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Mexico is US’s largest trading partner in 2023’s 1st quarter

Mexico was the United States’ largest trading partner in the first quarter of 2023, with exports of US $115.5 billion, according to figures released by the U.S Census office on Thursday.

​​Figures for Q1 2023 showed that total trade between the two countries (a combined total of imports and exports) was US $196.7 billion, an 8% increase over the same period in 2022.

In March alone, goods from Mexico accounted for 16.1% of U.S. imports — beating out Canada (15.5%) and China (10.1%) — for a total of US $42.8 billion. The figure represents annual growth of 5.9%.

China has topped the list in Q1 of each year since 2009 — with the exception of 2020, when the Covid-19 pandemic saw Mexico take the top spot. But in March, China saw exports drop 35% to US $30.8 billion.

Last year’s top whole-year trading partner, Canada, saw a 7.2% year-on-year drop in exports to the U.S market in March, registering only US $37.6 billion.

U.S. exports to Mexico also rose 2.6%, to US $29.3 billion in March — despite a year-on-year fall of 0.4% compared to 2022. Despite the rise, the U.S. still maintains a US $97 billion trade deficit with Mexico, or 12%, said the Economic Commission for Latin America. This figure has contracted considerably, however, previously standing at 39% in 2020.

The recent “super peso” and weakened U.S. dollar have created favorable conditions for export, but credit analysts Moody’s warned that there was some uncertainty surrounding global solvency for financial institutions, as well as volatility in the bond market that could lead to further fluctuations in exchange rates.

Mexico has become a nearshoring hub, with businesses from Asia rushing to set up operations in the country, taking advantage of the favorable investment conditions and proximity to the North American markets. This has led to a boom in manufacturing, especially in the automobile industry, but also increasingly in data, computing and home electronic goods, which are often exported to the United States.

Top exports from Mexico in 2023 included refined petroleum, auto parts and accessories, office machinery and integrated circuits, according to the Observatory of Economic Complexity.

 

Source: Mexico News Daily

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Nearshoring and Beyond: Hot Topics for Automotive Companies Operating in Mexico

As manufacturing in Mexico returns to pre-pandemic levels, several recent legal developments may affect those operations. Manufacturers, particularly those in the automotive industry, need to consider new Mexican labor regulations, the recent interpretation of the United States-Mexico-Canada Agreement´s (USMCA) Automotive Rules of Origin, and new requirements concerning transparency of ownership.

Recovery of Automotive Manufacturing in Mexico

North American manufacturers of sophisticated and highly-regulated products that are to be delivered Just-in-Time, such as automotive or aerospace products, benefit from reliable, close-to-home suppliers.

In the USMCA manufacturing region, Mexico has a number of competitive advantages to manufacture labor intensive and sophisticated products—namely several decades as part of North America’s complex supply chains, significant trade promotion programs, and a large number of Free Trade Agreements to name a few. Such advantages are reinforced through USMCA’s market access certainty to both the U.S. and Canada.

Although Mexico’s economy faced extreme difficulties due to the COVID-19 pandemic as there was no governmental program to boost its economy, the country’s resilient manufacturing sector already has surpassed pre-pandemic levels. This boost in manufacturing can be partially attributed to nearshoring of manufacturers into Mexico—many in the automotive industry—in order to be closer to the U.S. and Canada markets. This nearshoring trend has triggered the arrival of new foreign direct investment (FDI).

The Mexican Ministry of Economy recently reported that Mexico captured US$35.29 billion in FDI during 2022, up from $31.54 billion in 2021. Manufacturing reigns as the most influential sector in that increase, accounting for 36% of the country’s total FDI, with the U.S. and Canada standing out as Mexico’s two main trading partners. The Ministry of Economy also noted that automotive part manufacturers were among the largest recipients of foreign investment.1

According to 2022 data, the FDI in the automotive manufacturing sector has not yet recovered to pre-pandemic levels. However, there are reasons to be optimistic that this will change in the near future due to the USMCA’s market attractiveness and the natural advantages of manufacturing in Mexico, such as its highly specialized labor force and its geographic proximity to the U.S.

In anticipation of Mexico’s continued growth as a manufacturing hub for U.S. automotive companies, the following are recent updates and trends in Mexico that your company needs to consider when relocating or operating in the country.

