, , ,

Border corridor sees spike in jobs, international trade and sales tax collection

El Paso, Las Cruces,and Juarez add a combined 35,000 year-over-year jobs in October, Hunt Institute says.

The jobs are coming back to the Paso del Norte region.

El Paso, Las Cruces, New Mexico, and particularly Juarez, Mexico, saw an uptick in employment in October. El Paso added 8,900 jobs in October, led by growth in services, trade and transportation, the University of Texas at El Paso’s Hunt Institute for Global Competitiveness reported on Tuesday.

The same three sectors fueled job growth in Las Cruces, which added 2,300 jobs. Juarez gained 23,900 jobs led by its signature manufacturing sector.

Juarez is home to more than 300 U.S.-run manufacturing plants and the Mexican government has designated many as essential businesses, which has spared them from COVID-19 shutdowns. Juarez has seen year-over-year employment gains for the past 15 months, according to the Hunt Institute’s December 2021 report.

But whereas El Paso’s manufacturing sector remains stagnant, it leads all major Texas cities when it comes to growth in sales tax collections, the report states.

El Paso collected $93.5 million in sales taxes during the first 10 months of the year, a 20.3 percent increase compared to pre-pandemic 2019 levels. It also collected $16 million more over the same period in 2020.

El Paso also was among the top four in the Southwest border in terms of international trade. El Paso’s ports of entry recorded an increase of 11.2 percent in trade during the first 10 months of 2021 compared to 2019, the Hunt Institute reported.

EL PASO, Texas VIA (Border Report) –

/by
, , , , ,

Mexico could benefit from China’s exclusion from supply chains

The chunks metal being worked on do not look terribly special. But the factory of Aerospace, a chemical-processing firm in Tijuana, hints at Mexico’s importance to global supply chains. These are components, from tray tables to door parts, for aircraft made by companies including Boeing, Cessna and Lockheed Martin. BAP applies surface treatments to the pieces, from submerging them in big vats of chemicals to meticulous work done by hand, before shipping them north.

Mexico has long been a hub for manufacturing. Toyota, a Japanese carmaker, has had a plant in Tijuana since 2002. Honeywell, an American industrial giant, opened one in 2010. But increasingly the country is moving into higher-value processes. It now accounts for 3-4% of aerospace imports to the United States, up from 1.5% in 2010. By contrast China’s share, which was the same as Mexico’s a decade ago, is now just 1%. American sanctions on China and tariffs on Chinese goods explain much of this change, as well as rising wages in China and the difficulty of doing business there. The trend has accelerated recently. Pandemic-induced border closures, increased freight costs, and consumers’ demands for instant gratification have all nudged firms around the world to consider shortening their supply chains.

“This is a golden opportunity for Mexico,” says Helen Wang, a consultant. The country has some natural advantages, not least a long land border with the United States. Mexico is party to fully 23 free-trade deals. Manufacturing wages are lower than in China. A survey this year by the American Chamber of Commerce of Shanghai found that a fifth of its members were considering moving some work out of China; more than a third of those who were thinking of moving were looking to Mexico.

In Tijuana the mood among many Mexican businesspeople is optimistic. Several big firms have expanded recently. Panasonic, a Japanese electronics company, opened a plant in 2018 to make cables for aerospace. Other companies are diversifying into logistics and distribution. In September this year Amazon, an e-commerce giant, opened a warehouse there, though the company denied that it would use it to serve customers in the United States.

In addition to aerospace, the manufacturing of medical devices and other electronics is booming. “We are doing things [in Mexico] that once would have had to be done in Japan or Germany,” boasts Eduardo Salcedo, the manager of the local operations of Össur, an Icelandic medical-devices company. “We have guys running a million-dollar machine with their right hand and another one with their left hand.”

Chain reaction

The result is that the richest part of the country, by the border, is becoming even better off. “Northern Mexico is growing at similar rates to Asia,” says Luis de la Calle, a consultant who used to work at Mexico’s economy ministry. Elsewhere, however, the picture is mixed. FDI fell from 3.1% of GDP in 2018 to 2.3% in 2019, compared with 3.7% in Brazil or 6.2% in Vietnam.

And despite its proximity to the United States, Mexico has its shortcomings. Business parks provide world-class facilities but the infrastructure outside—from roads to ports—is of poor quality, says Mr de la Calle. Businesses complain of problems obtaining inputs. The likes of Panasonic and Össur import many of the materials they need. Similarly Össur nearly pulled out of Tijuana because it could not find a company to apply chemical processes to its products, which include prosthetics. (BAP eventually stepped in.)

