Mexico frantic to diversify export markets for some reason

He loves me, he loves me not

He loves me, he loves me not

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 »

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Recent and upcoming investment in Mexico

Information collected from media reports over the past month:

  • Glass: Mexican glass manufacturer Grupo Millet reported plans to construct a new production plant in the southeastern state of Yucatan. The US$70 million site will produce architectural glass for export to the United States and elsewhere in Latin America. (El Financiero, January 25, 2017)
  • Casual dining: Mexico’s leading casual dining franchise operator Alsea plans investment of approximately US$190 million to open a record number of new locations across its portfolio in 2017, the company reported. Plans include some 250 new stores, in formats such as Starbucks, Burger King, Domino’s Pizza, Chili’s and others. (Reforma, January 24, 2017)
  • Technology: U.S.-based Deloitte Consulting inaugurated a regional service delivery center in the central Mexican state of Querétaro. The US$10 million center is planned to provide development, testing, support and maintenance services for the firm’s application maintenance, enterprise resource planning (ERP) and IT consulting clients throughout the Americas. (El Economista, January 25, 2017)
  • Natural gas: Mexican fuel distribution company Grupo Energéticos (Energex) plans to build four service stations to offer vehicular natural gas in the country this year, the company reported. The US$4 million project will provide compressed natural gas for vehicular use as an alternative to conventional gasoline, which has risen sharply in price during the current year. (Reforma, January 23, 2017)
  • Energy: Spanish energy infrastructure developer Iberdrola will invest approximately US$600 million to construct an electricity generation plant in the northeastern state of Nuevo León, the company reported. The combined cycle plant is planned to be powered by natural gas. (Mundo Ejecutivo, January 19, 2017) Read the rest of this entry »

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Baja California is a swell place to visit

CactusRepeat visitors to this space will know that this is not a travel blog.  We are much more likely to discuss natural gas pipelines than to wax about resorts and yoga on the beach at sunrise, preferring to leave those complicated topics to skilled specialists such as Cancun Canuck and Mexican at Heart.  Nonetheless, tourism is one of the most important sectors of the Mexican economy, so it is fair game.  With this in mind, we took advantage of the recent holiday period to head up to the state of Baja California Sur to do some research on two critically important market sectors: fish tacos and beer.  Our fieldwork revealed that Baja is a great place to visit!  And along the way, we also observed some interesting quirks about the local economy. Read the rest of this entry »

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Recent and upcoming investment in Mexico

Information collected from media reports over the past month:

  • Gasoline: Mexico’s Energy Regulatory Commission estimates removal of price controls on gasoline and diesel in 2017 will stimulate up to US$16 billion in new investment. Major projects are expected in new service stations, transport pipelines and storage infrastructure. (Reforma, December 22, 2016)
  • Recycling: The Mexico City municipal government published a tender for the first of two plants planned to use solid waste from the city’s landfills as fuel to produce electricity. Officials estimated approximately US$3.5 billion in investment will be required for the total project, which is intended to provide electricity for the local Metro public transport system. (El Universal, December 13, 2016)
  • Rail: Mexican mining conglomerate and rail transport operator Grupo Mexico plans investment of approximately US$431 to support the operations of its rail transport subsidiaries Ferromex, Ferrosur and Intermodal, the company reported. Upgrades include acquisition of new locomotives, replacement of rail and ties and other infrastructure improvements. (Outlet Minero, December 14, 2016)
  • Retail: Japanese clothing and home products retailer Miniso is preparing to open its first store in Mexico before the close of 2016 via investment of US$3 million, the company’s Mexico franchise operator reported. The franchisee projects opening up to 100 Miniso stores in Mexico over the next five years. (Reforma, December 13, 2016)
  • Metal forming: SPM Auto Parts, a joint venture between Japan’s Mizuno Tekkosho and Korea’s Sunil Dyfas, inaugurated a new production facility in the northeastern state of Nuevo León. The US$16 million plant will produce precision screws and bolts for regional automotive OEMs such as KIA, Nissan, Honda, General Motors and Toyota. (Notimex, December 7, 2016)
  • Financial services: Spanish financial services multinational Grupo Financiero Santander plans investment of approximately US$750 million in Mexico operations over the next three years, the company announced.  Resources will support upgrading of software and systems, retail banking branches and introduction of new products, among other areas.  (Expansión, December 8, 2016)
  • Food processing: Mexican industrial miller and tortilla producer Gruma announced plans to build a new production facility in the southeastern state of Puebla. The US$50 million site is planned to produce tortillas and tostadas under the Mission brand. (Reforma, December 1, 2016)
  • Automotive: Korean auto parts maker Hanwha Advanced Materials inaugurated a new production plant in the northeastern state of Nuevo León, the state government reported. The US$20 million site will produce components for a new Kia Motors OEM manufacturing facility in the area.  (Milenio, December 1, 2016)

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South Korea and Mexico eye trade pact as Trump looms

Thanks to BDP Managing Partner José A. Jiménez for contributing the following post

mexico-koreaNow 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 »

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