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

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.

Fuente El Economista

Canadá, tercer mayor emisor de IED hacia Querétaro

Es la séptima entidad federativa con más recepción de inversión canadiense en el país, al sumar 2,062.0 millones de dólares entre 1999 y el año pasado.

Querétaro, Qro. Canadá se posiciona como el tercer mayor emisor de Inversión Extranjera Directa (IED) hacia Querétaro, acumulando 2,062.0 millones de dólares desde 1999 al 2020, detallan registros de la Secretaría de Economía.

La IED canadiense se encuentra sólo por debajo de la inversión proveniente de Estados Unidos y de España, que en ese periodo aportaron 6,202.3 y 3,311.7 millones de dólares, respectivamente.

Frente al impacto por la pandemia, en el 2020 la entidad recibió 43.7 millones de dólares con origen en Canadá, esta cifra significa una baja de 50.3% anual.

Del 2008 al 2010, el estado reportó los montos anuales más elevados de inversión canadiense; 233.5 millones de dólares en el 2008, 213.8 millones en el 2009 y 267.6 millones en el 2010. En ese trienio, la IED canadiense sumó 714.9 millones de dólares, que representan 34.7% del total acumulado desde 1999 al 2020.

Con cifras acumuladas, Querétaro es el séptimo con mayor recepción de IED canadiense en el país, al sumar 2,062.0 millones de dólares de 1999 al 2020, por debajo Zacatecas (6,594.7 millones), Ciudad de México (5,852.6), Chihuahua (4,173.6), Coahuila (3,282.4), Sinaloa (3,222.1) y Guerrero (2,790.2).

Presencia de firmas

Bombardier es una de las firmas canadienses instaladas en la entidad, forjando un amplio historial de operaciones en el centro del país; en este contexto, la firma aeroespacial cumple 15 años de instalarse en Querétaro.

Desde esta ubicación fabrica componentes estructurales clave para los jets de negocios líderes de la compañía, incluido el fuselaje trasero de todas las aeronaves Global.

En el 2005 Bombardier Aerospace anunció el establecimiento de un centro manufacturero de clase mundial en Querétaro, el cual emprenderían con una inversión de 200 millones de dólares. En el 2006 inició actividad con un centro de manufactura temporal en el Parque Industrial El Marqués.

Para el 2008, anunció una inversión de 250 millones de dólares para llevar a cabo la manufactura del fuselaje, ensamble de las alas, estabilizadores horizontales y verticales, así como la fabricación e instalación de arneses eléctricos para la aeronave Learjet 85, desde sus instalaciones de Querétaro.

En el 2011 anunció una nueva inversión de 50 millones de dólares en la planta de Querétaro para apoyar la fabricación del fuselaje trasero de sus nuevas aeronaves de negocios Global 7000 y Global 8000.

En México, Bombardier se centra en producir estructuras metálicas, arneses eléctricos y fabricar piezas a base de materiales compuestos.

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.”

Photo owned by Magnusson Klemencic Associates

(Article in spanish)

El flujo de productos entre San Diego y Baja California alcanzó 1,400 millones de dólares en el 2018 .

El líder del eje económico del CDT, Miguel Velasco Bustamante, explicó que de acuerdo con el Colegio de la Frontera Norte entre ambos lados de la frontera hay un intenso flujo de mercancías que tan sólo durante el 2018 alcanzó la cifra de 1,400 millones de dólares de productos.

El empresario comentó que el consejo trabaja en un reporte con la actualización de las necesidades de la proveeduría y las oportunidades de negocio que hay en la zona metropolitana y San Diego; así como dar impulso a la mejora regulatoria e incentivos a la productividad y a la inversión.

Para ello, el año pasado el organismo empresarial inició con un diagnóstico de las necesidades de la proveeduría de la región, con la intención de conocer las vocaciones de la ciudad y las áreas de oportunidad de cada uno de los sectores de la industria.