Some of the causes of Mexico’s problems are outside its control. When the government of the United States talks about “near-shoring”, it really means onshoring, says Bill Reinsch of CSIS, a think-tank in Washington. It can be protectionist in negotiations with Canada and Mexico. USMCA, the revised trade deal agreed in 2020 between the three countries, is stricter than its predecessor, NAFTA—indeed it was negotiated in part to preserve manufacturing jobs in the United States.

But Andrés Manuel López Obrador, Mexico’s populist president, has not helped. In 2018 his administration replaced one of the most business-friendly (if corrupt) governments in Mexico’s history, that of Enrique Peña Nieto. Mr López Obrador, in contrast, seems to enjoy unnerving investors.

Soon after taking office he cancelled a new airport for Mexico City, after the diggers had been working for three years, at a cost of at least $5bn. In 2020 he also pulled the plug on a $1.4bn investment in a new factory by Constellation Brands, an American brewer, which was near completion. He has weakened independent regulators by absorbing them into government or slashing their budgets.

Mr López Obrador is also reversing his predecessor’s opening of the energy industry to private firms and favouring inefficient state-owned outfits. Along with making electricity dirtier and less reliable, this sends forbidding signals to investors. In November the boss in Mexico of General Motors (GM), an American carmaker, said the company would not invest further in the country without laws that promote renewable energy. Earlier this year GM had said it would invest more than $1bn to make electric cars in Mexico from 2023. Last year Tesla, a leading maker of such cars, considered opening a factory in Mexico but opted instead for Texas. Although Tesla did not explain its reasons, Elon Musk, its boss, has grumbled about the Mexican government’s closure of some of the factories of its suppliers during covid-related lockdowns.

Mexico risks “shooting itself in the foot” by not taking advantage of shorter supply chains, says Michael Camuñez, who started a series of meetings to boost the economic relationship between Mexico and the United States during Barack Obama’s administration. (Mr López Obrador and President Joe Biden relaunched this “economic dialogue” in September.) Unfortunately it is Mr López Obrador who has his finger on the trigger and, if his past treatment of foreign investors is any guide, seems likely to pull it. 

This article appeared in the The Americas section of the print edition under the headline “Missing links” in the economist

/by
, ,

As supply chains strain, some corporations rewrite production playbook

Many firms are eyeing regional networks to replace globe-circling supply chains

The pandemic caught Stanley Black & Decker midway through an overhaul of its 18-country supply chain.

Executives at the toolmaker’s New Britain, Conn., headquarters already had shifted most production of heavy-duty industrial products closer to customers in the United States and Europe. But efforts to do the same with Stanley’s popular hand tools were unfinished when the coronavirus pandemic began disrupting global commerce.

This year, as ports grew clogged, Stanley saw its freight bills jump by a factor of seven, endured months-long shipping delays and scrambled to obtain computer chips for its power drills, saws and sanders. Earlier this month, the company had shipping containers stranded on 50 ships anchored off the Southern California coast.

Spurred by the pandemic, Stanley is moving on multiple fronts to strengthen its supply lines. Executives in charge of its tools business accelerated plans for two new factories in Mexico and one in Fort Worth. They locked in future supplies of lithium-ion batteries for power tools by funding dedicated production capacity at U.S. and Taiwanese suppliers and stockpiled an extra $1 billion in products.

“With the pandemic, it really has radically shaken the supply chain,” said Don Allan, Stanley’s chief financial officer. “It does drive home the importance of our strategy of getting closer to where we sell. The more you can minimize the amount of time your product is in transit, the better off you’re going to be.”

The toolmaker’s strategy illustrates how corporations are responding to the pandemic with some of the most consequential supply line makeovers since the onset of globalized production roughly three decades ago.

Many companies are using a variety of temporary solutions to try to navigate the current crisis. Eaton, an industrial manufacturer, dispatched its own experts to work alongside suppliers. Colgate Palmolive used more costly airfreight to ship its toothpaste and toothbrushes. And, Walmart chartered its own ships to circumvent backlogs.

As the disruptions persist, executives are embracing more lasting measures, moving production to new suppliers or different countries and relaxing their traditional fixation with low costs. But what they are not doing is equally important: There is no sign of any wholesale return of jobs to the United States. U.S. corporations remain believers in globalization, importing more than $2 trillion of industrial parts, raw materials and consumer goods each year from suppliers they regard as best suited to produce them.

