Mexico, like Canada, has traditionally been a good trading partner with the U.S. NAFTA built on this relationship to the benefit of all parties. In fact, in 2015, nearly 1.2 million U.S. jobs were supported by exports from Mexico. That ranks second only to the nearly 1.6 million jobs supported by Canadian exports.
It is a strong bond, but not without its challenges. The Trump administration has spoken of renegotiating all trade agreements while potentially taxing imports to protect American interests. There is no denying this has created a period of uncertainty regarding the business climate in North America.
For companies in integrated supply chains or producing components in Mexico, there are real concerns over not only increased border taxes and tariffs, but rapid elimination of the U.S.-Mexico trade deficit and even remittances.
I’ve heard these concerns first-hand from both Canadian and Mexican companies. For example, I recently met with one of the largest avocado provider to the U.S. They do 25 per cent of their business during Super Bowl Week. What would happen if there were delays or additional taxes placed on avocados at the border? It would obviously have a major negative impact on their revenue.
The facts are reassuring
The advantages of doing business in Mexico remain — and continue to grow.
It is a market of 120 million people very close to home. Establishing relationships and doing business in Mexico is relatively easy. NAFTA is in place and continues to benefit all three nations. The country has a growing middle class and a young, educated workforce, and consumer spending is on the rise. They have recently undergone significant reform that has opened up new opportunities. And the manufacturing base continues to be well built up.
Basically, the stage has been set for more growth in the future.
This is no time to panic
My advice to Canadian companies moving forward is not to panic. During times of uncertainty, companies need to take a longer view and analyze potential business opportunities in Mexico based on that long-term view. Remember, there are still a lot of great opportunities in Mexico in many sectors including oil & gas, power generation – especially renewable energy – technology, and MFG industry to name a few.
In the meantime, stay informed and make sure you understand all of the implications of any changes. As the saying goes, you don’t know what you don’t know, so go out there and talk to people who can share their learnings and experiences.
Continue to monitor the situation. There may be a little wait-and-see involved with respect to agreements that will or will not be renegotiated. And reach out to expertswho can give you market intelligence and answer your questions. In addition to strong Team Canada representation and the Trade Commissioner Service, the Canadian business community is well-established here, and can be a great source of information. The Canadian Chamber of Commerce in Mexico (CanCham) is holding their annual CanCham day in Mexico City on April 27th, so this is a good opportunity to meet all these experts.