Alberto Villarreal
Managing Director
Nepanoa LLC

Podcast

/
Expert Contributor

Mexican Businesses Should Look to US Opportunities

By Alberto Villarreal | Mon, 08/15/2022 - 11:00

Mexican businesses in diverse industries must look to the US as their most viable expansion opportunity. Long gone are the days when selling to US businesses or consumers was a complex and often impossible endeavor. The current US-Mexico relationship and free trade agreement facilitate such an objective and more Mexican businesses should take advantage of it.

The US food market is one of the largest in the world with more than 330 million potential customers. With current trends and eating habits driven by a healthier lifestyle, “healthy” and organic products continue to gain momentum among American consumers. The global organic food and beverages market is expected to have a compound annual growth rate (CAGR) of 13 percent from 2022 to 2030, with North America as one of the largest consumers. Mexico has greatly benefited from this trend, becoming the main exporter of fruits and vegetables to the US.

In 2021, according to the United Nations COMTRADE database on international trade, the US imported from Mexico US$388.36 billion in goods across different categories, from vegetables and fruits to vehicles and machinery and many more commodities. This same year, Mexico was the provider of almost 80 percent of all the fresh vegetables consumed in the US. Avocados and tomatoes are some of the top products exported from Mexico to the US, with onion, chili, lettuce, lemon, pineapple, and banana also near the top. Alcoholic beverages are another important part of Mexico's foreign trade. For example, just in 2019, tequila and mezcal totaled US$1.964 million in exports. Some of the top Mexican companies exporting fruit and vegetables to the US are Reiter Affiliated Companies, Crown and Hassiba. For alcoholic beverages, we can find Constellation Brands, Heineken Mexico, Casa Cuervo and Casa Sauza, among others.

However, Mexico is not only a leader in the exportation of consumer and agricultural products. The country is among the world’s Top 10 manufacturing giants. It is also a leader in the automotive, aerospace and electronics industries, hosting global companies like Ford, Honda, and BMW in the automotive sector and Honeywell, Cessna, Beechcraft and Samsung in aerospace and electronics. The country’s proximity to the US makes it a more affordable and strategic industrial partner than China or India, not to mention the highly qualified human capital in the country. As companies in the US contemplate nearshoring due to recent trade conflicts outside the continent, operating in Mexico continues to be a priority.

Existing trade agreements solidify the partnership between the US and Mexico, through facilitating business between the countries. The USMCA, the most recent actualization of the Free Trading Agreement (NAFTA), will benefit Mexican companies expanding to the US and vice versa due to the new legal framework established by this agreement.

The recent Infrastructure Investment and Jobs Act (IIJA, or the Infrastructure Bill) proposed by President Joe Biden is also good news for US-Mexico relations. The US will invest US$1.2 trillion to improve the country's infrastructure from roads and bridges to railways and transportation safety, which will aid in transportation efforts coming from Mexico through the southern border. There are also various opportunities that arise from this bill, especially for companies in the energy sector as well as mining. IIJA is expected to ramp up demand in the US for mining by allocating US$26.9 billion to the Federal Highway Programs in Texas. The energy sector will also benefit from US$49 billion allocated to offshore wind projects in the US.

The aforementioned facts uncover exciting new opportunities for Mexican companies that are starting to turn their expansion plans toward the US. Regardless of the industry or sector, entering the US gives any company exposure to the largest consumer market in the world, with a GDP of US$20.94 trillion and a potential market of almost 330 million people. According to the US Census Bureau, in the first quarter of 2022, the total commercial value between Mexico and the US was 110 percent greater than that of China and the US.

Now more than ever, Mexican businesses must seek to expand into the US market. There is a proven need in the US for Mexican products and services and USMCA provides the appropriate framework to work on both sides of the border. The time for Mexico’s business expansion into the US is today.

Photo by:   Alberto Villarreal