The shifts that are occurring cap four years of supply chain volatility, including the Trump administration’s trade wars, a once-in-a-century health crisis and increasingly frequent natural disasters on multiple continents.

“Supply chains used to be sort of very immobile, black boxes, quite set in stone,” said Sebastien Breteau, chief executive of QIMA, which conducts worldwide factory inspections and audits for major retailers. “We’ve seen the supply chain become a lot more dynamic. And we see people having to adapt almost in real time.”

In some cases, manufacturers such as General Electric are even redesigning their products to eliminate dependence upon vulnerable sources of parts and materials. At Honeywell, where “tiger teams” track supply shortfalls on a daily basis, engineers have tweaked the company’s sensors and fire control systems to use more readily available computer chipsets, executives said on a recent earnings call.

To insulate itself against future supply surprises, Honeywell is developing a dual-source strategy for some products and signing longer-term deals with key suppliers.

“We’re going to have to deal with some supply chain challenges that are here, they’re real, they’re probably understated in the market,” Darius Adamczyk, Honeywell’s CEO, said on an earnings call last month. “It’s only recently that it’s been realized how severe they are.”

Soaring freight costs and unpredictable deliveries undermine the logic of ocean-spanning supply lines as well as the dominant production theory of the past generation, which called for parts to arrive at factories “just in time” to be assembled into finished goods.

Amid congested ports, trucker shortages and rail yard delays, it now takes Stanley almost 90 days to get its products from factories in China to U.S. stores — three times as long as before covid-19, Allan said.

Bringing a standard shipping container full of clothes, toys, furniture or industrial components from China to Los Angeles now costs $18,730, more than 13 times the pre-pandemic price, according to the Freightos index. Long-distance trucking costs have risen 27 percent over the same period, the U.S. Bureau of Labor Statistics said

“Manufacturers who have complex products, they are scrambling for parts. They are scouring distributors. They are escalating with their suppliers every day, saying ‘I need more of these,’ ” said Willy Shih, a professor at Harvard Business School. “There is also a lot more stockpiling of parts, more ‘just in case, I’m going to carry a little more inventory.’ But when people order extra for ‘just in case,’ it’s actually making the shortages worse.”

Breaking a globe-circling supply chain into regional networks is emerging as a popular response. Construction companies on both sides of the U.S.-Mexico border expect to benefit from this trend of “near shoring” production with orders for new factories or warehouses.

“We think that’s going to be a nice little bump for us, probably late ‘22, early ‘23,” Joseph Cutillo, CEO of Sterling Construction in Houston, told investors earlier this month.

Likewise, Cemex, the Mexican construction giant, said in July that it was capitalizing on the shift of manufacturing and industrial capacity from China to Mexico. The cement and building products producer already is benefiting from the construction of new warehouses near the U.S. border, executives said.

Today, about 40 percent of the Stanley tools purchased by Americans are made in the United States or Mexico. Allan wants to get that figure closer to 70 percent over the next two years.

But bringing work back from overseas doesn’t mean many jobs will come along. The new Fort Worth plant is “virtually 100 percent automated manufacturing,” needing just a couple hundred workers rather than the 1,000 required in an Asian facility, Allan said.

Few companies are abandoning globalized supply channels entirely or shifting a significant number of jobs back to the United States. The volume of merchandise trade exceeds the pre-pandemic peak and is expected to grow by almost 11 percent this year, according to the World Trade Organization.

Labor cost and availability in the United States remains a high hurdle for repatriating manufacturing work. And even a 100 percent American supply chain this year would have been vulnerable to interruption from domestic upheavals, such as the aftermath of an unusual cold snap in Texas, which disrupted petrochemical production, or wildfires that damaged railroad bridges.

“We are not seeing any dramatic move to reshoring because it has not really been distance that has been the issue during the pandemic,” said Soren Skou, CEO of Maersk, one of the world’s top cargo carriers and thus a principal beneficiary of global supply lines. “If you nearshore, and you put a factory in Mexico instead of China or you put a factory in Eastern Europe instead of China, that factory can still be hit just as easily in a pandemic scenario as if it’s based in China.”

Indeed, imports have grown faster than the U.S. economy since the start of 2019, reflecting a continued reliance on foreign sources of both industrial components and consumer goods. Through September, the United States imported nearly $2.1 trillion worth of goods, according to the Census Bureau, a product surge that helps explain the chronic congestion at ports, terminals and rail yards.

