Decision-makers meet to discuss Mexico's future prospects. Decision-makers meet to discuss Mexico's future prospects.

MX finding its place in a world with Trump

Business leaders focus on how Mexico might generate new economic opportunities

We can all accept it at this point: we live in uncertain times. To be sure, all countries, whether emerging or developed, are experiencing a certain degree of uncertainty – but some more than others.

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Mexico is coexisting with the biggest hurricane of uncertainty in its recent history, particularly since the North American Free Trade Agreement (NAFTA), the 23-year-old treaty with the U.S. and Canada, was sentenced to death by U.S. President Donald Trump.

This is only one of the many clouds that have appeared over Mexico´s blue sky since Trump took over as president a month ago. What will the country do once NAFTA is annulled and tariffs of up to 20% are imposed? Could any other country become Mexico´s new major partner? How can Mexico remain competitive?

The international community has been working on these questions for some time and has not agreed on one simple response. The short term looks challenging for Mexico, but we continue to see a bright future for it.

In December, we published our last Business Barometer in Mexico, and we realized that we’re not the only ones maintaining a positive outlook for the Mexican economy.

It is now time for the local business network to speak and take the first steps towards the future.

To that end, Oxford Business Group organized, in partnership with Deloitte, a conference on how Mexico should generate new economic opportunities. In front of an audience of top-tier CEOs we shared our views and listened to key business people.

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The goal was to develop a better perspective of what decision makers expect for Mexico´s economy in the coming years.

Some participants, including Deloitte´s foreign trade agreement (FTA) expert and partner Ricardo González Orta, admitted, contrary to what some say, that a reform of NAFTA could even benefit Mexico.

González Orta suggested a revision of Mexico’s costs scheme in order to make the most of what he considers a “wide-reaching export platform.” A strong statement was made: Mexico could survive without the levels of dependence on the U.S. that have persisted for more than two decades.

Fernando Turner, one of our invitees to the conference and Secretary of Economy and Labour for Nuevo León – Mexico´s third-richest state, which is highly dependent on exports to the U.S. – highlighted the importance of strengthening Mexico’s domestic market.

All speakers agreed that an essential first step for Mexico is limiting its dependence levels on North American demand. Turner was critical of the lack of incentives offered to Mexican entrepreneurs and made a link between this and what he considered “low levels of investment” in the country.

As a businessman who is now involved in public affairs, Turner raised his voice against monopolies and requested the federal government intervene to reduce excessive bureaucratic red tape.

Several speakers cited inequality as one of the main issues affecting Mexico in this new context. Frederic García, CEO of the CEEG (an association that represents the top 50 multinational companies in Mexico), said the country must address the imbalance in production levels across its 32 states.

Southern states, for example, will have to match the productivity of northern ones. He also insisted on the importance of investing in research and development (R&D), and suggested Mexico turn its focus to South Korea, which invests more than 4.5% of GDP in R&D against Mexico’s paltry 0.5%.

Inequality could be also fought through better access to financing and improved financial education, added José Oriol Bosch, CEO of the  Mexican Stock Exchange.

If anyone does not see clouds in the Mexican sky these days he or she may be blind. However, the business community can at least agree on something: the new challenges, including those that arise from the passion of the U.S. president, are going to be overcome.

The writer is the Americas Regional Editor for the Oxford Business Group, a global publishing, research and consultancy firm.

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  • cooncats

    You had a good piece here until you started with the over the top rhetoric. Trump hasn’t “sentenced NAFTA to death.” He has stated his intention to renegotiate it. That also creates an opportunity for Mexico to address the damage NAFTA has done to its small farmer economy.

    This idea that Mexico is a place for U.S. companies to go so they can fire middle class Americans and open up sweatshops here, shipping the stuff back across the border unhindered, is not a sustainable business model. These factories that hardly pay living wages here are not how a Mexican middle class can be nurtured.

    Nor can Mexico realistically expect to have trade and other cash flows being far out of balance forever. The goal should be a relationship much more like that of Canada and the U.S. where things are nearly in balance.

    One sided trade and immigration policy is using the other country and using always eventually creates a back lash.. Ironically, China is a far greater user of both countries, indeed almost all of the countries it “trades” with and I am wondering if the clueless leadership of the U.S. and Mexico will ever stop barking at each other and realize who is the real problem.

    If that happens, then the conversation can and should turn to how both countries can pull back jobs and manufacturing to this hemisphere to the benefit of both. Unfortunately, I see nothing like this happening without some major political changes in both countries including addressing the cost of bloated bureaucracy in the U.S. and gross corruption here in Mexico.