Increase of Labor Benefits

The Lopez-Obrador administration has pushed for increasing labor benefits to employees in Mexico, which investors in Mexican manufacturing should take into account when making their budgets and economic projections. The following are the most recent and relevant changes to existing labor rules:

Vacations

Effective January 1, 2023, the Federal Labor Law increased vacation days in Mexico. Before this amendment, employees had a minimum of six (6) working days’ vacation period per year of service. The new rule increases the period to a minimum of twelve (12) working days per year of service, which will grow by two (2) days per year up until the employee is entitled to twenty (20) working days vacations. As from the sixth year of service, the period shall increase by two (2) working days per every five (5) years of service.

Minimum Wage

Beginning January 1, 2023, the minimum wage for Mexican employees increased 20%. Even though most employees receive more than minimum wage as a starting salary, this increase is expected to impact even Mexican companies that pay above minimum wage, as they commonly index salaries to a minimum wage reference. The effect of rising minimum wage on salaries will become clearer when the common yearly salary revision takes place.

Pension Funds

According to a 2020 amendment to the Mexican Social Security Law, companies’ mandatory contributions to one of the components of employees’ pension funds shall progressively increase from the current 3.15% of the employee salary to 11.87%. This increase shall occur progressively from 2023 up until 2030; during 2023, employers’ contribution will range from 3.15% to 4.24%, depending on the employee’s salary.

Mandatory Legitimization of Collective Labor Contracts

May 1, 2023 is the maturity date for all existing collective bargaining agreements across Mexico to be legitimized through the express support of a majority of the workers covered by the relevant agreement (following a carefully staged process).  Legitimization efforts have long been underway as per the relevant rules issued May 1, 2019. However, it is expected that 80% to 90% of current collective labor contracts will not meet the legitimization threshold and, consequently, will be automatically terminated.

When such agreements are terminated, individual labor contracts will be automatically created for every worker; said individual contracts will incorporate the terms contained in the then-terminated collective labor contracts that are superior to the minimum standards established by Mexican laws.2 This measure intended for individual workers to continue under the same labor conditions, though no longer under a collective labor contract.

The lack of a collective labor agreement—the long standing status quo in the country—likely will bring restlessness in the workforce. Though workers’ current rights will be preserved by the individual labor contracts, Mexican workers will need to decide whether to enter into a new collective labor agreement sooner rather than later.

 

Source: The National Law Review

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Chihuahua moves forward in electromobility

CHIHUAHUA – Given the current global restructuring of value chains, nearshoring represents a growth opportunity for the coming years, and the state of Chihuahua is looking to diversify and lead in the industry.

Although Chihuahua is making progress to position itself as a pioneer in electromobility, challenges remain, such as the development of public policies, infrastructure, labor force, incentives and greater promotion.

Experts explained that given the current global restructuring of value chains, nearshoring represents an opportunity for growth in the coming years, which is why the state seeks to diversify and lead in the electromobility industry.

For Francisco González, president of the National Auto Parts Industry, the generation of talent and the development of infrastructure at a national and local level to detonate this type of projects are priorities that states must keep in mind, because with the arrival of new companies and future requirements (such as charging stations) they will be necessary.

“The concrete challenges are to have a clear idea of the development of people, the development of talent for electromobility. To have good universities, good preparation. What we require at the state level is the facilitation of charging stations, having the possibility of infrastructure and greater accessibility,” he said.

In an interview with El Economista, María Angélica Granados Trespalacios, head of Chihuahua’s Department of Innovation and Economic Development, explained that the local government is developing short, medium and long-term plans for infrastructure.

In energy matters, she recalled, the State Agency for Energy Development was recently created to work with the private sector to develop the infrastructure required by new companies; Chihuahua is the city with the highest demand.

 

Source: Mexico Now

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JPMorgan Says Bright Mexico Outlook Contrasts With Brazil Gloom

Tesla plant, high demand boost optimism on Mexican economy
Bank says high interest rates will drag down Brazilian economy

 

Latin America’s top two economies are moving in opposite directions, with export and investment growth propelling Mexico while Brazil is set to fall into recession, according to JPMorgan Chase & Co.