More goods are coming to the United States, and they are coming from more places.

Even before the pandemic, years of tariffs and geopolitical tensions had prompted many companies to diversify their goods and materials sourcing by adopting a “China-plus-one” strategy.

As a share of total imports, Chinese goods have fallen from almost 21 percent in 2019 to 17.5 percent through the first nine months of this year. Vietnam over the same period nearly doubled its share of U.S. imports. Countries such as India and Indonesia also grew in importance.

But there are no perfect defenses against supply interruptions.

When Vietnamese factories closed this summer to battle fresh coronavirus outbreaks, Deckers Outdoor, which relies on the Southeast Asian nation for a majority of its footwear output, was forced to scramble. The maker of UGG, Hoka and Teva brand footwear had just 10 percent of its production in the hardest hit southern region and shifted production to other factories that were still open.

But widespread supply bottlenecks meant that more than twice as much of the company’s inventory was in transit at the end of September, compared with a typical year.

To gird against future interruptions, Deckers has secured additional production space in “new geographic locations” and signed up new suppliers, Steven Fasching, the company’s chief financial officer, said in late October. The company also plans to carry more inventory to meet expected demand and as a hedge against inflation.

Spencer Shute, a supply chain consultant with Proxima in Boston, said he expects companies to emerge from the pandemic with a “hybrid” model, blending elements of traditional just-in-time operations with the more cautious and costly “just-in-case” approach.

“It’s an unrealistic goal to think there will never be any type of disruption to their supply chain,” Shute said. “What’s realistic is to be able to react quickly.”

Source: THE WASHINGTON POST

/by
fashion supply chain
, , ,

Snarled supply chains force manufacturing exodus from Asia

Major clothing and shoe companies are moving production to countries closer to their U.S. and European stores, smarting from a resurgence in cases of the Delta variant of the novel coronavirus in Vietnam and China that slowed or shut down production for several weeks earlier this year.

The disclosures come amid a massive shipping logjam that is driving up costs and forcing companies to rethink their globe-spanning supply chains and low-cost manufacturing hubs in Asia..

The latest example is Spanish fashion retailer Mango, which told Reuters on Friday it has “accelerated” its process of increasing local production in countries such as Turkey, Morocco and Portugal. In 2019, the company largely sourced its products from China and Vietnam. Mango told Reuters that it would “considerably” expand the number of units manufactured locally in Europe in 2022.

Brazil, Mexico gain

Similarly, U.S. shoe retailer Steve Madden on Wednesday said it had pulled back production in Vietnam and had shifted 50% of its footwear production to Brazil and Mexico from China, while rubber clogs maker Crocs said last month it was moving production to countries including Indonesia and Bosnia.

Bulgaria, Ukraine, Romania, the Czech Republic, Morocco, and Turkey were some of the countries drawing new interest from clothing and shoe producers, though China continues to produce a large share of the apparel for U.S. and European clothing chains.

“We are seeing a lot of growth in freight and trucking activity in the former Soviet Republics… a big rise in Hungary and Romania,” said Barry Conlon, chief executive of Overhaul, a supply chain risk management firm.

In Turkey, apparel exports are expected to reach $20 billion this year, an all-time high, driven by a spike in orders from the European Union, Turkey’s Union of Chambers Clothing and Garment Council data showed. In 2020, exports hit $17 billion.

Business boom in Bosnia

In Bosnia & Herzegovina, exports of textiles, leather, and footwear amounted to 739.56 million marka ($436.65 million) in the first half of 2021, which was higher than for all of 2020.

“Many companies from the European Union, which is our most important trading partner, are looking for new suppliers and new supply chains in the Balkan market,” said Professor Muris Pozderac, secretary of the association of textile, clothing, leather, and footwear in Bosnia & Herzegovina.

In Guatemala, where Nordstrom significantly shifted its private-label volume production in 2020, clothing exports were a touch over $1 billion as of the end of August, up 34.2% from 2020 and even 8.8% higher than in 2019.

To be sure, many companies are also still heavily reliant on Vietnam, where recent production stoppages have caused significant disruptions. Vietnam’s government said in October that it will fall short of its garment exports target this year, by $5 billion in a worst-case scenario, due to the impacts of coronavirus restrictions and a shortage of workers.

Via the hindu https://www.thehindu.com/business/snarled-supply-chains-force-manufacturing-exodus-from-asia/article37408374.ece

/by
Arrendadores y arrendatarios haciendo un buen trato
, , , ,

Aspectos a considerar al renovar y/o establecer un nuevo contrato de arrendamiento.

