure conglomerate Grupo México.
The president announced Thursday that the government had reached an agreement with Grupo México under which the conglomerate will permanently cede control of the sections, which were taken over by the navy the day the decree was published.
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Nearshoring, in which manufacturing is relocating from Asia—mostly China—to North America—mostly Mexico—is one of the key drivers behind creation of CPKC (Canadian Pacific Kansas City), the first and only transnational, single-line railroad linking Canada, the United States and Mexico. CPKC, the merger of the Canadian Pacific and Kansas City Southern, was originally announced on March 21, 2021, roughly one year after USMCA (United States-Mexico-Canada Agreement) was ratified, replacing NAFTA (North American Free Trade Agreement), which had been in place since the mid-1990s and helped drive privatization of Mexico’s national railroad system.
Some background: On June 19, 2019, the U.S. Senate passed the Protocol to replace NAFTA with USMCA, described by former U.S. Trade Representative Robert Lighthizer as “the gold standard by which all future agreements will be judged, and citizens of all three countries will benefit for years to come.” U.S. The House of Representatives passed the agreement on Dec. 19, 2019; the Senate passed it on Jan. 16, 2020. The Canadian House of Commons and Senate passed the USMCA Implementation Act on March 13, 2020.
Three years later—March 14, 2023, one day before the Surface Transportation Board approved the CPKC merger—KCS President and CEO Pat Ottensmeyer gave a presentation, “Nearshoring in Mexico: A Lifetime Opportunity,” at Railway Age’s Next-Generation Freight Rail Conference in Chicago. As Railway Age’s 2020 Railroader of the Year and 2022 Co-Railroader of the Year with CP President and CEO Keith Creel, he has talked extensively about nearshoring, and his role as chair of the U.S. Chamber of Commerce U.S.-Mexico Economic Council, in which he worked to ensure that the rail industry has a voice by working with public- and private-sector leaders to strengthen bilateral commercial ties. Ottensmeyer retired as KCS chief executive on April 14, 2023, when CPKC’s Final Spike ceremony took place, and is now a special advisor on Mexican affairs to CPKC chief executive Creel.
“The thesis for investing in Mexico remains strong,” Ottensmeyer said as he began his NGTC talk. “Mexico has maintained Investment Grade ratings throughout the pandemic. With exception of early in the pandemic, the Peso exchange rate has remained stable for the past five years. Through August 2022, Mexico’s manufacturing sector has grown at three times the rate of GDP growth. The country’s manufacturing base is large and is well integrated into existing North American supply chains. Most trade disputes have been resolved in Mexico’s judicial system, and the Mexican Supreme Court has ruled in favor of investors in proposed changes in Electricity Law.”
Ottensmeyer referred to the ongoing U.S.-China trade war, in which the U.S. imposed trade tariffs on China in the first half of 2018. Since, then China has lost more than four percentage points of its share of U.S. imports.
Reshoring/Nearshoring Push Factors
The pandemic and the Russia-Ukraine conflict are the two main “push factors” behind nearshoring and “reshoring,” the practice of bringing manufacturing and services back to the U.S. from overseas. “The pandemic caused significant and widespread disruptions to global supply chains,” Ottensmeyer noted. “Companies exposed to global trade are trying to mitigate the risks from supply chain disruptions by moving supply chains closer to home. Time zones are also more relevant than before as video-conferencing for meetings, management, etc., are more widely utilized.”
On the Russia-Ukraine conflict, security is a major concern. “Sanctions on Russia by the West make companies want to relocate resources to countries that have lower risk of sanctions—’friend-shoring,’” Ottensmeyer said. “An energy crisis is impacting many countries, but Europe especially. Firms are looking for locations with more energy availability and reliability, and North America has plenty of energy, including Mexico’s resource potential for renewable energy.”