“Mexico is the silver lining in Latin America as it remains on a strong footing, on the back of resilient external demand, domestic consumption, and the catching up in fixed investment,” JPMorgan economists including Cassiana Fernandez and Gabriel Lozano wrote in a report published Monday.

In contrast, “Brazil, which was one of the first economies to tighten policy, will also be among the first to see a recession,” the economists wrote.

Mexico’s Dec. Fixed Investment Rises Up Most in 15 Months

Analysts became more optimistic about the Mexican economy after Tesla Inc. announced the construction of a new factory in Monterrey, an industrial city near the border with Texas, that’s likely to bring in billions of dollars of investment. Meanwhile, Brazil’s worse-than-expected end to 2022, when the economy shrank 0.2% during the final quarter, raised concerns that high interest rates will be a big drag on growth this year.

The economists don’t see Brazil’s central bank cutting rates “anytime soon,” unless there’s a deeper fall in economic activity.

“Looking ahead, we expect some economic recovery during the year – aided by a more solid external outlook particularly with China re-opening strength – but with growth remaining below potential up until the end of 2024,” they wrote.

On Monday, Mexico’s statistics institute reported that gross fixed investment grew 9.4% in December compared to the previous year, the fastest expansion since Sept. 2021. Shipments of vehicles, one of Mexico’s main exporting products, grew over 14% in February to 230,484 units, the institute said.

Source: Andrew Rosati, Bloomberg 

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Baja California, líder de inversión nacional

El estado de Baja California se ha destacado por su aumento en la llegada de inversión extranjera y nacional. Su posición geográfica, es una de las ventaja que han observado diversas empresas multinacionales, mismas que han decidido establecer sus operaciones de manufactura, logística y distribución en la región.

De acuerdo con el “Panorama Económico de Baja California”, realizado por la Secretaría de Economía e Innovación del estado, al cierre del 2021, el crecimiento de la actividad industrial fue de 12.7% en la entidad, hecho que la posicionó como el primer lugar de la frontera norte. Mientras que, al primer mes del 2022, el sector de la construcción creció 12.1 por ciento.

De igual forma, la dependencia, detalló que al 3T2021, los sectores con mayor crecimiento fueron las manufacturas (19.2%), el comercio (18.2%) y la minería (13.9%).

Inversión Extranjera Directa en Baja California 

En cuanto a la captación de Inversión Extranjera Directa (IED), la entidad se posicionó durante el mismo periodo, en el tercer lugar a nivel nacional, con 7%, solo por debajo de Nuevo León con 12.7% y CDMX con 16 por ciento.

“Se trata de un incremento del 85% respecto a 2020. De esta, el 45.7% se destinó al transporte de gas natural por ductos, seguida por la fabricación de automóviles y camiones (9.8%). Cabe mencionar que 8 de cada 10 dólares invertidos en B.C. provinieron de Estados Unidos (82.4%)”, se detalla en el documento.

Por su parte, la Secretaría de Economía Federal, destacó que la captación de IED del estado fue de 2 mil 212.8 millones de dólares, del cual 52.8% correspondió a nuevas inversiones.

Cabe destacar que la cifra total de IED, significa un récord para la entidad, ya que es la más alta registrada en 20 años.

Adquisición de vivienda en Baja California 

Otro de los sectores que han mostrado crecimiento en el estado, ha sido la adquisición de vivienda, principalmente por ciudadanos estadounidenses, que ante el aumento de costos en su país, buscan comprar alguna propiedad en la entidad.

El Comité de Turismo y Convenciones de Tijuana (Cotuco), explicó que el 40% de los inmuebles adquiridos en Tijuana, corresponden a personas del sur de California.

Por lo que en 2021, este sector dejó una derrama económica de 420 millones de dólares. Ante esto, Kurt Honold, secretario de Economía e Innovación de Baja California, informó que se busca continuar  impulsando este sector para que ciudadanos americanos, comiencen a comprar propiedades en la ciudad y no solo en las costas.

Arturo Gutiérrez Sánchez, presidente de Cotuco, explicó que los rubros económicos que crecieron durante la pandemia fueron el desarrollo habitacional, construcciones y turismo de salud.

