Mexico-NC news topics over the last month
Sheinbaum cabinet announcements
- 17 of 19 cabinet members have been announced to lead the executive under president-elect Claudia Sheinbaum. She will announce the Defense and Naval Secretaries closer to her inauguration, which is October 1, 2024.
- AmCham Mexico scooped the formal announcement of Marcelo Ebrard as Secretary of the Economy. Ebrard participated heavily in the USMCA negotiations when he was Secretary of Foreign Relations under Andres Manuel Lopez Obrador, and he was also the Mexico City mayor (succeeding AMLO and preceding Sheinbaum).
- Sheinbaum’s appointments come across in Mexico as pragmatic though somewhat academic, progressive yet cooperative with capitalism, and affording a level of continuity from the AMLO government.
Tesla factory planned for Nuevo Leon suspended
- Mexicans kind of knew this would happen, especially after Tesla earlier this year cited sales underperformance in the US. Maybe the plant will resume development at some point in the next year or two. Electric vehicle competitor to Tesla BYD has also announced a production plant in Mexico, which may also be put “on hold.”
- The Chevy Blazer and other established electric vehicle assembly and components production in Mexico remain unaffected
El Chapito, US intervention + Ayotzinapa
- Mexican eyebrows were raised when the US advised Mexico after the fact that one of El Chapo’s sons and another organized crime boss, El Mayo, were arrested together at a small, private airport outside El Paso, just across the New Mexico state line.
- This matters because as a matter of national sovereignty and international law, Mexico doesn’t by default agree to the DEA, or the FBI, operating in Mexico. Legally Mexico would have to request the US’s support in its local law enforcement operations.
- It’s still up in the air whether the Mexican government will ever know, or fully admit, what happened to the 43 students that disappeared after the bus they were on fled attack nearly 10 years ago. AMLO campaigned on transparency surrounding the investigation and this month promised the parents answers before he leaves office.
Mexico aligns with US on steel
- Chinese steel, Mexico has agreed, will face taxes when being exported to the US via Mexico regardless of Mexican value add. See also: Mexico imposes tariffs on 544 products
Direct NC flight to Mexico City
- We got to take Aeromexico 431 / 430 from Raleigh-Durham to Mexico City, on July 19, no less, the day of the global Crowdstrike outage. The Embraer 190 they’re using has seen many days, but it was comfortable, and most importantly, did not depend on going through Atlanta to get home. We made it to Mexico on time, in about 4 hours and 30 minutes.
- Aeromexico and Delta claim to have a seamless loyalty program between the two, but we booked the Delta codeshare flight with a Delta credit card, and the free checked bag was not honored.
Other news: Tehuantepec railway now in operation for freight; BBVA Mexico infosec hub to be operated by Telefonica Tech; Carso plans to develop a deep-water natural gas field for 1.8 billion USD
In-depth reading of the month
- The Triangular Balance: Mexico, the United States, and China by Juan Carlos Baker at the Wilson Center
- Mexico Nearshoring: Semiconductor Roadmap by the US-Mexico Foundation for Science with USAID
- American Chamber Mexico annual member survey on security (in Spanish)
On our minds and on our desks: Value Chains + Global Interdependency
At our desk, we have received inquiries from companies in North Carolina and other parts of the US about how and whether sourcing from Mexico can substitute for goods currently produced in China, Vietnam and Europe. The inquiries we get for supplier identification coming from the US are usually smaller brands or more specialized products that never really manufactured from the US (except perhaps prototypes; i.e., their business models were founded on international manufacturing), or in many cases they are the North America regional office of a non-US global company.
Generally, suppliers who are well enough equipped out of the gate to compare to the most attractive Chinese alternatives are among Mexico’s maquiladoras and shelters, or they are operations dedicated to manufacturing the products of their Mexican owners. Which is to say, the production capacity of the most mature operations we typically identify is already largely spoken for. However, we have identified and there exists a growing number of companies in Mexico that can be developed and scaled, with resources and cooperation, as suppliers to the US for results on par with or better than China-located manufacturers.
Developing the relationship with them typically means working with them on production, export or value-added capabilities. Organizations like COMCE and Bancomext are available to help them, and potentially a Sheinbaum iteration of ProMexico, but generally the onus falls on the US company looking to do the sourcing. Those without international supplier development experience may seek support from a sourcing consultant well-versed with Mexican manufacturing.
Notably, and as US and Mexican policymakers are aware, it’s not just US and European companies looking to produce in Mexico. It’s also “Chinese” companies, which more often than not can mean a company with a blend of Taiwanese, Japanese, Singaporean, Korean and Chinese capital. These companies do not want to lose their US business as the barriers to China-US trade risk becoming more institutionalized. Due to their experience with US brands and products in China, they are often in a strong position to establish and be successful in Mexico, though they still normally face productivity challenges.
The Mexican business community from our view has mixed feelings about the arrival of Chinese investors. One one hand, for example in recent surveys conducted in Mexico’s woodworking industries, we have heard companies express frustration with being undercut by newly arrived competitors. On the other hand, Mexican economic development organizations generally view Chinese investment as an opportunity to create tax revenue and jobs, not as a threat to local Mexican businesses.
On yet another hand, the Mexican federal government acknowledges the triangle of money laundering and other crimes embedded in “fentanyl-cheap consumer goods-real estate” exchanges occurring between the US, Mexico and China, however unable the Mexican government is, especially without suitable political will within the US, to actually monitor and control those flows.
Juan Carlos Baker’s piece for the Wilson Center discusses how these competing tensions and Mexico’s ability (or not) to avoid taking sides may influence the USMCA review that is due in 2026.
There is also a broader, “political science” perspective: economic development domestically and interdependence internationally help maintain peace.
Coming from Japan, with whom Mexico may have more and more in common when it comes to balancing the US and China, we also picked up a policy discussion this month from Nakatomi Michitaka at the Research Institute of Economy, Trade and Industry on security objections as trade barriers. Nakatomi suggests that increased citing of security misgivings as reasons for impeding free trade can be traced to the WTO losing relevance as a trade regulator. In the absence of a globally credible moderator, countries are more likely to let fear and suspicion sabotage healthy competition.