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VOLUME 20 - ISSUE 3 [email protected] Page 1
NAFTA Works TRADE AND NAFTA OFFICE / MEXICO’S MINISTRY OF THE ECONOMY / WASHINGTON, D.C.
In This Issue
Heavy Trucks in Mexico: The
Other Success Story
Selected Reading
Infrastructure Projects in
Mexico
Success Stories
Trade Highlights
Mexico Economic Update
Customs Infrastructure Moderni-
zation Will Accelerate in 2015
In just a few years, the Mexican automotive industry has risen as a global powerhouse, attracting over $23 billion in foreign direct investment since 2010. Mexico’s highly com-petitive automotive industry is spreading rap-idly to include high value-added segments such as heavy vehicles, turning Mexico into the world’s 5th largest producer of heavy trucks, according to OICA.
Since NAFTA entered into force more than twenty years ago, Mexico has emerged as a competitive platform for commercial vehicle production and export, as a steadily increas-ing number of leading foreign companies are shifting their investments overseas. Before NAFTA, Mexico had six heavy truck and bus assembly and engine manufacturing plants from global companies such as Kenworth, Dina, Freightliner, Cummins, and Scania. Today, the number has more than doubled to fourteen and new brands such as Hino, Isuzu, Man, Volvo, International-Navistar, Giant Mo-tors, and Daimler have established manufac-turing facilities in the country.
Consequently, heavy vehicle production has nearly tripled in Mexico. Back in 1998, the earliest figure available by OICA, production was slightly over 44 thousand units per year; in comparison, by 2014 heavy vehicle produc-tion multiplied by four to exceed 172 thou-sand units, setting an all-time record of 472 units leaving the production lines every day. Moreover, Mexico’s heavy truck production grew by 19.7% in 2014 alone, the highest increase among the top ten producers in the world.
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According to ANPACT, Mexico’s heavy truck produc-ers association, 340 units were exported daily last year up from 285 in 2012, estab-lishing another record for the industry, and making Mexico the 4th largest exporter in the world only behind the U.S., China, and Bra-zil. In 2014, Mexico’s heavy truck exports exceeded 124 thou-sand units , up from 97 thousand units in 2013, an impressive growth of 27%. Among the types of heavy trucks export-ed, Mexico’s sale of tractors to the inter-national markets experienced a solid growth of 31% per year, surpassing 18.4 thousand units, followed by an increase of 21.5% for trucks and 9.5% for buses.
Currently, the Mexican heavy vehicles sector successfully competes at a global level. Since 2000, Mexico’s exports of heavy trucks and buses have increased thirteen times, growing from a billion dol-lars to $13.6 billion in 2014. Mexico's geo-graphical advantage as a heavy vehicle supplier is derived from the benefits of being a competitive source with close proximity to the end product market of the United States. The United States is by far Mexico’s largest export market, absorbing
90% of total exports which reached $12.2 billion last year. This makes Mexico the largest supplier of heavy vehicles for the U.S., comprising 58% of its total imports. However, exports to other markets such as Canada, Colom-bia, Peru, and Chile have also grown significantly in the past few years.
Mexico’s network of free trade agree-ments with 45 countries grants duty free access to the world’s most im-portant markets such as the North and South American markets, making the Mexican heavy, commercial vehicle industry highly attractive for global in-vestment. Since 1999, Mexico has re-ceived foreign investment in this sector of $612 million, creating business op-
Heavy Trucks in Mexico: The Other Success Story
VOLUME 20 - ISSUE 3 [email protected] Page 2
portunities along its greatly specialized sup-ply chain to meet growing domestic and in-ternational demand.