 

Fuente: Monica Herrera, Inmobiliare

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Investing in Mexico: Seeing Opportunities in Industrial and Hotel

At the 2022 Spring Meeting in San Diego, panelists shared some of the opportunities they see in Mexico, while addressing some of the perceived challenges, both real and imagined.

Blanca Rodriguez, director of finance and capital at Marhnos Inmobiliaria, said that Mexico’s REITs, known as “FIBRAs”, help provide liquidity to the market for those looking to transact. “’How am I going to exit from these investments?’ is no longer a question,” said Blanca. “An institutional investor from anywhere in the world is welcome.”

Gonzalo Robina, CEO of FIBRA UNO, a real estate investment trust, said that many of the global events of the last decade are benefitting Mexico. Manufacturers are returning to Mexico to China and elsewhere. Even some of China’s companies are creating manufacturing facilities in Mexico to be closer to the North American customer base, said Gonzalo.

Federico Martin del Campo said that Mexico’s workforce is fairly well educated in engineering and other trades but at a lower cost.

Rodriguez said that some parts of Mexico have become destinations for “digital nomads” who can work from anywhere with Internet access.

“You don’t see too many cranes,” said Erez Cohen I, co-CEO of Urbium Property Group. “So we’re not worried about overheating or overbuilding.”

“Exchange rates have been stable, but with some of the hotels, you are getting paid in dollars with your expenses in pesos,” said Robina.

Del Campo said that in the past industrial has been somewhat recession proof as you can cut back on labor by reducing hours or shifts but you are still paying your full rent at least until the end of the lease.

Rodriguez said she sees an opportunity in the future for public private partnerships for infrastructure.

Cohen said Mexico is also home to six different unicorns, a term for tech companies with a valuation of more than $1 billion. He also sees a sees a nearly 10 million home deficit in terms of housing Mexico’s population, larger per capita than the United States.

Robina said that in the office space, most new development is the equivalent of LEED certified and energy efficient. Del Campo said that lenders are also interested in giving favorable financing to ESG compliant projects.

In response to an audience question, Carlos de Icaza, a partner with law firm Creel, García–Cuéllar, Aiza y Enríquez, said that there is some exaggeration of the issue of eviction in Mexico where ultimately it is a country of laws and courts where if you don’t pay, you eventually leave, particularly at the middle to higher income levels.

 

Source: Urban Land

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Mexico’s Border Bonanza Shows U.S. Importers Looking Outside China

Mexico’s economy appeared to limp into 2022. But factory-filled states along the U.S. border are thriving, with the country’s exports surpassing $80 billion in the first two months of the year.

Due to strong U.S. demand and a revival of the auto sector, investors are moving in and banks are getting ready to finance new projects. Exports of non-petroleum goods grew almost 27% in February compared with the year earlier. If you’re interested in cars, toys, or medical supplies, there’s probably a company ready to ship through the world’s busiest border.

Mattel, the maker of Barbie dolls and Hot Wheels toy cars, announced in mid-March plans to make Mexico the site of its biggest plant in the world, a $47 million consolidation and expansion project that includes a 200,000-square-foot facility with some 3,500 workers.

Mexico’s Exports

The five Mexican states responsible for the biggest chunk of exports are all along the border. Monterrey-based Grupo Financiero BASE, which does half of its lending in the state of Nuevo Leon bordering Texas and includes among its clients everyone from orange growers to budget mobile-phone makers, expects that exports will grow another 6% in 2022.

“It’s a year of big opportunities,” Julio Escandon, BASE’s chief executive officer, said in a recent interview. “Because of the pandemic and probably the situation in Ukraine, the supply chain that comes from Asia is moving to Mexico.”

There’s a whole set of businesses that provide secondary projects, such as the makers of covers for jacuzzis or the seats of autos. Cars were scarce in part because of chip shortages that pushed up prices, but in February exports had grown by 32% from the year before, suggesting some of the worst missing-parts problems had been resolved.

Big Chunk

Battery maker Contemporary Amperex Technology is considering a Mexico plant to supply Tesla, though the deal is not yet closed. A series of votes at car production plants that slotted in new union representatives also suggests that labor conditions might become fairer, under pressure from the U.S. to respect trade agreement rules.

The rest of the country has been more slothful in its recovery, with a 2% expansion expected for 2022 according to a Bloomberg survey, but Escandon’s projections for the northern states are more optimistic.

