The New Era in Foreign Trade

A Historic Opportunity for Mexico

“Whilst walls and borders divide countries, customs unite them”: AAAPUMAC

Every time, Mexico stands out more in the global level and its products are making their way in foreign markets: COMCE

Since the beginning of 2017, Mexico faces a major challenge in foreign trade before the new protectionist administration of the United States of America, who has been its main trading partner for decades. Undoubtedly, this situation marked a new commercial era initially filled with uncertainty, but after the first trimester of the year, new historic commercial opportunities emerge for our country.

The immediate order from the President of the United States, Donald Trump, to leave the Trans-Pacific Partnership (TPP) and the announced renegotiation of the North American Free Trade Agreement (NAFTA), generated instability and concern in Mexico. However, this situation also leads us to seek new commercial horizons, envisaging historic trading opportunities. It is important to mention that the TPP is about to become the greatest trading pact in the world with almost 40% of the GDP and more than 800 million consumers in 12 countries and that the NAFTA came into force in 1994 and placed Mexico as the main trading partner of the United States.

Facing the scenario generated by the United States, organizations such as the Mexican Business Council for Foreign Trade (COMCE), the World Bank, the World Trade Organization, ProMexico and the Secretariat of Economy, amongst others, have pointed out that more than a threat, Mexico is going through a historical opportunity for commerce with 12 agreements that gets it closer to more than 46 nations. Therefore, experts consider this to be an encouraging scenario and recommend increasing commercial projects with all those partners, putting an end to the dependence on the United States as destination of 80% of the Mexican exports.

IMPORTANT INFORMATION TO KEEP IN MIND:

  • Mexico is part of 12 free trade agreements with 46 countries.
  • The United States and Canada are its main trading partners (NAFTA).
  • 68% of the Mexican GDP derives from foreign trade.
  • Almost 90% of Mexican exports are manufactured goods.

Nowadays, Mexico stands at the prelude to new markets to be explored, all of them full of magnificent opportunities and, according to experts, a plethora of opportunities to do business with growing economies. Therefore, the optimism keeps building up and the new era of trade points to new alliances.

“WAKING UP THE TIGER” OF MEXICAN TRADE

The president of the Mexican Business Council for Foreign Trade (COMCE) in Colima, Hugo Herrera Mier, pointed out that consequent to the decisions on foreign trade taken by the United States’ new government, the Mexican exporting sector is taking the necessary measures to diversify its markets. “There certainly are many exporters who are married to the US market and it will be difficult for them to diversify their markets. However, the US position towards NAFTA will be a pivotal indicator on the extent these companies will be forced to look for new business opportunities”.

So far, the US has cancelled its participation in the TPP, but has not walked out of NAFTA, although it is interested in modifying it. Since Mexico and Canada are also willing to do some modifications, I do not think the US is willing to stir things up and affect its two bordering partners; I believe that many pros and cons will be discussed and that this could be beneficial for the NAFTA which urgently needs an update.

In the community where I participate as COMCE, “the tiger is being woken up.” We realized there are many more markets and that we have ports such as Manzanillo where we are already approaching the main world market, which is the Orient. This is due to the great number of consumers for the wide variety of foods that Mexico produces.

“You’ve got to get your act together, open yourself to new markets and stop depending on the United States. That is a good thing, it will make us move and create new businesses. This could be even better than before. For instance, land freight to the northern region of the US is more expensive than a maritime freight to Asia. Therefore, you cannot make excuses about freight costs or product scarcity. You are simply opening to new markets which have been unexplored because you feel comfortable with the ones you have nearby.”

Regarding agriculture, COMCE is creating a new division for agribusiness, and I will be part of the national committee. Undoubtedly, this is one of the important sectors in Mexico’s future. We must have excellent logistics to help agriculture moves ahead, and we need to focus on being more efficient.

I see this as an opportunity to grow. Instead of people continuing to sell their crops, offering them right after the harvest or having the responsibility for retailing them, it is best to sell them to Asia where there is a market for it. I can only see opportunities, nothing else.

Potential growing markets where we have started to work on are in Asian countries. There are a lot of them, and not all of them have Mexico’s climate. Some of them are big, for example China, and they are interested in our products. There are even countries with a bigger purchasing capacity than the United States, and we just need to figure out what product to focus on.

There will be changes, yes, but positive ones. Regarding, the automotive industry, I can tell that factories will try to generate Mexican suppliers to make a tariff leap and make them Mexican products. NAFTA conditions will always be better than those of China or Japan. That will result in automotive makers opening factories in Mexico, so their products are Mexican and can enter the United States.