Additionally, Mexico’s large pool of highly skilled workers has not only promoted a rise in the production of top quality products but also an increase in the number of assembly lines dedicated to the production of more technologically advanced heavy vehicles. Federal and state governments, in collabora-tion with academic institutions, are actively working to add more specialized and innova-tive training programs and research centers that may contribute towards increasing Mexi-co’s global competitive edge. An example of the Mexican industry’s capacity for innova-tion is the way it adapts its commercial vehi-cles to the competitive market by designing and manufacturing environmentally friendly vehicles, with hybrid technology for buses and heavy trucks. Mexico’s industry has the infrastructure and talent required to rapidly adapt its production of new vehicles to the changes in standards in the U.S. and other relevant markets. This even offers Mexico
Selected Reading The TPP Negotiations and Issues for Congress Authors: Fergusson, McMinimy, and Williams. Congressional Research Service. March 2015
The TPP is a proposed “comprehensive and high-standard FTA” that aims to liberalize trade, in almost all goods and services, and investment through the elimination of tariff and nontariff barriers among the parties involved. It “includes rule-based commitments beyond those cur-rently established in the WTO” that member nations must meet. If concluded as envisioned, it may be used as a guide for a trade pact among APEC members and other countries in the future. This report reviews several issues such as the importance of formal trade promotion authority, the impact on the multilateral trading system and other trade negotiations, and oth-er congressional trade policy concerns.
https://www.fas.org/sgp/crs/row/R42694.pdf
Infrastructure Projects in Mexico
Indios Verdes-Santa Clara Viaducto Sponsor: Ministry of Communica-tions and Transportation (SCT) Location: Mexico City Project Value: $648 million
The project consists of constructing an eight-lane and 6 km-long elevated viaduct, including a half kilometer of tunnels, from Mexico City’s Indios Verdes site to Santa Clara in the State of Mexico. The project will speed up traffic mobility of 200,000 vehicles per day between Mexico City, Pachuca, and Tuxpan, reducing travel times and carbon emissions and promoting the economic develop-ment of the states of Hidalgo, Puebla, and Veracruz.
Business Opportunities: Construc-tion material, engineering, heavy ma-chinery, signaling equipment. Tulum Expressway Bypass Sponsor: Ministry of Communications and Transportation (SCT) Location: Quintana Roo Project Value: $120 million
The project involves the construction of 26 kilometers of expressway which includes a branch to the future Riviera Maya International Airport, with a length of 5.5 kilometers. The bypass will begin just north of Tulum, bypass-ing the projected urban area, and run near the new airport, intersecting with the Tulum-Coba highway. South of Tulum, the bypass will merge with the existing highway where it begins to move away from the beachfront, heading south to Chetumal and the Costa Maya area.
Business Opportunities: Construc-tion material, engineering, heavy ma-chinery, signaling equipment. Samalayuca—Sasabe Pipeline Sponsor: Federal Electricity Com-mission (CFE) Location: Chihuahua and Sonora Project Value: $916 million
Developed by state power company CFE, the project calls for the design, development, construction, and oper-ation of a new 36-inch natural gas transportation pipeline that will run 558 km between Samalayuca, Chi-huahua and Sásabe, Sonora. The pipeline will have a capacity of 472 Mf3/d and will transport natural gas from Waha, Texas to the San Isidro-Samalayuca and Sásabe-Guaymas pipelines. The pipeline will begin oper-ating by June 2017.
Business Opportunities: Construc-tion materials, pipelines, financing, engineering.
the opportunity to become an important pro-ducer of “greener” heavy vehicles.
Mexico’s heavy vehicle industry is experi-encing increased momentum following both growing international and domestic demand. It is estimated that the industry will exceed 180 thousand units of production in 2016, according to Business Monitor. Domestical-ly, the heavy vehicle industry will further benefit from steady economic growth pro-moted by structural reforms and the mas-sive amount of resources involved in the National Infrastructure Plan, and the imple-mentation of government policies such as the Heavy Vehicle Substitution Program established to help renew the Mexican fleet.