“The demand from the United States does not stop growing. There’s an expansion of plants, but the existing warehouses are not enough for this level of growth,” he said.

A Logistical Nightmare

Climbing Congestion Costs | A measure of U.S. supply-chain pressures rose to a record, adding to already stiff inflationary headwinds from logistics amid dwindling warehouse space and unprecedented inventory costs. The Logistics Managers’ Index advanced for a third straight month in March, reaching 76.2 from 75.2 in February. “Continued inventory congestion has driven inventory costs, warehousing prices, and overall aggregate logistics costs to all-time high levels,” the report stated. “This is putting even more pressure on already-constrained capacity.”

Source: Bloomberg

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¿Qué beneficios brindan Parques Industriales a usuarios?

En Bienes Raíces tenemos un dicho – Location, lotacion, location — y es que es lo más importante al tomar una decisión respecto RE es evaluar siempre la ubicación. En el sector Industrial, las empresas se encuentran con la opción de ubicarse dentro o no, de un Parque Industrial, en el norte, en el centro o en el sur del país. 

Por eso es necesario entender que es un Parque Industrial y que beneficios brinda a los usuarios localizarle dentro de uno.

Los Parques Industriales son complejos que otorgan espacios a empresas para llevar a cabo sus operaciones en condiciones adecuadas de infraestructura y servicios; y cuentan con una administración a la que se otorga una cuota para su correcta operación.

Estos espacios aseguran que existe una factibilidad adecuada en términos de uso de suelo, sobre todo para organizaciones que no están familiarizadas con los asentamientos urbanos y los procedimientos para regularizarlos; este factor es determinante.

Además los parques industriales, ofrecen servicios in situ para sus clientes, es decir, los inquilinos pueden encontrar instalaciones, permisos y servicios en términos de electricidad, agua, drenaje, luz, gas, seguridad y accesos. Los inquilinos deben formalizar los tramites necesarios para iniciar las operaciones en sus plantas.

Otra ventaja de un parque industrial es usualmente su ubicación, pues buscan tener la mayor conectividad posible, esto significa accesos, carreteras y en algunas ocasiones ferroviarias. 

Dentro de un proceso de arranque de operaciones o reubicación de un proyecto, se deben considerar estos y otros factores clave para que asegurar el éxito de las empresas. NAI Mexico, cuenta con  la experiencia y el personal para acompañar a nuestros clientes en el mercado inmobiliario industrial. Si tu organización esta evaluando o se encuentra dentro de un proceso como este, no dudes en contactarnos.

 

Fernanda Martinez

fmartinez@naimexico.com

Directora Regional para el Bajío

NAI Mexico

 

Luis Miguel Torres

lmtorres@naimexico.com

Sales Associate

NAI Mexico

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Global Market Trends & Predictions for the Year – Mexico & The Caribbean

In 2021, Mexico was NFL season tickets, a Premier League football match, the Met Gala, and a Formula1 race, all rolled into one. The sign said ‘sold out’ and yet global firms kept arriving to the standing room-only country, hoping for admission. Owners of industrial real estate across the country found themselves in the right place at the right time. Most major markets saw historically low vacancy rates ranging from .5% to 5%, as a result of strategic perspective shifts from global players.

Despite the pandemic and rising fuel costs, Mexico was almost perfectly positioned for a record spike in demand for industrial real estate. Some markets saw 40-100% increases in leasing while a lack of inventory required many global operators to delay expansion or new entry for 6-12 months. By Q3 2021, most industrial transactions were registered as new build-to-suit construction, to lease or own. This has required longer lease terms,
averaging 7-10 years, at lease rates which escalated 10-20% during the last 18 months.

Medical, aerospace, and automotive sectors initially slowed during 2020, but rebounded by 2021, while logistics and fulfillment sharply escalated. Scores of new fulfillment operations expanded into Mexico, often leasing more than 100,000 square feet. These range from existing firms to new operators from US, Canada and Europe, as well as a large influx of Pacific Rim-based companies entering Mexico to avoid future tariffs and duties, and US firms reshoring from China.

Office and retail sectors have paralleled the US experience during the last 18 months. Construction has slowed, and land-lords are working to retain tenants and rebalance their portfolios.