Reshoring/Nearshoring Pull Factors
There are also “pull factors” for nearshoring/reshoring. “The goal of the USMCA is to reduce tariff costs and boost the integration of regional supply chains among its members,” said Ottensmeyer. “Since the original NAFTA, merchandise trade in North America has increased steadily. The three countries in the region not only trade, but also co-produce. Mexico is not only one of the top three exporters to the U.S., but also one of the top three importers. Many intermediate goods go back and forth several times across the border. Mexico already has a large manufacturing base that is highly integrated with the U.S. Its macrostability means the real exchange rate has remained stable in recent years. The country has political stability when compared to other emerging markets. Institutional checks and balances have been working. One recent example is that Congress rejected a constitutional change proposed by the President on energy, as the bill was perceived as discouraging private investment in the sector.
“Mexico has more than 25 years as a manufacturing powerhouse and has developed human capital at the production and managerial levels. For example, it’s usually among the top ten countries in the number of engineering graduates per year. Wages have remained stable, but wages in China have increased substantially: Despite recent increases in minimum wages, Mexico continues to have one of the lowest minimum wages compared to other EM or Latin America countries—US$4.80 per hour compared with US$6.50 per hour in China.”
The Path Forward
To leverage this “opportunity of a lifetime,” close dialogue must be elevated “at every possible level,” Ottensmeyer noted. This includes the North American Leaders’ Summit and North American Competitiveness Committee, high-level economic dialogue among the three countries, and encouraging private-sector engagement. “We need to improve cross-border mobility of goods and people, establish tri-national protocols to reduce supply chain disruptions during any future crisis, strengthen the regional digital economy via expansion of connectivity and optimization of cybersecurity, and promote sustainable economic and social development in the lesser prosperous regions through workforce development and financial inclusion,” he said.
“We’ve always been taught that the three most important factors in success were location, location, location,” Ottensmeyer stressed. “The same can be said for where to establish a business. In a post-pandemic environment, now is a great time to review what nearshoring could mean for a company’s supply chain. The benefits of USMCA complemented by the impacts of the COVID-19 global pandemic and international trade tensions have created the perfect opportunity for companies to explore the benefits of shifting manufacturing to Mexico to take advantage of the many benefits nearshoring has to offer. For companies that understand the concept of the cost of doing business and the importance of a comprehensive cost benefit analysis and want to offer quality products and services produced in the most economical manner possible, Mexico offers several cost benefits that make it an attractive manufacturing and distribution hub, such as a stable corporate tax rate and an incentive program combined with low labor rates and low costs of inbound freight—especially when compared with China.
“Mexico’s composite tariffs with the U.S. of 0.04%) compare very favorably with China’s composite tariff rate of 19.2%. Mexico’s current tax rate of 30% has not changed since 2010., and the amount a company pays in overall taxes might be even lower if it takes advantage of Mexico’s Maquiladora Program or the country’s Special Economic Zones. In addition Mexico has 14 free trade agreements with more than 50 countries representing more than 60% of world GDP.
“U.S. proximity to Mexico is a major advantage to businesses due to quicker transit times. Transporting goods from Mexico to New York can take about 6-12 days while going from Shanghai to New York can take about 35 days. Mexico to Los Angeles is 4 days, where Shanghai to Los Angeles is 22-26 days. Additionally, components can be sourced from the U.S., assembled in Mexico, and shipped back to the U.S. in a short amount of time. With Mexico located in the same time zones as the U.S. (Pacific, Mountain and Central), companies will benefit from greater efficiency and productivity. As more Americans speak Spanish and more Mexicans are speaking English, the language communication barrier is less of an issue in today’s marketplace.
“Mexico’s transportation and communications infrastructure have been upgraded, promoting the flow of freight over the border, reducing bottlenecks and improving logistics for U.S.-Mexico cross-border trade. Mexico has 16 major maritime hubs offering Pacific Ocean and Atlantic Ocean. access. Critical investments include CPKC’s (KCSM) Veracruz rail corridor connection to Oaxaca connecting the Atlantic and Pacific coasts, and an expansion of the Lázaro Cárdenas Specialized Automotive Terminal. Finally because of Mexico’s geographic proximity and figurative closeness with the U.S., corporate social responsibility practices and trends are on the rise in Mexico.”
