Now that the United States is loudly breaking up with Mexico on social, Mexico is suddenly on the prowl for hot rebound trade with other markets. This is how it looks from here anyway, with Mexican officials popping up all over the media saying some country or other is going to be a big new market for Mexican exports. The new U.S. administration’s threats to dismantle the North American Free Trade Agreement (NAFTA) are currently stoking the flames of economic terror in Mexico, but we all know that Mexico’s dependency on the U.S. export market has been the stuff of economists’ nightmares for decades. To put it in perspective, the share of Mexico’s annual exports shipped to the USA has not dropped below 79% since some time before 1993, if it ever has. From 1998 to 2001, the concentration of Mexican exports destined for the U.S. market hovered near a truly bloodcurdling 89%. So it’s not like we didn’t know we were exposed to risk from overdependence on one market, but after 25 years of trade-loving U.S. governments, we became accustomed to living in denial. Read the rest of this entry »
Archive for category Trade
Thanks to BDP Managing Partner José A. Jiménez for contributing the following post
Now that the Trans-Pacific Partnership (TPP) has been, for all practical purposes, ditched by U.S. President-elect Donald Trump, a wait-and-see phase has begun regarding what will happen to U.S. foreign trade policy once Mr. Trump assumes power on January 20, 2017 — particularly his threats to renegotiate the North American Free Trade Agreement (NAFTA) with Mexico and Canada, and impose prohibitive tariffs on imports from China. With this backdrop, Mexico and South Korea have pledged to move forward with the trade negotiations begun by the TPP and establish a formal trade agreement between the two countries.
On her visit to Mexico in April 2016, President Park Geun-hye of South Korea and Mexico’s President Enrique Peña Nieto reiterated their support for integration into the then expected TTP and signed a 17-point memorandum of understanding with the aim of strengthening bilateral economic relations. The cooperation agreements signed cover areas such as clean energy, technology, law enforcement, telemedicine and tourism, among others. The two countries further announced two new lines of credit, one for US$1 billion for electrical infrastructure development and another for US$200 million to finance Mexican suppliers of Korean industries. Read the rest of this entry »
The victory of Donald Trump in the U.S. presidential election of November 8, 2016 casts a dark, cold shadow over the relationship between the United States and Mexico. On one hand, Mr. Trump has expressed his opposition to the North American Free Trade Agreement (NAFTA), which we support. Since entering into effect in 1994, this agreement has been implemented painstakingly through tremendous effort by all sides, and has built a trade relationship in which Mexico represented a market of US$267 billion for U.S. goods and services in 2015. Putting up barriers to the Mexican and Canadian markets for U.S. exporters for the presumed purpose of saving jobs in the United States risks destroying many of the jobs this trade has created.
But for Mexicans, the election of Mr. Trump cannot help but be seen as a deeply personal affront. Throughout the campaign, the U.S. President-elect repeatedly expressed disdain and derision toward Mexican immigrants in the United States, which many people in this country take as a personal insult to all Mexicans. Mr. Trump is a crass boor. But the fact that a majority of American voters validated his harshly worded opinions about Mexicans (not to mention Muslims, women and other people) sends a clear and chilling message to Mexico and to the world that the American people share these opinions and values. This stunning revelation will now hang like a toxic cloud over every business meeting, trade mission, trade show and even long-running relationships between business people in the two countries. We can only hope that the intelligence and personal grace of individual business people will help to buffer the damage the election of Donald Trump will do to the U.S.-Mexico relationship. But make no mistake, the resentment is deep, and this cannot be good for our economic and personal relations going forward.
This morning we launched our day like your average cube monkey — hit the coffee nook for some Joe, busted out a glazed donut (one of them cake jobbies, uh huh), checked the sports scores, and pulled up the latest figures on corn imports. As a kid we used to think of “corn” as elotes, or corn on the cob. Working in trade, however, we soon came to learn that the vast majority of corn imported and exported is used as a raw material in the production of animal feed or other food or industrial products. Looking at data from the Economy Ministry (Secretaría de Economía, or SE) on corn imports into Mexico, we noticed that after a strong surge early in the decade, imports dived in 2013 (see chart below). We’re not sure what caused the precipitous dip, but we’ll be sure to look into that over an upcoming donut. In any case, we can see that even though 2015 imports exceeded the previous year by only a small margin, the trend does appear to be on the rise. Read the rest of this entry »
We’re wearing mittens inside the office here at the Mexico Business Blog Global Campus, but chilly temperatures in the black heart of the Mexico City winter are the least of our worries as financial markets plummet and the dollar skyrockets. The peso started off 2015 in the neighborhood of 14.6 to the dollar and continued to inch up throughout the year. Pundits routinely speculated that the dollar would come back down by year-end, but by the second quarter central bank Banco de México (Banxico) was selling off dollars to ease pressure on the peso. When the dollar broke the 17-peso barrier in the third quarter foreheads began to perspire, and now that we’ve surged past 18 pesos to the dollar, the question isn’t when to panic, but how to go about it. Read the rest of this entry »