US-Mex­ico fall­out could bring trade op­por­tu­ni­ties to other coun­tries

DEMM Engineering & Manufacturing - - NEWS -

Cur­rent anti-Mex­ico rhetoric from the United States gov­ern­ment in­cludes Pres­i­dent Trump’s call to the US au­to­mo­tive in­dus­try to dis­man­tle its Mex­i­can as­sem­bly chains or face high duty taxes on re­turn­ing fin­ished prod­ucts to the US. This stance could cost Mex­ico many trade op­por­tu­ni­ties, ac­cord­ing to Atra­dius.

Mark Hoppe, man­ag­ing di­rec­tor, ANZ, Atra­dius, said, “Trade threats like this are more se­ri­ous than threats of wall-build­ing and can cause wide­spread eco­nomic dam­age. How­ever, this could also mean a huge trade op­por­tu­nity for Mex­ico.”

Since the North Amer­i­can Free Trade Agree­ment (NAFTA) was en­acted in 1994, trade be­tween Canada, the US, and Mex­ico has grown ex­po­nen­tially. This growth is largely due to the re­dis­tri­bu­tion of re­sources away from Mex­ico’s pri­mary trad­ing part­ners pre-NAFTA.

Hoppe said, “If built, the wall could let Mex­ico fur­ther di­ver­sify its ex­port des­ti­na­tions and re­duce its overde­pen­dence on the US for its for­eign trade. With more than 120 mil­lion con­sumers in Mex­ico, this mar­ket di­ver­si­fi­ca­tion pol­icy could of­fer sup­pli­ers from other coun­tries op­por­tu­ni­ties to com­mer­cially pen­e­trate one of the Latin Amer­i­can mar­kets with the most com­mer­cial po­ten­tial.”

Mex­ico is part of the G20 and the Or­gan­i­sa­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment (OECD), and has greater eco­nomic sta­bil­ity than many other Latin Amer­i­can coun­tries. It also has a pop­u­la­tion of 120 mil­lion peo­ple, about half of whom are un­der 30 years old, a key in­di­ca­tor of a grow­ing, emerg­ing mar­ket. Mex­ico’s eco­nomic per­for­mance also tells a promis­ing story: GDP growth slowed down in 2016 but still in­creased by two per cent; the gov­ern­ment deficit is at 2.6 per­cent of GDP; and pub­lic debt at 50.2 per­cent.

Re­cent months have seen an ac­cel­er­a­tion of the ne­go­ti­a­tions aimed at re­new­ing and ex­tend­ing the 2000 free trade agree­ment be­tween Mex­ico and the Euro­pean Union. There is also a pos­si­bil­ity of free trade agree­ments in the sub-re­gional bloc of Mer­co­sur (com­pris­ing Ar­gentina, Brazil, Paraguay, and Uruguay) and Asia Pa­cific. Mex­ico is also dis­cussing bi­lat­eral deals with Aus­tralia and New Zealand, two im­por­tant food- ex­port­ing coun­tries.

Hoppe said, “The main in­vest­ment op­por­tu­ni­ties in Mex­ico pri­mar­ily con­cern the en­ergy sec­tor, both for the ex­plo­ration and ex­ploita­tion of Mex­ico’s huge off­shore oil fields, and for the de­vel­op­ment of re­new­able en­er­gies. De­mand for en­vi­ron­men­tal tech­nolo­gies and ser­vices in Mex­ico is also grow­ing. Con­struc­tion and pub­lic works of­fer an­other in­vest­ment op­por­tu­nity. De­spite threats from the US, the au­to­mo­tive in­dus­try re­mains a key sec­tor. Many car man­u­fac­tur­ers have fac­to­ries in Mex­ico, mak­ing the coun­try the sev­enth-largest car man­u­fac­turer in the world.”

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