For the first half of this year, Mexico has surpassed China as the largest US trading partner.
In billions of dollars
Exports Imports Balance Mexico 160.6 236.0 -75.5 China 72.5 203.0 -130.3
4 Likes
Proximity probably helps the balance with Mexico: sub-assemblies and supplies sent to MX, for assembly in finished products coming back. My hecho en Mexico 2002 Ford Escort had an air conditioner built in Plymouth, Michigan, and the engine was apparently built in Dearborn.
Steve
And reshoring seems to be going on. People have decided China is a risky supplier. OK in normal times but easily disrupted by major event like Covid. Better to bring operation closer to home even if they cost more. But savings on shipping, inventories, and close at hand when problems require discussion all make Mexico a good location.
They are reporting that reshoring is part of the economic slowdown in China–not to mention trade tensions, concerns about Taiwan, cyber infiltrations, security issues, etc.
3 Likes
All you need do is look at the skyrocketed peso/dollar stat over the last year… A whole lot of “persons” (SCOTUS defined) are moving to Mexico.
david fb
2 Likes
What is more interesting is how much of it is controlled by corporate America? Do the Mexicans insists on their own citizens owning a percentage like China did?
I will guess we control a huge swath of the factories outright. I will also venture Mexican citizens are getting into production factories as well in separate corporations. Most of this has been building for a while now.
No, but they do have a history of nationalizing businesses at times. They have announced plans to nationalize their lithium deposits. They recently nationalized a railroad. Pemex was nationalized from Standard Oil years ago.
2 Likes
I think that is perfectly reasonable.
I get it is not liked.
Most of it will not be in anyway nationalized. The US back when Pemex was created was not building factories on this scale in Mexico. This is very different for the Mexicans. It is an acceptance into the industrialized world.
Lulu is searching for that for Brazil as well.
It is a game changer for relations. I think mostly only Mexico is getting entry.
The situation with US owned factories is different. In extraction-based operations, like Pemex or PDVSA, they only need to import generic industry equipment to work the fields.
The foreign owned factories are often dependent on shipments of parts from the US/Japan/Korea to build the finished product. Nationalizing a Ford plant, for instance, will not get them much, if Ford refuses to ship to them the engines/transmissions/other sub-assemblies the plant needs.
Steve
3 Likes
Excellent point.
More to it B2B sales creates an opportunity for Mexican businesspeople.
2 Likes
No. My wife worked for a private company that had a factory in Juarez. It was fully owned by the LLC.
DB2
2 Likes
Maquiladora.
- a factory in Mexico run by a foreign company and [exporting] its products to the country of that company.
1 Like
I have a hunch that the word being spoken in the Board Rooms isn’t “covid” but “Taiwan”.
2 Likes
The first word in a board room is resources. The main land Chinese are not going to share resources or water in particular with western factories. Move now or have no production later.
Maybe “covid” begat “Taiwan.” Linear thinking about complex systems is too simplistic.
The Captain
1 Like