BOA on Nearshoring
According to a recent Bank of America (BOA) analysis, Mexico “can increase exports by 9% of GDP. Nearshoring represents Mexico’s best growth opportunity for the next 10 years and it is already occurring. The country is a natural candidate for firms to relocate production to serve the U.S. market, following the fragmentation of global supply chains and the ongoing reversal of the China trade shock of the early 2000s. U.S. imports are close to $3 trillion (220% of Mexico’s GDP). Mexico’s share of imports is 14%, while China’s share recently fell by 4% to 18%.”
BOA believes the positives should offset the negatives: “Nearshoring has started and led to a Mexican manufacturing boom. The sector has grown more than 5% year-to-date in real terms—one of the few sectors that is already above pre-pandemic levels (+6%) and that is growing as a percentage of GDP. Manufacturing exports are up 17% in year-to-date dollars, and Mexico increased its share in U.S. imports in some manufacturing products by 50% in the past three years. According to a recent survey by Mexico’s central bank, 16% of large firms in Mexico already report benefits from nearshoring. Reshoring is positive for Mexico as it would entail a positive productivity shock for the country at the expense of China.”
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Mexico has emerged as a key player in the global Information Technology (IT) industry, offering a range of opportunities for companies and professionals looking to tap into a growing market.
With its highly educated workforce, favourable business environment, strategic location, and vibrant startup culture, Mexico is poised to play a significant role in shaping the future of the IT sector.
In this article, we will explore the key factors that make Mexico an attractive destination for IT workers and why the future of this industry in Mexico is bright.
Mexico’s highly educated workforce is one of the most important reasons for its success in the IT industry. Mexico has a growing pool of highly skilled professionals with expertise in software development, data analysis, and other vital areas of the IT industry. Many of these professionals have received a world-class education. They are eager to apply their skills to a rapidly growing market. The education quality in Mexico is also improving since universities now offer computer science, engineering, and other IT-related programs that prepare students to enter the workforce with the skills they need to succeed.
Another factor that makes Mexico an attractive destination for the IT industry is its favourable business environment. Mexico has a strong commitment to free trade and open markets. It has established a supportive ecosystem for companies investing in the IT industry. This includes tax incentives, favourable labour laws, and a supportive regulatory environment encouraging investment and innovation. Mexico also has a thriving entrepreneurial culture, with many young entrepreneurs starting new companies in the IT industry. This entrepreneurial spirit is helping to drive growth and modernization in the IT industry, positioning Mexico as a leading player in the global market for technology and innovation.
Mexico’s strategic geographic location is another critical factor that makes it an attractive destination for the IT industry. The country is close to the United States, one of the world’s largest markets for IT products and services. It has a well-developed transportation and telecommunications infrastructure that makes it easy to connect with other markets in North America, South America, and beyond. This location also makes it easier for companies to access a large pool of skilled talent and take advantage of the many resources available in Mexico, such as low-cost labour, tax incentives, and a vibrant business environment.
The Mexican government has invested significantly in the IT industry, recognizing its potential to drive economic growth and create jobs. The government has implemented several initiatives to support the IT industry, such as tax incentives, grants, and other forms of support. These investments are helping to drive innovation and growth in the IT industry, positioning Mexico as a leader in the field.
Mexico is also home to a thriving startup culture, with many young entrepreneurs creating pioneering companies in the IT industry. This entrepreneurial spirit is helping to drive growth and innovation in the IT industry. Many of these startups focus on developing cutting-edge technologies, such as artificial intelligence, blockchain, and the Internet of Things, transforming businesses’ operations and competition.
In conclusion, the future of the IT industry in Mexico is bright, with a growing pool of highly skilled professionals, a favourable business environment, a strategic location, and a thriving startup culture. The Mexican government’s investment in the IT industry and its commitment to free trade and open markets are helping to drive innovation and growth. This project will promote Mexico as a key player in technology and creativity in the global marketplace. With its many advantages, Mexico is well-positioned to play a major role in shaping the future of the IT industry and become a leading centre for originality and development in the years to come.