¿Qué aspectos considerar al renovar y/o establecer un nuevo contrato de arrendamiento?

 

La eficiente administración del portafolio de los activos fijos debería ser parte fundamental de la estrategia a largo plazo dentro de las corporaciones; los beneficios de hacerlo son de gran impacto no sólo al enfrentarse a la firma o renovación de arrendamiento sino también en las finanzas de quienes poseen o administran un activo fijo.

La conciencia sobre del estado de las propiedades de la organización es lo que permite a las corporaciones garantizar el mejor uso de los activos (naves industriales de manufactura y/o almacén, terrenos y edificios de oficinas) así como optimizar el valor de las inversiones realizadas. Esto implica actualizar los valores en libros de los activos tomando en cuenta las depreciaciones o plusvalías que el mercado y las condiciones de los bienes generen sobre los activos de la compañía,

Sin embargo, dado el entorno actual del mundo de los negocios regido por la globalización, los procesos de fusiones, adquisiciones y alianzas estratégicas entre sociedades nacionales e internacionales, las compañías integran equipos multiculturales de trabajo, ubicados en diferentes países y cuya estructura en ocasiones dificulta el conocimiento total del número de activos que posee el grupo en cuestión.

Entonces, ¿Cómo iniciar?

Las siguientes son algunas acciones que pueden marcar la diferencia en la administración de activos al interior de la compañía:

  • Realizar un inventario de todos activos que incluye el portafolio de bienes y raíces es un primer paso para iniciar un plan estratégico de administración y gestión de las naves, terrenos y oficinas.
  • Identificar los arrendamientos vigentes le permitirá a la compañía realizar auditorias sobre éstos, buscando homologar las prácticas comerciales. 
  • Crear y mantener actualizadas bitácoras del estado de las propiedades, así como las mejoras realizadas durante la vida de los contratos.

En el caso de las renovaciones será vital poner atención en los siguientes aspectos para lograr una negociación exitosa:

 

  • Estado Actual de la Propiedad: 
  • ¿Qué actividades de mantenimiento es necesario realizar para lograr la mejor operación del activo? Algunas de las más comunes son: re-encarpetamiento del estacionamiento, reemplazo de los tragaluces del techo, pintura interior y exterior, ampliación del área de oficinas y/o del almacén, etc. Una vez identificados todos los trabajos a realizar, será necesario realizar un presupuesto.
  • Revisión del Contrato de Arrendamiento: para identificar los derechos vigentes que se tienen, principalmente los derechos de prórroga así como las condiciones de precio e incrementos pactados.
  • Situación Actual del Mercado: un estudio profundo del mercado actual sentará la bases para la negociación de los términos y condiciones a pactar.

Conocer la oferta actual disponible, así como el análisis financiero de los costos para una reubicación son los factores indispensables para poder lograr una buena negociación.

Es importante considerar los puntos antes mencionados, además de enlazar las necesidades de la compañía con las propuestas de todos sectores involucrados en el proceso, sin perder de vista las diferencias socio -culturales entre ellos. 

Por estas y otras razones es que los Brokers, son de gran utilidad; ya que son responsables de facilitar el proceso de negociación dentro de los grupos y corporaciones, cuentan con toda la información necesaria para lograr un buen trato y tienen vasta experiencia tratando con los desarrolladores y propietarios locales.

En NAI Mexico, contamos con profesionales en los mercados más importantes del mundo que están dispuestos a ayudar a facilitar tus procesos de arrendamiento, renovaciones, expansiones y fusiones.

¿Su compañía atraviesa algún proceso como estos?

Si deseas conocer más sobre un proceso el proceso de renovación de los arrendamientos puedes contactar a Fernanda Martínez.

PERFIL DE FERNANDA MARTINEZ EN NAI MEXICO

 

/by
China-supply-chain
, ,

China Plus One – An Emerging Supply Chain Diversification Strategy

Diversifying the sourcing portfolio from China (either nearshoring or offshoring) will help address challenges, whether in supply chain, logistics or availability of raw materials.

 

China’s supremacy as the global production hub for several industries such as medical devices, electronics, automotive and textile was unchallenged until sometime back. The key factors were easy availability of raw materials, business-friendly laws, technological innovations and access to skilled and cheap labor. However, the scenario changed in 2019 due to increasing cost of labor and the U.S.-China trade war, which tarnished China’s image as a favorable center of production. The Coronavirus disease (COVID-19) pandemic aggravated the situation.