Autoparts, mining, medical and electronic devices amongst the main opportunities

According to the Secretariat of Economy, commercial exchanges between Mexico and the Asian continent increased 172% from 2016 to 2016. The main opportunities for Mexico’s exportations are mining, auto parts and medical and electronic devices.

So far, Mexican exports to Asia have focused on less than 10 products, amongst them meat and tequila, which are dynamic markets. However, there are many more products which Mexican producers could sell to those countries, and this is the right moment to do it. Countries such as China, Japan, Taiwan and Korea have displayed great commercial opening towards Mexico in a new business era where our country stands out more in the global level and its products are making their way in foreign markets.

IT IS TIME TO LOOK TOWARDS ASIA: PROMEXICO

Promexico’s delegate in the State of Colima, Carlos Ugarte Dombierer, pointed out: “Even though this is a complex moment for everyone, we have to wait and see how things related to foreign trade with the United States evolve. It should be understood that it is not only a decision made by President Donald Trump, but that the changes must be endorsed by Congress because of all the interests that could be affected on both sides of the border; we must stay calm and wait.”

In my opinion, bilateral trade will not stop, although there may be some variations or partial interruptions in some departments. but the economic situation between the two nations cannot be stopped while all the adjustments are made.

Nonetheless, this is a crucial moment of opportunity for this country, given that Mexico is part of free trade agreements with other 45 countries, and these agreements have not been fully exploited. Our main consumer, with 80% of Mexico’s international trade, is the United States followed by Canada as the second commercial partner with barely 4%, and then the rest of the world. Think of all the potential we have. We must take advantage of it and develop it.

There is a large market for Mexican products, and it is time to look around to other countries and continents, to focus our effort on two fronts and understand that independent from our trade with the northern neighbor, it is urgent to start turning our heads towards Asia, Europe, Latin-American and Africa. We must identify other countries’ needs because there is a huge international market for Mexico and we must get to them.

DUPLICATE TRADE WITH CHINA

In short, experts agree that Mexico not only has new opportunities in Foreign Trade, but there now opens a little explored horizon with a range of surprising alternatives. One of them is the possibility of doubling its trade with the Asian giant, China, through a platform built on organization, quality and competitiveness. Also, lower tariffs, better technology, connectivity and good relations that will be strengthened in favor of both countries.

COUNTRIES WITH WHICH MEXICO HAS FREE TRADE AGREEMENTS

Mexico is one of the countries that has more free trade agreements than any other country in the world. It is part of 12 agreements in three continents that involve 46 countries. The most significant one is the North American Free Trade Agreement (NAFTA) which, from the start, has increased by almost in 300% in trilateral trade amongst Mexico, the United States and Canada. Another agreement which is very important to increase the global trade network is the Trans-Pacific Partnership (TPP), but it has been momentarily affected by the United States exit.

Colombia, Chile, Israel, European Union, Iceland, Liechtenstein, Norway, Switzerland, Uruguay, Japan, Peru, Central America, Panama, Pacific Alliance.

TPP

Exports and competitiveness are boosted through these agreements. Besides, it benefits consumers with lower prices on many products.

COLIMA ALREADY EXPORTS

Faced with the commercial and economic scenario in Mexico, it is convenient to analyze the position of companies in Colima to face challenges in a new era in foreign trade. Just with a glimpse, we discoverer the great potential of the companies that already export and those who are about to export their products to new markets.

ProMexico’s delegate in Colima, Carlos Ugarte Dombierer pointed out that there already are companies that export, especially in the agribusiness sector; they are well consolidated firms that know the international markets, are strong and keep growing. There are also SMEs (Small and Medium Enterprises) that are becoming exporters, and they extend to the information technology sector which is fast developing in the economy of Colima.

Within the agribusiness, products such as lemons, coconuts, papayas, cantaloupes, watermelons, blackberries, cranberries and coffee from Comala, among others, have a great potential now that the Chinese market is open because it allows the import of more Mexican products. For instance, in the Information Technologies sector, there is special software adapted for very specific apps which is finding its place in certain international markets with Mexico. Additionally, there are companies in Manzanillo related to agribusiness and sea products sectors that are already exporting.

Regarding logistics platforms that COMCE created in collaboration with ProMexico, all the members of the logistics community in the Port of Manzanillo gathered to make a platform with the specific mission to find out what is necessary and what are the requirements that will provide the capacity to have an integrated logistic port in the next 30 years. COMCE and ProMexico worked together in the agribusiness and logistics platforms, and that is going to give a tremendous boost in the medium and long term in the State of Colima, which will create first world conditions to generate exports.

HOW COMPLICATED IS IT TO EXPORT?

ProMexico’s president explains: starting an export is not simple. If it is a SEM, it is even more complicated because of all the costs that need to be paid. Mainly financing, but more than anything you need a lot of knowledge, training and counseling on how to do it.