If you want to travel to Mexico, check out the visa and vaccination requirements to enter this country. Whether you are a seasoned tech professional or a student just starting out in the field, Mexico is a destination that will inspire and excite you, offering opportunities for growth, learning, and adventure.
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Mexico was the United States’ largest trading partner in the first quarter of 2023, with exports of US $115.5 billion, according to figures released by the U.S Census office on Thursday.
Figures for Q1 2023 showed that total trade between the two countries (a combined total of imports and exports) was US $196.7 billion, an 8% increase over the same period in 2022.
In March alone, goods from Mexico accounted for 16.1% of U.S. imports — beating out Canada (15.5%) and China (10.1%) — for a total of US $42.8 billion. The figure represents annual growth of 5.9%.
China has topped the list in Q1 of each year since 2009 — with the exception of 2020, when the Covid-19 pandemic saw Mexico take the top spot. But in March, China saw exports drop 35% to US $30.8 billion.
Last year’s top whole-year trading partner, Canada, saw a 7.2% year-on-year drop in exports to the U.S market in March, registering only US $37.6 billion.
U.S. exports to Mexico also rose 2.6%, to US $29.3 billion in March — despite a year-on-year fall of 0.4% compared to 2022. Despite the rise, the U.S. still maintains a US $97 billion trade deficit with Mexico, or 12%, said the Economic Commission for Latin America. This figure has contracted considerably, however, previously standing at 39% in 2020.
The recent “super peso” and weakened U.S. dollar have created favorable conditions for export, but credit analysts Moody’s warned that there was some uncertainty surrounding global solvency for financial institutions, as well as volatility in the bond market that could lead to further fluctuations in exchange rates.
Mexico has become a nearshoring hub, with businesses from Asia rushing to set up operations in the country, taking advantage of the favorable investment conditions and proximity to the North American markets. This has led to a boom in manufacturing, especially in the automobile industry, but also increasingly in data, computing and home electronic goods, which are often exported to the United States.
Top exports from Mexico in 2023 included refined petroleum, auto parts and accessories, office machinery and integrated circuits, according to the Observatory of Economic Complexity.
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As manufacturing in Mexico returns to pre-pandemic levels, several recent legal developments may affect those operations. Manufacturers, particularly those in the automotive industry, need to consider new Mexican labor regulations, the recent interpretation of the United States-Mexico-Canada Agreement´s (USMCA) Automotive Rules of Origin, and new requirements concerning transparency of ownership.
Recovery of Automotive Manufacturing in Mexico
North American manufacturers of sophisticated and highly-regulated products that are to be delivered Just-in-Time, such as automotive or aerospace products, benefit from reliable, close-to-home suppliers.
In the USMCA manufacturing region, Mexico has a number of competitive advantages to manufacture labor intensive and sophisticated products—namely several decades as part of North America’s complex supply chains, significant trade promotion programs, and a large number of Free Trade Agreements to name a few. Such advantages are reinforced through USMCA’s market access certainty to both the U.S. and Canada.
Although Mexico’s economy faced extreme difficulties due to the COVID-19 pandemic as there was no governmental program to boost its economy, the country’s resilient manufacturing sector already has surpassed pre-pandemic levels. This boost in manufacturing can be partially attributed to nearshoring of manufacturers into Mexico—many in the automotive industry—in order to be closer to the U.S. and Canada markets. This nearshoring trend has triggered the arrival of new foreign direct investment (FDI).
The Mexican Ministry of Economy recently reported that Mexico captured US$35.29 billion in FDI during 2022, up from $31.54 billion in 2021. Manufacturing reigns as the most influential sector in that increase, accounting for 36% of the country’s total FDI, with the U.S. and Canada standing out as Mexico’s two main trading partners. The Ministry of Economy also noted that automotive part manufacturers were among the largest recipients of foreign investment.1
According to 2022 data, the FDI in the automotive manufacturing sector has not yet recovered to pre-pandemic levels. However, there are reasons to be optimistic that this will change in the near future due to the USMCA’s market attractiveness and the natural advantages of manufacturing in Mexico, such as its highly specialized labor force and its geographic proximity to the U.S.
