Chinese companies in Mexico have accessed an ideal platform to reach the US market
Faced with the trade conflicts between the United States and China, the Asian economic powerhouse is discovering that Mexico is an effective conduit through which to export its products to the largest market in the world. As a result, it expected that the number of Chinese companies in Mexico will continue to increase over the next several years.
Mexico’s advantages go far beyond its geographic location and its participation in the North American Trade Agreement (USMCA). Among them are also the skilled workforce and the supply chains that have been developed in the country over the last several decades. Because of these features, Chinese investors and businessmen see Mexico as one of the principal doors of entry to reach the United States market.
” A collateral benefit that we have experienced from the trade policy that the United States has recently implemented against China is that Mexico is the best option to use as a platform to export products for sale into the US market”, said Samuel Peña. Peña is the vice president of Hisense, a Chinese multinational technology company that produces televisions and refrigerators.
In the coming years, Peña said without offering more detail, Hisense will continue to grow in Mexico while highlighting that “Mexico has managed to survive” crises such as the ones of 1994 and 2008, as well as the current coronavirus pandemic.
“Chinese investors see a country with the potential to grow and be the platform to enter the US market,” added Samuel Peña during his recent participation in a foreign direct investment event organized by the Mexican Association of Private Capital (Amexcap).
In 2020, the United States imported $ 328.86 billion from Mexico, noted Lyman Daniel, president of CBRE of Mexico. He also highlighted that Mexico’s competitiveness has grown in strength in recent years and that the country has implemented commercial agreements that have established free trade relationships with more than 50 countries.
In addition to the negative US trade policy with China, the emergence of the coronavirus will cause further diversification and relocation of supply chains, thereby increasing the number of Chinese companies in Mexico.
“The economic disruption that we have been witnessing with the pandemic caused everyone to think about diversifying supply chains. For the United States, it meant more cooperation and the relocation of companies from the Far East to Mexico. The United States saw the need to diversify its supply chains to be better prepared for any future disruptions. It will not be easy, but there is room for further cooperation,” according to Lynda Schweitzer, the Deputy Head of the Global Fixed Income Team.
Another development that also represents an opportunity for the Mexican economy has to do with the shortage of chips and semiconductors that are produced in countries such as India and Singapore.
“Why not make semiconductor chips in Mexico? The country has the workforce, the knowledge, and the available industrial space. I don’t see why we couldn’t consider the possibility that Mexico could be a potential country in which to take on this type of manufacturing activity,” said Pascal Pierre Aubois of GLD Circuits, a company based in Guadalajara.
“For the foreign direct investor, it is very easy to establish an enterprise in Mexico. It was very easy for us to find a suitable building and to navigate the entire Mexican bureaucracy. ” While commenting on his own company’s experience, he noted that there are many Chinese companies that are currently seeking to improve their logistics processes in Mexico.
In addition to a manufacturing cluster sufficient that is sufficient in size to satisfy US consumers, Chinese companies in Mexico also have access to a market with a value of between US $ 22 billion and US $ 23 billion, said David O’Donnell, founder, president and CEO of O’Donnell, a management consulting firm based in Troy, Michigan.
The international consultant also highlighted the fact that Mexico is 30% more competitive than Asia in terms of the overall cost to manufacture products. “It will be a bit of time before the companies start to arrive in significant numbers. We are talking about industries such as automotive and infrastructure, but over time we are going to see other sectors that are going to join other Chinese companies in Mexico”, said O’Donnell.
In addition to creating a hospitable environment for Chinese and other foreign manufacturers in Mexico, USMCA also has an electronic commerce chapter (e-commerce) that has been built into the text. This is important not only because there has been a significant increase in last-mile services in Mexico City. Cities like Mérida, Querétaro, Guanajuato and Monterrey, as well as the border markets “have received significant investment to establish electronic commerce infrastructure,” said O’Donnell’s executive.