Supply chain disruptions, such as shortage of raw materials due to plant shutdowns in China, increased the cost of manufacturing by pushing labor and shipping costs high and increasing lead times. Plus, amid the growing risk of intellectual property (IP) theft and declining tax incentives, companies either consolidated operations in their home country, expanded existing operations, explored nearshoring activities in Mexico or offshored operations to other Asian countries such as India and Vietnam. Many leading organizations in the mobile and electronics, automotive and medical devices industries have either started implementing their plans to partially shift supply chain to Mexico or are exploring this option followed by India and Vietnam.

Leading automotive, electronics companies shifting supply chain functions or expanding operations in Mexico, followed by India and Vietnam

Shift in supply chain. The shift of supply chain is already underway, as some leading electronics players are exploring Mexico as a production facility.

Following Mexico, India introduced the Production-Incentive Scheme for mobile phone manufacturing and electronics components, including assembly, testing, etc. This factor contributed to attracting some companies to set up manufacturing plants in India.

Vietnam is yet another preferred location for the manufacture of electronics parts.

Expansion of existing facilities. In addition to the shift in supply chain, leading automotive companies are planning to move production to Mexico. End-users, for instance, have already shifted or expanded their manufacturing operations to Mexico.

Electronics companies in Mexico too are keen on increasing their production lines for servers, lighting systems and cognitive services, respectively.

Geographic proximity, low-cost labor, lower logistics expenses and availability of raw materials are the key factors drawing large organizations to Mexico. The country also is taking initiatives to attract investors and increase foreign-direct investment (FDI) in different industries.

Factors supporting investments in Mexico vis-à-vis India and Vietnam

Mexico’s GDP stands at $1,076 billion, of which, $318 billion comes from the industrial sector, followed by the service and agriculture sectors. However, in India, the service sector is the major contributor, accounting for $1,413 billion, followed by the industrial sector at $618 billion. In Vietnam, the service sector is the major contributor to GDP.

The main manufacturing industries in Mexico are mechanical (stamping, smelting, forging, machining, plastic injection, die casting), automotive and electronics that have 77,071, 2,500 and 2,300 companies, respectively; together, they employ more than 2 million people.

The industrial sector in India, with its major sub-sectors such as mining, quarrying, manufacturing, electricity, gas and water supply, accounts for around 26% of the country’s GDP. It employs over 15-20% of the total workforce in India, and mainly caters to the iron and steel, cotton and textile, mechanical (smelting, forging, stamping, machining, die casting plastic injection), automotive and electronics industries.

On the other hand, in Vietnam, state-owned industries such as furniture, plastics, textiles and paper constitute the foundation of the economy. Even sectors like tourism and telecommunications contribute significantly to the economy. In 2020, these industries accounted for 34.5% of the GDP and employed 28% of the total workforce.

Overall, Mexico has a strong supply base that can ensure “just-in-time” delivery to consumers and distributors and provides end-users access to the South American market.

Trade (imports and exports). The United States is the most preferred export destination for Mexico, accounting for approximately 79% of total exports, followed by Canada, China, and others. Export of electronics and automotive components from Mexico to the United States increased over 2019-20, with electronic equipment exports rising 5-10% in this period. Also, in the last three years, by value (in metric tons), the import of automotive products to the United States from Mexico has increased by more than one-third.

Of the total exports from India to the United States, products such as medical appliances, leather goods and textiles account for more than 17%. The United States is also the major export destination for Vietnam.

Note: Trade data includes exports and imports of all products from Mexico, India, and Vietnam for the year 2019 and 2020.

Growth in FDI accompanied by strong government initiatives. In 2020, India was on the list of the Top 10 recipients of FDI, clocking $64 billion, up 27% from that the previous year. Major investment was in the manufacturing industry (18%), followed by service and computer software/hardware. Furthermore, the Indian government has now allowed 100% FDI in contract manufacturing in its bid to boost investments in manufacturing. In Vietnam, FDI decreased by 25% year-over-year to $28.5 billion in 2020; half of the investments were in processing and manufacturing.

FDI inflows to Mexico totaled nearly $30 billion in 2020. The top investing countries were the United States (39%), Canada (15%), and Spain (14%), followed by Japan, Germany, etc. Of the total investments in Mexico, 41% is directed toward the manufacturing sector, concentrated in industries such as aerospace, automotive and electronics. These established industries offer a strong supply chain, existing infrastructure and skilled labor.