In anticipation of Mexico’s continued growth as a manufacturing hub for U.S. automotive companies, the following are recent updates and trends in Mexico that your company needs to consider when relocating or operating in the country.
Increase of Labor Benefits
The Lopez-Obrador administration has pushed for increasing labor benefits to employees in Mexico, which investors in Mexican manufacturing should take into account when making their budgets and economic projections. The following are the most recent and relevant changes to existing labor rules:
Effective January 1, 2023, the Federal Labor Law increased vacation days in Mexico. Before this amendment, employees had a minimum of six (6) working days’ vacation period per year of service. The new rule increases the period to a minimum of twelve (12) working days per year of service, which will grow by two (2) days per year up until the employee is entitled to twenty (20) working days vacations. As from the sixth year of service, the period shall increase by two (2) working days per every five (5) years of service.
Beginning January 1, 2023, the minimum wage for Mexican employees increased 20%. Even though most employees receive more than minimum wage as a starting salary, this increase is expected to impact even Mexican companies that pay above minimum wage, as they commonly index salaries to a minimum wage reference. The effect of rising minimum wage on salaries will become clearer when the common yearly salary revision takes place.
According to a 2020 amendment to the Mexican Social Security Law, companies’ mandatory contributions to one of the components of employees’ pension funds shall progressively increase from the current 3.15% of the employee salary to 11.87%. This increase shall occur progressively from 2023 up until 2030; during 2023, employers’ contribution will range from 3.15% to 4.24%, depending on the employee’s salary.
Mandatory Legitimization of Collective Labor Contracts
May 1, 2023 is the maturity date for all existing collective bargaining agreements across Mexico to be legitimized through the express support of a majority of the workers covered by the relevant agreement (following a carefully staged process). Legitimization efforts have long been underway as per the relevant rules issued May 1, 2019. However, it is expected that 80% to 90% of current collective labor contracts will not meet the legitimization threshold and, consequently, will be automatically terminated.
When such agreements are terminated, individual labor contracts will be automatically created for every worker; said individual contracts will incorporate the terms contained in the then-terminated collective labor contracts that are superior to the minimum standards established by Mexican laws.2 This measure intended for individual workers to continue under the same labor conditions, though no longer under a collective labor contract.
The lack of a collective labor agreement—the long standing status quo in the country—likely will bring restlessness in the workforce. Though workers’ current rights will be preserved by the individual labor contracts, Mexican workers will need to decide whether to enter into a new collective labor agreement sooner rather than later.
https://naimexico.com/wp-content/uploads/2023/05/cargo_trains-shutterstock_326430638-L-scaled.jpg17072560Vincenthttp://naimexico.com/wp-content/uploads/2016/07/logonai.pngVincent2023-05-08 11:53:192023-05-09 10:20:05Nearshoring and Beyond: Hot Topics for Automotive Companies Operating in Mexico
El 31 de enero del presente año, el gobernador del estado de Nuevo León, Samuel García, hizo el lanzamiento del evento “Americas´ Mobility of the Future“.
Este evento, organizado por Hannover Fairs México, el Clúster Automotriz de Nuevo León A.C. (CLAUT) y Nuevo León 4.0, con el apoyo del Gobierno del Estado de Nuevo León, es el primer evento en Latinoamérica dedicado a temáticas de movilidad del futuro, transportación inteligente, infraestructura y logística sustentable, y ha sido creado con el objetivo de ser un catalizador para convertir a Nuevo León en un hub de tecnología para la industria automotriz del país.
Con la reciente noticia de la inversión de Tesla para construir su primera Gigafactory de Latinoamérica en Nuevo León, y la consecuente instalación de sus principales proveedores en la región, se presentó la necesidad de crear una cadena de suministro mucho más sólida en cuanto a capacidad y calidad se refiere.
Ante este contexto, el CLAUT ofrecerá a los proveedores y compradores de la industria, la oportunidad de reunirse y hablar de negocios en el evento Proveedor Automotriz 2023, el cual se realizará en paralelo a Americas´ Mobility of the Future, el 6 y 7 de junio en Cintermex.