Detalló que el estudio es realizado con fondos del Fideicomiso Empresarial de Baja California y se logró la actualización de necesidades de proveeduría, en coordinación con la Cámara Nacional de la Industria de la Transformación (Canacintra) en Tijuana, con quien se trabajó en la promulgación de la Ley de Fomento a la Proveeduría local.

Se hicieron análisis de cada uno de los sectores en particular con en el electrónico y se coordinaron trabajos para conocer demandas de las grandes empresas tractoras.

“Se encontró que en la industria electrónica hay una serie de componentes, productos y servicios que tienen que importarse y que hay capacidades instaladas localmente para que haya más proveeduría”, expresó.

Velasco Bustamante detalló que la idea del CDT es contribuir con información para que el ecosistema pueda obtener apoyos de los gobiernos municipal, estatal y federal.

“Para este año la idea es actualizar las necesidades de proveeduría y las oportunidades de negocios; se han contratado servicios de un despacho internacional para ser más precisos y saber cuáles son las oportunidades de negocios en cada uno de los sectores”, declaró.

Por su parte Aarón Victorio Escalante, director del CDT, señaló que dentro del eje económico se trabajó en diversos proyectos durante el 2018 que se han ido consolidando con la finalidad de promover la proveeduría local.

Durante la presentación del estudio de Cadenas Productivas y Contenido Nacional de la Industria Maquiladora del municipio de Tijuana, destacó que a través de ese análisis se encontró que en los diversos sectores de la industria hay un potencial importante de crecimiento.

De acuerdo con Canacintra, las maquiladoras en el estado compran tan sólo 2% de insumos locales, y con la iniciativa de fomento a la proveeduría estatal se fijaron como meta incrementar ese consumo hasta 30%, representando 293 millones de dólares anuales para beneficio de la región, por cada punto porcentual que se aumente.

Article originally published by Gabriela Martínez, source: www.eleconomista.com.mx
Among states, Baja California Sur was No. 1 with 269% growth.

Data from the National Institute of Statistics and Geography (Inegi) shows that Mexico’s overall manufacturing growth between 2013 and 2018 was 17.9% – 1.4% higher than that achieved in the previous six years. The increase in the value of nationwide production was largely driven by the Bajío, a region made up of Guanajuato, San Luis Potosí, Querétaro and Aguascalientes.

Western Mexico – Jalisco, Michoacán, Nayarit and Colima – achieved the second highest growth in the period, with the value of its production up 25.3%.

The northern border region – taking in all six states that abut the United States – was next with 21.5% growth, followed by the central-north region with 15.3% growth and central Mexico, which saw a 9.8% increase.

Among individual states, Baja California Sur was a clear-cut winner. The state saw whopping growth of 269% between 2013 and 2018.

San Luis Potosí was in second place with the value of its output increasing by 73.7%, while Aguascalientes recorded 70.4% growth to finish third.

Mexico’s south and southeast was the only region that saw a decline — a 17.3% decrease. Manufacturing shrunk by 42% in Oaxaca, 16% in Veracruz, 11.8% in Guerrero and 0.8% in Tabasco.

Output in Tamaulipas, Hidalgo, Mexico City, Sonora and Durango also declined in the six-year period.

 

The total value of manufacturing in Mexico last year was just over 7.3 trillion pesos (US $380.1 billion), with 32% of that figure coming from the northern border region. Factories in central Mexico generated 28.2% of the wealth and the Bajío region contributed 21.5%.

In 2013, the same three regions, in the same order, were also the leading contributors to the value of Mexico’s overall manufacturing output.

But 2018 figures show that only the Bajío increased its participation in percentage terms, contributing 4.3% more than it did in the first full year of Enrique Peña Nieto’s presidency.

The newspaper El Economista said that policies introduced by governments in Guanajuato, San Luis Potosí, Querétaro and Aguascalientes have been the driving force behind the Bajío region’s strong performance in manufacturing, pointing out that the states entered into commercial alliances that helped them to attract domestic and foreign investment in sectors such as automotive and electronics.