The heavy vehicle manufacturing market is becoming increasingly globalized, following in the footsteps of the passenger car mar-ket, and this means that Mexico is similarly well positioned to solidify its status as a leading producer and exporter of heavy trucks and buses.
VOLUME 20 - ISSUE 3 [email protected] Page 3
Constellation Brands Expands Footprint in Mexico Constellation Brands, a publicly traded drinks company with a portfolio of brands in wine, beer and spirits based in the state of New York, distributes Corona, Modelo Negra, and Modelo Espe-cial in the U.S. It will invest more than one billion dollars to expand production at its brewery in Coahuila, Mexico from 10 to 25 million hectoliters a year, a move that the company expects will help it to increase its share in the U.S. beer market from 7% to 14%. A company spokesman, Edgar Guillaumin, said “imported beer and craft beer are growing a lot in the U.S. so we want to keep pushing premium Mexican brands in the U.S. market.” In the last years, Mexican beers have enjoyed a boost in sales and now account for 15% of U.S. sales. Anheuser-Busch InBev Is Investing in Yucatán Anheuser-Busch InBev, the world's largest brewer headquartered in Belgium, will invest $325 million through its subsidiary Grupo Modelo, the Mexican Corona maker, to add an aluminum beer can factory to plans for a new brewery in the southeastern state of Yucatán, Mexico. The brewery, Modelo's 8th in the country, will have the initial capacity to produce 5 million hectoliters per year, and the can factory will be able to produce up to one billion cans per year. ThyssenKrupp Opened Its Fourth Plant in Mexico German company ThyssenKrupp, one of the world’s leading auto parts suppliers, continues to expand in North America. In April, ThyssenKrupp inaugurated a new components plant in Huejotzin-go, Puebla, which will manufacture steering systems for the auto-
Success Stories
motive industry. The new $100 million facility in Mexico has the capacity to produce over one million steering columns, more than seven million steering shafts, and over 45 million cold-forged steering parts per year for the North American market. Goodyear to Invest on New Tire Plant in Mexico Goodyear Tire & Rubber Co. will invest $550 million to build a new tire plant in the central state of San Luis Potosi to serve its customers in the Americas. The new factory, along with invest-ments in its existing U.S. and Canadian factories, will enable Goodyear to meet the strong and growing market demand for high value-added consumer tires in North America and Latin America which is expected to increase by 10 million tires per year from 2014 to 2019. The new factory will be Goodyear’s most technologically and environmentally advanced with a ca-pacity of about six million tires per year, employing about 1,000 people. Starwood Aggressively Expands Portfolio in Mexico Starwood Hotels & Resorts Worldwide signed an agreement with Inmobiliaria Punta Tormentos to introduce its Sheraton brand to Cozumel, Mexico. Sheraton Cozumel Resort is the fifth Starwood hotel signing in Mexico within the first quarter of 2015, reflecting the strength of the company’s brands in this dynamic market. Mexico is the largest market for Starwood in Latin America and its seventh largest market worldwide. Cur-rently, Starwood boasts a total portfolio of 29 hotels in Mexico across eight of its nine brands.
Trade Highlights
Mexico Economic Update
VOLUME 20 - ISSUE 3 [email protected] Page 4
On January 6, 2015, Mexico’s Ministry of Finance, through the Tax Administration Service (SAT according to its initials in Spanish), announced actions aimed at accelerating the implementation of the 2013-2018 Customs Modernization and Infrastructure Development Plan. Mexico and the United States have a trade dy-namic of over $534 billion annually, of which 80% is transported by land across the border, making it a priority to rapidly advance trade facilitation programs and to improve customs infrastructure. This will allow Mexico, and North America as a region, to be more competitive and to increase business productivity.
The new approach aims to complete 12 projects to upgrade customs facilities on the US-Mexico border within the year.
The reorganization of the Zaragoza Cus-toms and the construction of new facilities at the Guadalupe-Tornillo crossing, both of which are part of the Ciudad Juarez Customs, receive more than $35 million in funding.
