Mexico increasingly attractive to US shippers, manufacturers

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Economic growth in Mexico has attracted the attention of many US manufacturers and shippers looking to nearshore or to take advantage of Mexico’s improving transportation networks and young, educated workforce. It seems that Mexico and the US share more than one border.

“Many companies that went to China, Thailand or Vietnam are considering bringing their investments back to North America,” said Kenneth Smith Ramos, partner at Agon, a full-service antitrust and regulatory advisory firm in Mexico, the international firm at the Development helps strategies to deal with the country’s regulatory and market complexities.

“Because of these different elements like USMCA, lower labor costs and skilled workforce, we see Mexico becoming a very attractive location for this investment.”

Ramos, who previously served as Mexico’s chief negotiator for the modernization of NAFTA that led to the signing of the agreement between the United States, Mexico and Canada, spoke to Mark Vickers, Reliance Partners’ executive vice president of international logistics, about Mexico’s rising economic and trading status.

Agon and Reliance Partners jointly have pre-vetted relationships with 3PLs that operate free trade zones (FTZs) and bonded facilities in their warehouses. These groups help shippers bring products into Mexico by taking advantage of the tax deferrals that Mexican free trade zones and bonded warehouses offer.

“It’s the right time, especially when companies around the world are really taking nearshoring seriously as companies are coming back home,” Ramos said when asked if shippers should consider venturing into Mexico.

China remains the US’s leading trading partner, but not as strong as many assume. Mexico and Canada have joined China in a close race for pole position. In fact, Mexico only held the top position last April.

It then fell to third place before overtaking Canada in January to become the United States’ second-biggest trading partner as trade with the US rose 17% year over year to $56.9 billion. In comparison, China’s trade with the US rose 14% to US$59.2 billion in January; Canada stood at $56.8 billion.

“Mexico has a market of 127 million people. We have all been hit by the economic crisis, but as the US economy starts to grow, the Mexican economy is also growing because we are very integrated,” Ramos said, adding that he expects the Mexican economy to grow this year 4 % will grow .

Mexico’s economy began to diversify after the passage of NAFTA in 1994, when Ramos noted the advanced manufacturing in sectors such as automotive and aerospace that have encroached on the country in recent years.

He said these developments had greatly improved the skills of Mexico’s younger workforce, noting that they could not simply be categorized as cheap labour.

The influx of trade, foreign investment, and federal and state funding has created a kind of competition between Mexican states. Ramos said the central Mexican states are catching up with their northern neighbors on an uptick in advanced manufacturing. In fact, he described Guadalajara, in the state of Jalisco, as “Mexico’s Silicon Valley” because of its burgeoning software technology sector.

Since NAFTA, significant highway and rail infrastructure projects have been implemented across the country. And with USMCA, Mexico has even more plans in the works, as Ramos said the goal is to strengthen its intermodal port and rail operations.

With the advent of nearshoring and increasing cross-border trade, now is an optimal time to take advantage of what Mexico has to offer.

However, it is best to enter the market with a trusted partner.

“It’s important to work with someone local in Mexico who understands the rules at the federal and state levels … to help coordinate all of the logistical, legal and regulatory considerations so they can cut costs without having to worry about it.” how Mexico works,” Ramos said. “Working with a company like Agon, in partnership with [Reliance Partners]we are able to reduce costs to a level that makes investing in Mexico more profitable and successful.”

Reliance Partners, a proud partner of Agon, not only specializes in cross-border and international usage-based insurance in North America, but also provides international business consulting services.

To ensure all of their bases are covered, shippers should consider Reliance Partners All-Risk, Shipper’s Interest Cargo Insurance as part of their Borderless Coverage program. From the moment of pickup to final delivery, this coverage protects against cargo theft and damage, regardless of mode of transport.

Vickers said most shippers don’t realize they can’t get cargo insurance in Mexico or mistakenly assume their US cargo insurance extends to Mexico.

But with an all-risk, Shipper’s Interest policy, coverage for high-value Mexican and international shipments can be secured on a per-shipment or per-project basis.

Freight brokers who have historically refused shipments of cargo to Mexico can now serve shippers with confidence with this policy. A network of trusted Mexico-based carriers, along with good risk management processes, cargo insurance and world-class shipment visibility, is exactly what global shippers skeptical about entering the Mexican market want to hear.

Click here to learn more about Borderless Coverage’s consulting services.

More from Reliance Partners:

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All-risk coverage, high-visibility technology that’s making waves in Mexico

Register today for the Future of Supply Chain #FOSC22

The leading voices in the supply chain are coming to Rogers, Arkansas, May 9-10.

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