In November, the governors of the four states also agreed to work together to create a new manufacturing region to be known as the Central Bajío Corridor.

Long-term cooperation between the states will also extend to security, tourism, transport and social development, among other areas.

 

The Bajío region state that generates the most manufacturing wealth is Guanajuato.

Since 2010, it has ranked fourth every year for the value of its economic output behind México state, Nuevo León and Coahuila, which have maintained their spots, in that order, as Mexico’s top three manufacturing powerhouses for almost a decade.

San Luis Potosí and Querétaro are now also in the top 10 manufacturing states, taking the places of Sonora and Tamaulipas, which featured in the 2013 list.

The 7.3 trillion pesos generated by manufacturing last year accounted for 16.1% of gross domestic product (GDP), making the sector the most important of Mexico’s economy.

Production of cars and pickup trucks was the most profitable sub-sector of the manufacturing industry last year, generating 16.2% of all wealth followed by oil refining, which contributed 4.1%.

The production of buses and trucks was the third most profitable sub-sector, making a 4% contribution to the industry’s value.

Between 2013 and 2018, the value of parts manufactured for vehicle transmission systems increased by 101.7%, making it the best performing sub-sector in terms of growth, followed by beer production, which surged 73.5% and car and pickup truck production which grew by 68.1%.

Petroleum refining and the production of pharmaceuticals and tortillas were among the manufacturing sub-sectors whose contribution to total manufacturing value fell while Peña Nieto was in power.

Article originally published by Rodrigo A. Rosales on Wednesday, February 20, 2019 Source: mexiconewsdaily
Michelin breaks ground on plant in León, Mexico

LEÓN, Mexico (Aug. 24, 2016) — Group Michelin has started construction in Mexico of its 21st factory in North America — eight years after the global economic crisis of 2008 forced it to postpone the project.

“I’m really excited because a few years ago, in 2008, I had to come to this country to postpone our investment because of the crisis,” Michelin CEO Jean-Dominique Senard told Tire Business Aug. 22.

“At the same time I was incredibly impressed by the way the Mexican authorities took the news. So coming back with the decision (to revive the project) is a joy.”

Mr. Senard had earlier hosted a groundbreaking ceremony at the 242-acre site in central Mexico where the French tire company is investing $510 million in what, according to one senior executive, will be Michelin’s first greenfield passenger tire plant in North America in three decades.

In a speech, Mr. Senard said the León investment is the tire maker’s largest investment anywhere in 2016.

“The last time we launched a greenfield passenger tire plant in North America was over 30 years ago,” Scott Clark, executive vice president and COO of Michelin North America, said in a separate interview with Tire Business.

“So this is not something we do every day. This is a big deal and this is exactly the right place to be and at the right time.”

The factory, which will employ 1,000 when finished in late 2018, will be within a threehour drive of 18 car maker assembly plants, Mr. Clark said. It is located in a new industrial park called León-Bajio, which stands beside the León-Silao highway.

 

“The new Michelin investment in Mexico represents a vote of confidence that strengthens the positioning of Mexico as an investment destination, because it comes from a company with a long tradition in the industry and widely recognized for its commitment to innovation”

Idelfonso Guajardo Villarreal, Mexico’s federal economy secretary.

 

Source: http://www.tirebusiness.com/article/20160824/NEWS/160829978

 

Mexico City (CNSNews.com) – Experts who help foreign companies build factories in Mexico report a recent surge in interest by U.S. and international firms, with executives voicing less concern about Mexico’s crime and security problems.

“We’ve seen a 40 percent increase in inquiries about building factories in Mexico compared to where we were last year,” Ricardo Rascon, a salesman with The Offshore Group in Tucson told CNSNews.com.

“It has surged dramatically in recent years,” he said. The number of companies approaching the company looking to build facilities in Mexico is not as high as it was prior to the financial crisis of 2007, however.

Half of the increased interest is coming from U.S. companies, while the other half is from companies located in Canada, Germany, South Korea and even China, Rascon said.