The Zaragoza Crossing project is sched-uled to begin operations later this year. Zaragoza - Ysleta is the third most im-portant crossing between Mexico and the US, connecting the border cities of El Paso, Texas, and Ciudad Juárez, Chihua-hua. The upgrade will double its capacity by increasing clearance modules in the imports area from 5 to 7, and the lanes and exit modules from 1 to 3. For exports, two additional clearance modules will be in operation, bringing the total to 5. Also, the review platform will increase to 20 stations from its original 10. Additionally, the project includes the creation of exclu-sive lanes for use by businesses affiliated with the NEEC & C-TPAT programs. The new infrastructure will directly benefit around 608 maquiladora companies in the region.
The new border crossing of Guadalupe-Tornillo is scheduled to replace the Fa-bens crossing in the Ciudad Juarez – El Paso region this fall. This crossing is built around a six-lane bridge about 650 feet from the existing two-lane Fabens Bridge and will accommodate vehicular, pedes-trian, and commercial traffic. This cross-ing will consist of two clearance modules for imports and exports, two entry lanes for Mexico and two exit lanes for the US. A building will serve as a base for foreign trade officials and canine units and for the review and clearance of pedestrians and bus passengers. This crossing represents a new alternative for the transit of people and cargo and will be a trigger for the commercial and economic activity in the Ciudad Juarez region.
The new pedestrian access, Puerta Mexi-
co Este, will start operations at Tijuana Cus-toms. More than 25,000 people will be able to enter Mexico daily from here, turning it into the most important pedestrian crossing of the US-Mexican border, signifi-cantly benefitting the Tijuana – San Diego re-gion.
The reorganiza-tion of the im-ports area at the Otay cargo crossing in Tijuana, the second most important US-Mexico border crossing, will be completed by the end of 2016 with an investment of $40 million. The new car-go infrastructure will allow the clearing ca-pacity to double by increasing the clearing modules from 6 to 9, the stations in the review platforms from 18 to 35, and the lanes and exit modules from 3 to 6. Further-more, an area will be designated for the review and clearance of small imports and an exclusive exit will be assigned for empty tractor-trailer trucks and enterprises affiliat-ed with the NEEC/C-TPAT programs. Two entry lanes to Mexico will be added for light vehicles and pedestrians, for a total of 5, and a new building will operate exclusively to process pedestrians. Around 900 import-ing businesses in the region will directly benefit from this project.
The Mexicali border crossing reorganization of the exports area began in the first quar-ter of the year. Once completed, this project will allow a significant increase in capacity, increasing the number of clearance mod-ules from 4 to 5, and it will also triple the number of stations at each platform from 4 to 15. Like the customs upgrades at the other locations, exclusive lanes will be dedi-cated to busi-nesses affiliated with the NEEC and C-TPAT programs. The project will also consider the relo-cation of this new infrastructure to later allow for the modernization and expansion of the imports area.
In Chihuahua, the Ojinaga Cus-toms will expand
and reorganize with the construction of new transit and clearance installations for light vehicles, pedestrians, and cargo with an investment of more than $30 mil-lion, directly benefitting over 490 import and export business located nearby. In the area for imports, the customs entry modules will be doubled and the platform review/clearance modules will increase from 2 to 8. Also, an area for export re-views, currently lacking, will be added. This is anticipated to operate on two en-try modules and seven-station review platform.
This year, executive projects will be com-pleted with a view to start construction as early as possible. The projects provide for the reorganization and expansion of the Customs of Puerto Palomas, Ciudad Acuña, Tecate, Mexicali, Reynosa (Nuevo Amanecer International Bridge) and Nogales.
The goal of modernizing the customs infrastructure is to have dependable in-stallations for seamless operations that can further facilitate the growing trade flows between Mexico and the United States.
Customs Infrastructure Modernization Will Accelerate in 2015