The unique selling point of Mexico continues: Labor rates are a fraction of the US market, real estate values and prices are still competitive, and the ability to ship overnight to US markets greatly enhances the competitive advantage. Global industrial operators will turn the corner on 2021 and continue the same pace into 2022, as strategic planners in board rooms in Asia, Europe and the US plan further record investment, and leverage Mexico’s continued strategic advantage as a major industrial platform for all of North America.

If you want to consult the full Global Market Trends & Predictions for the Year by NAI Global, Click Here.

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¿Cómo Seleccionar el Mercado de mi Nuevo Proyecto Industrial?

La selección del destino de inversión de cualquier proyecto industrial ya sea expansión, reubicación y/o consolidación, es el resultado de un análisis que muestra la suma de los factores clave para la operación de la empresa.

Al llevar a cabo cualquier transacción de bienes y raíces: un arrendamiento, una compra-venta y/o un proyecto de construcción a la medida; Existen factores generales a evaluar como la ubicación, los precios, la disponibilidad de mano de obra y la calidad de vida en cada una en las plazas que compiten por el proyecto. 

Sin embargo, es importante recalcar que cada proyecto que se gesta dentro de las organizaciones tiene una identidad singular y por tanto, necesidades únicas a cumplir para poder hacer de la nueva ubicación un centro de utilidades.

El análisis que proviene del área de operaciones es fundamental. Es necesario comprender cuál es el origen del proyecto ya sea un nuevo contrato que se ha ganado recientemente y que exige cercanía al cliente final;  la llegada de nuevas líneas de producción que generan la necesidad de espacio adicional para el almacenamiento de la nueva maquinaria y la que se va reemplazando; una nueva planta industrial derivada del crecimiento del negocio; la consolidación de diferentes puntos de producción y almacenes bajo un solo techo con la finalidad de hacer más  eficiente la operación, o bien una nueva inversión en el país con la finalidad de entrar y posicionarse en el mercado.

Cada uno de los escenarios anteriores requiere que el equipo de Brokerage  realice una profunda evaluación del mercado y de la situación actual del cliente,  que les permita a los tomadores de decisiones la elaboración de un caso de negocios que contenga la siguiente información:

 

  • Las diferencias existentes al operar en las distintas regiones del país una planta de producción y/o almacén, por ejemplo: la frontera vs. la región bajío o el sur.  Estas pueden ser identificadas a través de un estudio que identifique claramente los costos de producción, aspectos clave de logística para el proyecto, las tendencias del mercado de bienes raíces y los aspectos de calidad de vida en cada una de las plazas.

  • Las oportunidades y retos existentes en cada una de las plazas de acuerdo con el ciclo de mercado que atraviesan, es decir; actualmente hay algunos mercados como Tijuana en los que la disponibilidad de Tierra y la disponibilidad de inventario es escasa, mientras que la Región del Bajío experimenta la situación contraria, generando que la alta oferta ofrezca para los usuarios/inversionistas precios sumamente competitivos y la posibilidad de elegir entre edificios existentes o construir uno nuevo.

  • Otro factor decisivo son los actores clave del mercado en cada una de las plazas, tanto del lado de los bienes raíces (oferta) como del lado de operaciones (clientes potenciales, competencia, etc.) con la finalidad de identificar las estrategias y acciones que deberán implementarse para llevar a cabo el proyecto.

  • El costo total de ocupación; este puede ser determinante para la toma de decisiones, sabemos que todo buen estudio de proyecto deberá culminar con un análisis financiero que refleje de manera clara además del monto total de inversión, el costo que representará para el usuario/inversionista la apertura y/o reubicación de su nuevo centro de operaciones, almacenaje y/o distribución.

Toda la información obtenida de los puntos mencionados no debe ser tomada de manera aislada, sino que deberá integrar un análisis profundo que alineado a los planes de la compañía dará como resultado un escenario óptimo para la evaluar y determinar el mercado de mi nuevo proyecto industrial.

 

Si actualmente tu compañía está evaluando algún proyecto de expansión, reubicación y/o consolidación @Fernanda Martínez y @Luis Miguel Torres pueden ayudarte a realizar tu evaluación a través de un análisis de selección y sitio. 

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