27 Jan New age for business opportunities for Mexico

The current situation, marked by the covid-19 pandemic and the trade dispute between China and the United States, is accelerating the hyper-segmentation of production processes, their location in a smaller number of countries, as well as Industry 4.0 and the digitalization of trade, have set the tone for the evolution of international flows of goods, services and investment in recent years.

The ongoing reconfiguration of production chains at the international level offers a series of opportunities for Mexico.

To begin with, the country can strengthen its participation in the T-MEC area, through the arrival of productive investment from foreign companies interested in establishing themselves in the country to meet the demand of the U.S. market, or those interested in mitigating the vulnerability of their supply chains.

Likewise, the reconfiguration of global value chains towards a regional approach opens up the opportunity for Mexican supply companies to increase their capacities and supply intermediate goods markets.

Mexico it is estimated at 355 billion dollars.

Finally, the trade tension between China and the United States has an undercurrent of technological race, Mexico will have the opportunity to increase the production of high-tech products, if it takes advantage of the T-MEC agreements on issues of cybersecurity, dual use and intellectual property.

Trade opportunities for Mexico in the post-covid-19 age

If the forecasts prove valid, this will open a window of opportunity for Mexico to consolidate its participation in the T-MEC region and become a privileged recipient of foreign direct investment, mainly from Asian companies interested in bringing their production lines closer to the U.S. market and mitigating the risk of their supply chains.

In order to quantify the business opportunities in a scenario such as the one described above, first of all, those products in which Mexico has the opportunity to replace imports coming from Asia into the T-MEC area were identified.

According to the magazine “Comercio Exterior Bancomext”, two parameters were established for this purpose:

1. 1. 1. 1. 1. 1. That the value of the product imported from Asia to the T-MEC area exceeds 50 million dollars, an amount indicative of the relevance of the market in economic terms.
               2. Mexican exports of that product to the United States and Canada must be equivalent to at least 30% of the value of what the T-MEC region demands from Asia. This condition ensures that Mexico has production and trade links with its northern neighbors.

In order to evaluate the complementarity of production chains through foreign direct investment and to identify those goods that could move their production from Asia to Mexico, two parameters were established:

1. 1. 1. 1. 1. 1. The value of the product imported by Mexico from Asia exceeds 50 million dollars, which denotes the relevance of the market and the relevance of an eventual investment in Mexico.
               2. Mexican imports from Asia represent at 40% of total imports. This condition guarantees that dependence on Asian countries is significant and therefore that the value chains are vulnerable.

Conclusion

The challenges that Mexico must face in order to return to the path of sustained growth, it is important not to miss the opportunities offered by current trade and production trends.

If they are fully exploited, Mexico can strengthen its participation in the T-MEC area, the most important trade bloc in the world. Hence, the relevance of implementing an industrial policy with clear objectives and pertinent strategies to increase productive capacities, strengthen local production chains and increase the value added internally to Mexican exports.

The opportunity strategy proposed in this analysis not only includes increasing Mexico’s exports, but also considers the complementarity and strengthening of local supply chains in products in general and high-tech products.

In the technological area in particular, the opportunity for Mexico involves becoming the main supplier of products with high technological content for strategic sectors and national security in the United States.

It is important to establish mechanisms that strengthen the links and synergies between national companies, both large and SMEs.

Information taken from the article OPORTUNIDADES COMERCIALES PARA MÉXICO EN LA ERA POST COVID: https://www.revistacomercioexterior.com/articulo.php?id=1019&t=oportunidades-comerciales-para-mexico-en-la-era-poscovid