Mexico is exceptionally well-placed to take advantage of the USA’s deteriorating relationship with China – but it must invest in its infrastructure, networks and its people if it is to exploit the opportunities. This was the key message given by John Manners-Bell, Founder of the Foundation for Future Supply Chain, at the opening of the TradeHub Summit in Mexico City last week.
Mexico’s existing economic integration with the US economy and its stable political relationship as part of the USMCA gives it huge advantage as the re-shoring and near-sourcing trends take hold. The on-going trade war, export bans on advanced technologies, ethical legislation which prevents US companies from sourcing goods from the Xinjiang region of China, and the fall out from China’s Covid policy have directly resulted in an increase in US-Mexico cross-border volumes. Logistics, trucking and rail companies are ramping up their operations to leverage this upturn in business.
However, as Manners-Bell commented, these volumes are still growing relatively slowly compared to the size of the opportunity. Using data from the Agility Emerging Market Logistics Index, he explained to delegates that whilst Mexico performed well against some metrics, it was lower down the rankings in terms of ‘Digital Readiness’ and ‘Business Fundamentals’. Not only should there be investment in technology but a new generation of logistics and supply chain professionals would need to be trained, regulations simplified, markets liberalized and data digitized. At the same time corruption and cargo crime are systemic challenges which unless addressed will significantly compromise efforts to attract manufacturers to the country.
Speaking at the conference, Manners-Bell concluded by saying, ‘Mexico has significant advantages over many other markets considered as alternatives to China. However, it needs to build the necessary production eco-systems which will provide investors with the confidence to locate their manufacturing in the country. There also needs to be a change of attitude on both sides of the border if Mexico is to prosper from any moves towards the concept of ‘ally-shoring’. Mutual distrust and Mexico’s existing links with China could compromise any future growth opportunities.’
Source: Ti Insights
Author: John Manners-Bell