A common error made by local producers is that they want to export when they are not doing well in domestic markets. However, to become an exporter you first need to have a very strong and consolidated domestic market. It does not have to be huge, but the company must be consolidated and have a stable economy. They should know their market, the requirements and their own product or service. This will generate growth in business and then the possibility to start exporting. Later comes all the necessary aspects to go beyond the border, such as the required types of certifications, where and to whom the product will be sold, administrative and financing costs, as well as knowing their domestic competence. All of this calls to develop a business plan which is fundamental for exporting, because it encompasses important aspects. For example, it covers sales projections for several years, financial behaviors, products that will be exported or added for future exportations, etc.  It takes great effort, but once it is accomplished, it becomes a great instrument that benefits the company and allows it to focus its resources and efforts towards foreign trade.

For Mexico, this new trade era must be characterized by unity. It is time to solve internal problems that have afflicted us such as corruption, violence and crime. We must not be afraid of exporting. There is a lot of work to be done, but it must be done with intelligence instead of fear. There must be trust and work with others. As federal government, we can help you achieve your goals.

COORDINATION WITH THE PORT OF MANZANILLO

 For ProMéxico’s delegate in Colima, Carlos Ugarte, this delegation possesses a special interest in working with the Port of Manzanillo and its companies, in collaborating and being part of its plans, tendencies and future growth. Undoubtedly, this precinct will position itself as the most important in Latin America. “The port’s growth encourages us and gives us confidence in development. The entrepreneur must know that every time   there will be more infrastructure, that equipment and technology will be at their disposal, and that an entire platform of professionals will mobilize your cargo anywhere.”

IMPORTANT FACTS

ProMexico alerted its branches in Asia, Europe, Latin America and Canada to look for potential markets for Mexican exporters. It has 48 branch offices overseas. Some of them are regional, which cover all the world that is economically active and industrialized. It works in three major axes, which are exports, direct foreign investment and the internalization of Mexican companies overseas.

Many companies in Colima have already gone international, and one of them has recently opened a branch office in Switzerland.

COMPANIES IN COLIMA THAT ALREADY EXPORT

 Sause “La Colimeña”

 “We are a small Company in Colima which has a great vision for expansion. We have already approached overseas buyers, not only in the United States, but also in Peru, Chile and some other countries in South America and Europe. There are some Asian companies that are very interested in taking our products to other markets. It is no longer complicated to reach the exporting goals for our brands, especially thanks to the excellent support provided by the Mexican Council in Foreign Trade (COMCE Colima), ProMexico, the Secretariat of Economy and the Secretariat of Economy Promotion of Colima.”

Bruno Guerrero

Representative

Ramamy Organic Bananas

 “We have grown bananas in Colima for 45 years with a domestic market, but 18 years ago we started growing organic bananas and we are now exporting to the United States, Japan and some countries in Europe, but we keep increasing our markets. In the beginning, logistics were difficult, but now we have a lot of orientation and potential, and we have found the basis to send our perishable products to distant countries without damaging them. I believe Colima has more potential to export. People must know that we can already get to other destinations in the world, not only to the United States. They should also know that through training we learn new processes to move ahead. Ramamy has branch offices in Guadalajara, Cerro de Ortega and Colima, this is where our major brand belongs.”

 Guillermo Durán

Representative

Tio Noni

“Undoubtedly, Colima has received great support in the exporting sector. We were disconnected but through seminars and meetings such as the Training Platform from COMCE, we can now display our products and establish goals to export. Noni is a 100% natural and artisanal juice, and a nutritional supplement, that is produced, processed and bottled in Manzanillo. We ship that to different markets, having recently exported it to the United States. Nowadays, we are looking for new destinations where we could sell, mainly in Asia. Therefore, we keep working with authorities and organizations such as COMCE Colima to fulfill those objectives.”

Juan Andrade Rodríguez

Representative

SMALL COMPANIES IN COLIMA THAT ALREADY COMPETE IN FOREIGN TRADE: ECONOMY

 “In 2017, the Secretariat of Economy plans to support mora than 2 thousand company projects in Colima. Our objective is that they can compete in new markets. Small and medium enterprises represent 98% of the economic units in the country. That is why we work so they are not isolated and become more productive; even setting goals to reach foreign markets. Regarding commerce, we know that China is an important country that can replace the United States as Mexico’s strongest consumer. The trade potential it represents is huge, and that is where we need to start looking at. Regarding the economy, 2016 was a very productive year for Colima and 2017 seems to be more dynamic, because even though there are major challenges, we also know that we have the potential to move ahead internationally.”

Agustín Trejo

Economy Delegate in the Estate of Colima

 

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