With tensions between the US and China resulting in a shift in global trade, Mexico is emerging as one of the countries with a unique business opportunity. Today, Mexico has emerged as the biggest trade partner of the US, overtaking China. According to the US Census Bureau, the total value of goods traded between the two countries surpassed $614 billion in 2019. This feat is impressive considering the various disruptions to global trade, including the US-China trade war and the coronavirus pandemic.
Mexico has been able to capitalize on its manufacturing reputation and geographic location to become the new largest supplier of goods to the United States. While the previous trade deal, NAFTA, had its problems, it has, to an extent, leveled the playing field. The current tension between the US and China presents a significant business opportunity for Mexico, with its adeptness in maquilas manufacturing and close proximity to the US market. Mexico has the potential to become a robust international trade leader, and the current global economic climate has primed it to make the most of this opportunity.
Mexico's Manufacturing Reputation and Maquilas:
Mexico's manufacturing reputation has been solidified over the years with the creation of maquilas, factories that employ low-wage labor for assembly-line production. The surge of manufacturing plants along the US border has played a significant role in Mexico's economy, allowing them to become one of the best-prepared countries to capitalize on a changing global market. The maquilas have been the backbone of Mexico's economy for decades, and this reputation has helped fuel the recent shift in global trade dominance.NAFTA, Exports, and the Growth of Northern Cities:
The North American Free Trade Agreement (NAFTA) allowed for an increase in exports and acted as an accelerant for growth in northern Mexican cities like Monterrey. With products manufactured in Mexico now finding their way to the United States, investment funds are flowing into the country, adding to its economic growth. Mexico's recent e-commerce boom has also been a contributory factor in its economic growth, with exports and building domestic supply chains.The Mexican government pro-business tax incentives:
Mexico also offers a favorable business environment for foreign investors. The Mexican government has implemented tax incentives and other policies to attract businesses, and the country's legal and regulatory framework provides stability and predictability for investors. Additionally, Mexico has a more stable political environment compared to other countries in the region, which is attractive for foreign companies seeking to invest in Latin America.Opportunities in the New Cold War:
With tensions between the US and China as the new Cold War takes shape, Mexico is in an opportune position to take advantage. The trade war has made the US seek to reduce supply-chain reliance on geopolitical rivals and shift towards closer imports. Mexico appeals to these two counts, with its geographically advantageous position on the US border and its expertise in manufacturing.Mexico has been able to capitalize on its manufacturing reputation and geographic location to become the new largest supplier of goods to the United States. While the previous trade deal, NAFTA, had its problems, it has, to an extent, leveled the playing field. The current tension between the US and China presents a significant business opportunity for Mexico, with its adeptness in maquilas manufacturing and close proximity to the US market. Mexico has the potential to become a robust international trade leader, and the current global economic climate has primed it to make the most of this opportunity.
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