Overall, Mexico is a preferred choice for companies looking to maintain competitive manufacturing costs while having regional distribution strategies to control inflation.

Availability of port infrastructure. On the Quality of Ports Infrastructure Index, Mexico ranks 65th, India 51st and Vietnam 85th among 139 countries.

The Indian government has permitted up to 100% FDI on port-related projects and even has a 10-year tax holiday for construction and maintenance of port projects. The government also spent $1.85 billion on infrastructure development at major ports in the country. Due to its geographical location, Vietnam offers easy connectivity with other Southeast Asian countries; this makes it an appropriate hub for manufacturing. Seven major ports dot its 1,900-km coastline, and currently about 400-500 million tons of cargo moves around this line annually.

Mexico has more than 100 major ports on a coastline of 9,330 km, with an annual capacity of nearly 300 million tons. In the last three years, road shipping volume from Mexico to the United States increased by 32%, mostly via Port Laredo in Texas. Inbound ocean freight volumes also increased from Mexico, mainly to Port Newark in New Jersey and Port Everglades in Florida.

Shipping rate from Mexico to the United States is the lowest as compared to from China, India, and Vietnam, which makes Mexico a favorable destination.

Aranca China Plus One Infographic1Aranca

Technology adoption and automation. On the Automation Readiness Index, Mexico ranks 23rd, Vietnam 24th and India 18th. Despite, gross expenditure on R&D (as a % of GDP) is at same levels for all three countries; Mexican industry is planning to accelerate digitalization and automating processes typical of Industry 4.0, which would raise the country’s GDP by 3% points.

The Indian government is finalizing plans to boost digital manufacturing in the country. Many organizations have already taken the initiative and invested in Industry 4.0 Center of Excellence. The Government of India is planning to develop land spanning 461,589 hectares (two times the size of Luxembourg) to invite businesses looking for alternative locations to China. Government-led initiatives such as Rapid Transformation Hub (SAMARTH) and Smart Advanced Manufacturing – Udyog Bharat 4.0 are also aimed at increasing the pace of digitalization.

Vietnam, too, has initiated the adoption of Industry 4.0; however, investments need to come from other countries such as Japan. A few companies, for instance, have undertaken automation-related initiatives in Vietnam, but other domestic companies are still lagging.

Aranca China Plus One Infographic2Aranca

Availability of raw materials. In Vietnam, raw materials are not always available easily and manufacturers in several industries rely on imports to produce goods. In fact, 75-80% of electronics components, 85-90% of pharmaceutical raw materials and 70-80% of textile and plastics raw materials come from China.

Comparatively, India has strong raw material production capacity. The country is the largest manufacturer of cotton and second-largest manufacturer of steel globally. Therefore, availability of raw materials is easy for various industries.

In Mexico, on the other hand, several raw materials produced locally are used in its domestic manufacturing sector; these include metals, minerals, resins, timber, gems, etc. Mexico is among the Top 10 producers of metals such as copper, silver, gold, lead and zinc worldwide. It has a large mining sector. Countries such as the United States, Canada, and several European nations import metals, minerals, ore and gemstones from Mexico. The country has abundant forests with different types of wood and naturally occurring fibers and resins. Companies signed up with the Maquiladora IMMEX program may enjoy the benefits of importing raw materials to Mexican manufacturers and consider sourcing Mexican material supply chains.

Companies believe that diversifying the sourcing portfolio from China (either nearshoring or offshoring) will help address challenges, whether in supply chain, logistics or availability of raw materials. Mexico, India, and Vietnam are undertaking initiatives and implementing policies that will facilitate their emergence as the new hub for manufacturing. From increasing adoption of technology to relaxation of FDI norms and implementation of reforms in land acquisition, the three are locked in a race to win the mantle. However, based on the factors mentioned above, and among the other up-and-coming sourcing hubs, Mexico is steadily catching up with the alternative sourcing giants in the world.

 

ORIGINAL SOURCE https://www.sdcexec.com/sourcing-procurement/sourcing-solutions/article/21747630/aranca-china-plus-one-an-emerging-supply-chain-diversification-strategy

 

/by
, , ,

Así es como el Bajío busca convertirse en el referente para América Latina

El Bajío cuenta con 157 parques industriales y busca convertirse en un referente para América Latina impulsando el pensamiento creativo en todas las industrias.

