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Made in Mexico, one of these days

Effective January 20, 2012, Mexico was admitted to the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies.  It may sound like an arcane treaty of interest only to trade policy eggheads, but it actually stands to have concrete impact on some of Mexico’s most advanced manufacturing industries and their foreign business partners.

The Wassenaar Arrangement is an agreement among 41 manufacturing countries to abide by common guidelines intended to enhance transparency and responsibility in the exportation of arms and “dual-use” goods and technologies, which means those which could be used for both civilian and military applications.  For example, a chemical used in plastics manufacturing that could also be used in chemical weapons would be considered a dual-use good.  Participants in the arrangement must each implement their own internal controls and procedures domestically in compliance with the guidelines of the arrangement.  Mexico applied for admission in June 2011, and was accepted as a member after implementing a system of export permits and reporting applicable to arms and dual use goods which entered into effect in October 2011.

What Mexico wants most out of Wassenaar membership is access to lucrative overseas markets for high technology defense and security manufactures.  The country is already a serious player in the international automotive, aerospace and software industries.  Wassenaar membership will open the gateway for leading manufacturers in countries such as the United States to contract with Mexican firms, or establish Mexican subsidiaries, to produce ever more sophisticated products and components using previously restricted technologies.  Mexico’s highly competitive and fast growing aerospace industry, for example, is already among the world’s leading recipients of direct foreign investment in aerospace.  U.S. and European makers of military aircraft or their electronic systems may now consider manufacturing those products in Mexico, and would need to provide sophisticated technologies and invest in production lines and sensitive equipment to do so.  Mexico’s already advanced automotive, electronics, chemical and software industries stand to gain similar opportunities.  In this way, Mexico’s entry into Wassenaar may represent business opportunities for foreign manufacturers of advanced manufacturing equipment as well, since much cutting edge machinery and equipment that will be needed by Mexican manufacturers is not produced locally.

The Mexican government, which has endured withering criticism over the years for the much maligned maquiladora in-bond manufacturing program, has undertaken a serious drive to boost the level of added value of the country’s advanced manufacturing sectors.  On the heels of its accession to the Wassenaar Arrangement, the Economy Ministry has made known Mexico’s intention to pursue additional memberships in advantageous export control organizations such as the Australia Group (control of chemical or biological weapons) and the Nuclear Suppliers Group (non-proliferation of nuclear weapons), as well as to seek key certifications for advanced manufacturing.  Monterrey-based Metalinspec, for example, has taken the initiative by becoming the first Mexican company to obtain NADCAP certification for materials testing for aerospace manufacturers.

We applaud the federal and state governments’ campaign to raise the skill level and sophistication of advanced manufacturing in Mexico.  As Mexico competes against China, Brazil and other emerging economies for investment and manufacturing contracts, raising our level to that of the highest international standards will play an important role in generating more and better jobs in the country.  And if this means we have to buy expensive high-end process equipment from U.S. and European manufacturers along the way, that’s OK too.

If you’d like more information about how Mexico’s participation in the Wassenaar Arrangement could affect your company’s business, drop us a line at info@bdp-americas.com .