    Mexico, Canada and the U.S. could be a world beating trade and political alliance. Mexico’s young, hard working and energetic population can be a tremendous asset to a real North American union.

    But first must come far better leadership than any of the three enjoy at present.

  • K. Chris C.

    As long as that way is not with China, the US tyranny will be fine with it. Otherwise it is Allende for the pols and crats and Pinochet for the people. Or maybe the people will be afforded Batista , or Somoza, or Guzzett, or Montt, …

    An American citizen, not US subject.

  • Mike S

    Mexico is our 3rd largest trading partner. The trade imbalance between Mx and US has dropped to $60 billion as oil prices have lowered and US oil/gas production has increased. That’s out of almost $536 billion total trade. That’s less of an imbalance than Germany and Japan with far lower trade totals. Millions of Mexicans cross the border every week and go on buying sprees that are not included in that total. Our imbalance with China is $350 billion and they buy few US made products. Mexico loves and buys US products; 6 million high paid US jobs depend on that trade. Mexico’s agricultural exports keep prices lower in US grocery stores. Mexican manufactured good contain on average 40% US parts and many final products cross back and forth many times. If Trump starts a trade war with Mexico, both countries will suffer. Trump is an irrational bigot and that what his base wants. The narcissistic vindictive Orange Warthog is ignorant about trade, economics, and history.

    • GOPerson

      Mexico is not a fair trader. You cannot buy a russet potato because Mexico blocks the import of such to protect the farmers. And a 16% VAT tax on everything imported from the states is the same thing as a tariff.

      • Mike S

        A VAT tax is not a tariff because it is imposed on both imported goods and domestic goods. It is a level playing field tax. It is simply a tax system…the same system used in most of Europe, Canada, and many many other countries in lieu of other tax revenues to fund the government. Our sales tax system is a semi-VAT tax. Don’t know about russet potatoes but all trade agreements have a few protections. I do know that our well funded Monsanto tax payer subsidized corn and fructose industry virtually destroyed small corn operations in Mexico back in the 90s throwing hundreds of thousands out of work.

    • gypsyken

      Thank you! I’m henceforth referring to the unthinking followers of Il Duce Trump as acolytes of “the narcissistic vindictive Orange Warthog”

  • alance

    First, Mexico needs to drain the swamps in all 31 states plus Mexico City of nepotism and too many civil servants.

  • Eugene Nero

    What will the country do once NAFTA is annulled and tariffs of up to 20% are imposed? I don’t accept this assumption. Let’s wait and see. I suspect NAfTA will be modified–not annulled.

  • Hailey Mannering

    I´m confused. I thought Canada and Mexico were going to remain in NAFTA. The article says NAFTA will be anulled.

    • The column is wrong on that point. Trump says NAFTA will be renegotiated, nothing more. The column is wrong on other points too.

  • Geoffrey Rogg

    Expats are mostly lib-dems living a neo-colonial life-style in Mexico and whose criticisms of current US policy the hight of hypocracy. Mexico has to out its country back on track as democratic, law abiding state providing all its citizens with equal opportunity and distribution of resources. As long as its tolerates corruption at all levels and criminal activities it will dive head first into being another failed state.

    • Mike S

      So you love the US plutocracy and all the gerrymandering and lobbying and fake “think tanks” and ideologically driven news from Ruppert Murdoch? Expat progressives are the furthest thing from so called “neo-colonials”. The US is almost as corrupt as Mx; it is just we mask our corruption better and the Mexicans leave it all out for everybody to see. Right now Mexico is struggling with entrenched organized crime spawned by a bottomless lucrative drug demand coming from the North. Once organized crime gets its tentacles in a country, it is very hard to eradicate. It took the US several generations to get our Mafia under control. Our mafia started with prohibition but then moved into gambling, drugs, and protection rackets. Mx & the US need to work together to solve the hard drug problem. Even then, our legal drug system that promotes so many pain killers and tranquilizers will be almost impossible to stop. I believe many of these mass shootings in the US are caused by anti-depressants that in a small subset of people cause suicidal/homicidal tendencies. The US and Mx are different societies and Mx isn’t for everybody but for Americans who don’t understand Mx with its good and bad to take a superior attitude is ignorance. Trump and his wall and bigotry will solve nothing.

