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Mexico’s Future Is in its Past

By Iván Cardenas - BeGo


By Iván Cárdenas | CEO - Wed, 04/20/2022 - 09:00

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Once known as the Venice of Mesoamerica, and crown jewel of the Aztec empire, the grand city of Tenochtitlan harnessed its power from its trade of products and produce tradition fueled by canals and thousands of canoes, a.k.a. chinampas. Enabling 60,000 people to gather at its marketplace (more than twice that of Toledo, Spain's capital at the time), was a humbling experience even for Hernan Cortes. Canals, canoes, and its people created a marketplace that would empower one of the most sophisticated civilizations in history.

Five hundred years later, the first quarter of 2022 is ending and global drawbacks and turmoil have come to light after living in a pandemic for over two years. The new reality renders a challenge for governments, multilateral agencies, and the East and West private industry since it is stressing global trade and supply chain systems, creating product shortages, such as semiconductor chips. 

In addition, the terrible and unfortunate Russian invasion of Ukraine hinders the worldwide produce and food production at an unparalleled scale. For example, around 29 percent of the global wheat production comes from Ukraine and Russia (representing 15 percent of human consumed calories), where harvesting and planting are currently on hold. Furthermore, the bump in natural gas prices and Russian export restrictions on fertilizer increased the cost of crops by three times on average and is expected to reach five times by the end of 2022. This includes corn, beans, and sugar, accounting for over 50 percent of Mexico's caloric intake.

The above means an increase in food prices for developed countries since they are used to overproducing by up to 20 percent of their average yearly consumption. On the other hand, it represents a food scarcity problem for developing and emerging markets (e.g., Mexico and Latin America) that are used to importing products and food to cope with their consumption demands. Nevertheless, this condition is hardly exclusive to food. As we have learned, it affects other products and industries, such as automotive components, electronics, fabrics and medical equipment. Hence, the opportunity lies in connecting those who have with those who need. Furthermore, providing visibility through a marketplace among underutilized goods, regions requiring them to meet their consumption requirements, and transportation means to exchange such goods. 

Mexico is uniquely positioned to become America's leading marketplace again as one of the world's Top 20 economies, the No. 1 commercial ally of the US (over China and Canada), trading more than US$600 billion annually, and due to its combination of technological, social and political advances and its geographical advantage, Mexico already is a manufacturing hub.

While Mexico's conditions provide an edge, it is only fair to recognize that the country faces challenges, mainly related to its primary means of trade: trucking. Ground transportation by truck accounts for 56 percent of shipped goods across Mexico, according to the SCT and SE, followed by boat and rail with 31 and 13 percent, respectively. Some of the hindrances that Mexico faces in achieving its true potential include driver/operator shortages due to working conditions, demanding schedules, and instability. According to CANACAR, while directly employing around 1 million people and indirectly financially supporting over 6 million families, the sector is shrinking by about 1 percent every year. However, it must increase by 20 percent to sustain the current market growth rate by 2025. While fleet management systems, CRMs, route tracking and optimization, and automized accounting technologies are available to private fleets and tier 1 or transnational companies, they only account for little less than 40 percent of the industry, leaving stranded most of the market, which is operated by small and medium companies owned and operated by truckers with small fleets of less than 30 trucks and typically six. It may not make sense for them to cover the cost of software development or streamlined adoption, let alone research the applications of artificial intelligence.

Becoming the primary marketplace of the continent is a substantial challenge, indeed. However, it is not unsurmountable, given the proper combination of technology, talent, capital and passion for complementing today's trucking and trade industries. It is even attainable for Mexico during the next five years to build a digital marketplace, harnessing its roads/canals, trucks/canoes, and people. Mexico's future is in its past.

BeGo is a digital marketplace using artificial intelligence to connect cargo shippers with truckers for the US$600 trade industry between Mexico and the US.

Photo by:   Iván Cardenas

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