Proveedor Automotriz es organizado desde el 2011 por el organismo en sinergia con la Secretaría de Economía estatal y actualmente es reconocido como el evento de proveeduría automotriz más eficaz de México, siendo una excelente oportunidad para generar nuevos negocios para todas las empresas que desean sumarse a la cadena de suministro automotriz.
Este año, el evento de Proveedor Automotriz contará un área de exposición mayor que cualquier edición anterior y con la premisa de traer a más de 1500 tomadores de decisión de la industria automotriz con casi 500 empresas OEM, Tier 1, Tier 2 y Tier 3.
Miguel Bravo, director del evento y líder de Desarrollo de Proveedores en el Cluster Automotriz de Nuevo León, comentó que la prioridad es llevar a cabo citas de negocio de calidad y para eso han contratado a la empresa finesa Brella, que es uno de los mejores proveedores en el mercado mundial para citas B2B.
“Después de cada evento se realiza un seguimiento detallado de la efectividad de las reuniones B2B y se sabe que dos de cada tres citas avanzan a un RFQ y que una de cada 10 citas de negocio culminan en una orden de compra, lo cual significa que el porcentaje de efectividad es casi del 10%, siendo por mucho el evento de negocios más efectivo realizado en el país”.
Al igual que la edición anterior, este año se contará con el apoyo de la región de Quebec, Canadá, a través de su organismo Invest Quebec, quien estará presente con una delegación de más de 10 proveedores con procesos relacionados a la fabricación del vehículo eléctrico al ser ésta una región potencia en recursos naturales y de investigación para el aluminio y litio.
https://naimexico.com/wp-content/uploads/2023/04/auto-shutterstock_223654213-L-scaled.jpg18082560Vincenthttp://naimexico.com/wp-content/uploads/2016/07/logonai.pngVincent2023-04-14 11:20:262023-04-19 09:47:44Ofrecen oportunidades de negocio en Proveedor Automotriz 2023
In March 2023, Marcelo Ebrard, Minister of Foreign Affairs, went to New Delhi, India, to advance innovative binational projects in the fields of aerospace, lithium, biotechnology, water and vaccines, before opening a Mexican Consulate in Mumbai. An agreement was signed between the Ministry of Foreign Affairs, represented by Ebrard, and the Council of Scientific and Industrial Research (CSIR), represented by Dr.Jitendra Singh, India’s Minister of Science and Technology.
“Both countries will identify priority projects for development, including hydraulic management, electromobility and production of vaccines at low cost. Once the funding is determined, research institutes will be called upon to implement the project,” said Ebrard. The agreement also considers a fund of US$1 million, financed by both countries of US$500,000 each.
Both Mexico and India are part of the G20, which plays an important role in shaping and strengthening global architecture and governance on all major international economic issues. The collaboration between G20 countries on lithium research is a move in the right direction as lithium can help Mexico with its energy transition due to its role in rechargeable batteries for e-vehicles.
In February 2023, the Geological Survey of India (GSI) stated the discovery of 5.9Mt of Lithium deposits in the Salal-Haimana area of Jammu & Kashmir’s Reasi District. During his visit, Ebrard encouraged Sun Mobility, a company known for building energy infrastructure for electric vehicles, to expand into Mexico. The company tweeted, “We had the pleasure of demonstrating our battery swapping solution to @m_ebrard … during his visit to Delhi. It is highly motivating for us to receive such a positive response for our “Made in India” solutions for the world.”
Regarding vaccines, India has been named the “Pharmacy of the World” for not only successfully carrying out the largest vaccination campaign during the COVID-19 pandemic but also for providing vaccines to over 100 countries under its Vaccine Maitri initiative. Both India and Mexico will benefit from this collaboration, as manufacturing becomes more regionalized.
https://naimexico.com/wp-content/uploads/2023/04/electricity_tower-shutterstock_427050199-L-scaled.jpg17072560Vincenthttp://naimexico.com/wp-content/uploads/2016/07/logonai.pngVincent2023-04-14 11:15:332023-04-14 11:15:33Mexico, India to Collaborate in Innovative Binational Project