En los últimos 20 años, el Bajío mexicano ha mostrado su competitividad en diversas industrias como la aeroespacial, automotriz, biotecnología, investigación y educación, ante esto el proyecto El Gran Bajío, conformado por empresarios e innovadores de Querétaro, Guanajuato, San Luis Potosí, Aguascalientes, Zacatecas y Michoacán buscan posicionar a la región como una de las más importantes en América Latina.

“Y es que así como Silicon Valley impulsó el pensamiento exponencial, los nórdicos un pensamiento colaborativo y los japoneses un método de 5S, el Bajío se está convirtiendo en un referente del pensamiento creativo en Latinoamérica“, declaró Federico Quinzaños, Presidente y Fundador de El Gran Bajío en entrevista para Forbes México.

El proyecto El Gran Bajío busca impulsar un ecosistema de pensamiento e innovación para fortalecer el desarrollo de la región mexicana evolucionando a industrias como: la aeroespacial, farmacéutica, movilidad, energías limpias, tecnología y otras más, de la mano de empresarios, innovadores, ejecutivos de negocios y emprendedores.

“El tema de El Gran Bajío es cómo evolucionar a una nueva era; cómo evolucionar hacia un nuevo panorama de nuevas industrias porque estamos en una nueva era y tenemos que entender cómo hacer una transición de la industria automotriz a la industria de la movilidad; cómo sacar de las tecnologías de las tradicionales a la 2.4; de la aeronáutica a la aeroespacial, así como impulsar las industrias creativas y energías limpias”, añadió Quinzaños.

No te pierdas: Inversión de empresarios en sector turístico es clave para su recuperación

Así mismo el directivo aseguró que si bien El Gran Bajío inició con el apoyo de empresarios ya se le han sumado innovadores, empresas globales, ejecutivos de negocios y startups formando un ecosistema con ejecutivos de todos los niveles e industrias que generen una nueva era para la región.

“Iniciamos con los grandes empresarios de la región pero se nos fueron sumando los innovadores que están facturando arriba de los 15 millones de dólares al año; son sólidos, están exportando y tienen alianzas en el extranjero y patentes. En un tercer nivel están las empresas globales y tenemos más de 4,400 en la región de 80 países que han decidido depositar su inversión aquí en El Bajío: es evidentemente que están viendo algo y la cuarta son los ejecutivos de negocios”.

Federico Quinzaños 2
25 de junio 2021. Foto: © Cortesía El Gran Bajío

Actualmente el Bajío cuenta con 157 parques industriales, 100 centros de investigación, más de 250 universidades, 76 viñedos, industrias consolidadas como la aeronáutica con 90 empresas, 800 firmas relacionadas con la industria automotriz y 12 armadoras de autos.

“El Bajío durante 20 años ha tenido una estrategia muy interesante de posicionamiento enfocada en crear y desarrollar. Se ha destacado contra otras regiones en México porque tiene un pensamiento creativo porque ha pasado de tener una producción y servicios muy básicos a generar industrias como la aeronáutica, automotriz y tecnología. Hoy tenemos 157 parques industriales, 100 centros de investigación, más de 250 universidades y 100 centros de alta especialización”.

Lee: Sectur digitalizará los 132 pueblos mágicos de la mano de Google

El Gran Bajío cuenta con cinco agencias internacionales para conectar proyectos y negocios nacionales con agencias globales, además de tener capacitación y guía por parte de Singularity University

Quinzaños agregó que actualmente Querétaro se ha enfocado en reforzar la industria aeroespacial, mientras que Aguascalientes ha optado por impulsar la industria de movilidad y en tanto, Guanajuato y San Luis Potosí se han centrado en el sector agroindustrial que está transitando hacia la biotecnología.

“Más que el tema de industrias El Gran Bajío tiene que ver con un tema de mentalidad: ¿cuál es la que estamos compartiendo? Hoy estamos impulsando el pensamiento creativo“, destacó Quinzaños.

 

FUENTE FORBES

/by
RAIL FREIGHT TRAINS
, ,

Rail merger is a key to economic growth, supply chain security

 

BY JEAN-JACQUES RUEST AND PATRICK OTTENSMEYER, OPINION CONTRIBUTORS 

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

/by
, , , , ,

The Case for a Pan-American Manufacturing Ecosystem by Bindiya Vakil, Tom Linton, and Dale Rogers

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

/by
, , ,

Peso expected to remain stable amid Mexico midterm elections – official

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.

/by