      • Geoffrey Rogg

        I stand by what I said although I agree it is somewhat of generalization. I not only have lived in Mexico but worked for a major manufacturing and distribution company with branches throughout the county as Director of field services, the company being 100% Mexican owned. I am proud to identify myself with Mexico and its peoples but know from first hand experience the corruption that exists, albeit often on a small scale. Far more serious is the criminal element in society, as I clearly stated in my previous comment. Mexico owes little or nothing to the.US for its woes but to a tragic history of European colonialism, cultural genocide and foreign interference.

        • Mike S

          I respect your well put comment and knowledge of Mexican society. There are good and bad people everywhere. I consider myself a world traveler but in my retirement I have turned to Mexico. I have been traveling and living there on and off for 40 years. Everybody’s experience is different, but I truly enjoy Mexican society and so much good from the ordinary Mexicans. I see the good, the bad, and the ugly in both countries. There is a lot of diversity between states in Mexico- much more than in the US. The drug violence grabs headlines in the North and too many ignorant people are too fast to stereotype and generalize (Trump being one of them). The countries and people are just different so I hate to compare. I am happy that that such a diverse and interesting country is close by to enjoy. I don’t fixate on la mordida but it beats a $1000 speeding ticket up north. On the other hand, driving in Mx is always a defensive challenge. I don’t know much about business corruption but I’m sure its part of doing business and one has to weigh all the pluses and minuses to see if it’s worth while. I know some small business gringos in Mx with Mexican wives who have done well in the restaurant, home rental, and furniture exporting business. Court system is weak in Mx.

          • Geoffrey Rogg

            Mike, the rule of law and an equitable justice system are the sine qua non of a stable society. Mexico has neither. I still love the country, the best of its culture and people but have personally encountered the criminality of its gangs and the authorities that work hand in hand with them.

          • Mike S

            Like I said before, organized crime in Mexico was spawned by drug demand from the North and once it gets established, its tentacles are hard to remove and it will get into other areas besides drugs. We had our own mafia which grew out of Prohibition and it took a long time to get it under control. Police and courts are grossly under paid in Mx. I had a wealthy Mx friend whose 4 brothers were kidnapped and killed for not paying a portion of their lucrative avocado crop money to a gang. However, many big corporations continue to invest heavily in Mx believing they can do well there. We have the highest incarceration rate in the world as an answer to 300 years of racism and that is not a pretty picture either. Gun violence is out-of-control in the US. The hope I see is as the Mx middle class grows and the tax base is better able to fund law enforcement and courts…and as the poor find other opportunities besides crime, things will get a lot better. Mexico is a democracy and is not an ambitious competive military empire like China. We should be so lucky to have a 2000 mile non-military border with people who generally like us and have not sold out to Russia or China like Cuba did. The US would be smart to aid economic, and law enforcement and help Mexico develop. Canada has the resources, the US the engineering and business savvy, and Mexico the labor and work ethic. NAFTA is a powerful combined economic force for the US to compete with Asia and Europe. Trump is an idiot.

          • Geoffrey Rogg

            Whatever the ills the USA has, it is still light years ahead of Mexico in the rule of law and citizen safety. NAFTA is fine in theory but as with the expanded EU, nations with dissimilar social & fiscal cultures, infrastructure and national governance cannot be united under the same set of rules. There can be investment without NAFTA and most favored nation trading terms and later when conditions are at a common level an agreement such as NAFTA could be successfully implemented.

          • Mike S

            One selfish thing I like about Mx is the high level of personal freedom and individuality. There are no rules but everything seems to work. You buy a property and its on you to have it inspected and check out the title. Building codes are lose. Health departments are lax so you have to do your research and act on reputation, Same is true for doctors, dentists, lawyers, mechanics, contractors, etc. Political correctness and petty laws are not shoved down everyone’s throat. Bargaining is constant and for us who know the society things can be very cheap…no middle men and red tape. Things often rely on personal interactions which makes some Americans nervous. Frivolous lawsuits are laughed out of court. Of course such high levels of personal freedom carry a higher level of risk and require a visitor to understand how all politics is very local and accept higher risk of being ripped off if you’re not paying attention. I hope Mx never turns in the dull sameness and “franchise” society like the US. I hated so see Walmart show up.Don’t get me wrong, I like both societies and I don’t want them to be the same. Such things raises anxiety in many gringos and they assume a superior attitude. As a retied gringo, the cartel war doesn’t really affect me. Drunk speeding drivers are much more of a menace.

  • rob smith

    Mexico should pursue a trade deal with Canada as a first step. Bypass America entirely. Mexico should also pursue trade deals with China as well as South America. My advice for all countries is to pursue trade deals with each other and exclude the USA. Isolate Trump and his insane nationalist agenda. Then watch as America goes down the tubes.

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