“We signed our first Chinese company this week. They are moving a product line from China into Mexico for the logistical advantages for serving the U.S. market.”

Companies in Germany in particular were also showing a “big interest” in building factories in Mexico to be closer to the U.S. market, Rascon said.

U.S. companies that move to Mexico don’t always shut down in the U.S., but often instead open new factories in Mexico to be closer to suppliers, he said.

Rascon also said company executives were asking fewer questions about crime in Mexico than was the case several years ago.

“I could tell you three or four years ago, security was the first thing people would ask, but now it’s on the back burner. Now, all they ask about is cost.”

According to the business data firm Dun & Bradstreet, inquiries from multinational companies about locating in Mexico have increased by 20 percent through June just this year, Reuters reported on Tuesday.

A recent survey of companies that moved jobs overseas to take advantage of lower wages and costs in Asia, but now want to relocate them back to North America, found Mexico to be their “first-choice destination” over the United States.

A third of the companies surveyed said they were now actively looking at moving “primary production and assembly operations currently located in China, India and Brazil back to North America,” it said.

Entitled “Footprint 2020: Expansion and Optimization Approaches for U.S. Manufacturers,” the survey was sponsored by Deloitte and The Manufacturers Alliance for Productivity and Innovation.

In a report this week analyzing corporate credit worthiness in Mexico, Moody’s Investors Service said free trade agreements make Mexico especially attractive to U.S. automakers Ford, GM and Chrysler.

“Hourly industry wages in Mexico are well below rates in Brazil, South Korea and even China,” the report said, noting that the auto manufacturing industry in Mexico is now the seventh largest worldwide and the country’s second largest industry.

“Mexico’s auto-parts manufacturers depend heavily on North America, which bought 82 percent of their exports in 2015, far more than South America (8 percent) or Europe (6 percent),” the report said.

A 2015 survey of 250 senior-level manufacturing and distribution executives in North America and Western Europe by the consulting firm Alix Partners found “continued appetite for nearshoring” with a 32 percent of those surveyed reporting they had recently moved production facilities nearer to their customer markets.

Fifty-five percent of the North American companies said they preferred to locate in the U.S. in order to be closer to their markets while 31 percent favored Mexico.

The firm’s research showed Mexico’s popularity with manufacturers had declined in 2015 from 49 percent three years earlier, possibly due to security concerns.

Asked about security concerns in Mexico, the number of respondents saying they “expected improvement in those areas” dropped from the previous year’s survey.

 

The offshoring trend that has dominated manufacturing footprint strategy for the last 30 years was based on solid benefits: lower labor costs, access to raw materials, inexpensive rent, etc. However, many factors such as the significant travel involved in managing overseas business, proximity to the U.S. market, perpetually shifting regulations and intellectual property concerns are significant deterrents for companies to offshore their manufacturing lines. OEMs with constantly scaling or smaller volumes find it especially hard to justify the hassle and expense involved in offshoring. As a result, many OEMs are reversing the trend and moving to a reshoring strategy, and they have sound rationale for doing so. While the United States manufacturing industry has plenty to celebrate with this trend, the movement is more broadly focused on North America as a whole, and Mexico is an especially attractive location for manufacturers.

According to a Deloitte report, 66 percent of survey respondents have offshored manufacturing work overseas in the last two decades. Among those, a third are now considering relocating operations to North America, with Mexico being their first choice and the United States their second.

Mexico offers several key benefits that make it especially attractive: lower labor costs, advantageous land and facility cost structures, more favorable transportation logistics expenses and increased proximity to the U.S. market are a couple of examples.

However, some of the obstacles and concerns manufacturers had about Mexico years ago remain today – transportation infrastructure, security concerns in certain areas and access to skilled labor are a few examples. That is why the component distribution model employed in the U.S. can’t be easily replicated in Mexico and that is also the driving force that led TTI to create a sustainable model that would allow it to fully serve this growing market buyers.”