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News Article

Mexico Days Away From USMCA; Opportunities, Challenges Ahead

By Alessa Flores | Thu, 06/25/2020 - 10:20

Today, President Andrés Manuel López Obrador announced that in July, he will travel to Washington to meet with Donald Trump, US President and Justin Trudeau, Prime Minister of Canada to inaugurate USMCA. López Obrador also highlighted that his visit to the US will be to thank the US government for its support. "I want to go thank the US government and President Trump for the support we have received to face the pandemic because they helped us get ventilators," said López Obrador at the conference.

USMCA’s inauguration has generated various pronouncements by the industry, some in favor and some against. For Puebla, which stands out for its automotive industry, it has been an "economic breath of fresh air." Josefina Lombard Sánchez, General Director of the Mexican Council for Foreign Trade (COMCE) in the southern region, stressed that "the update of the agreement will represent opportunities for the productive sector in Puebla and will help SMEs participate in global value chains," she said in an interview with Milenio. She also stressed that Puebla will benefit from its relationship with the automotive industry, since it contributes more than 14 percent of the production and exports of vehicles in the country thanks to the Audi and Volkswagen plants.

However, USMCA also brings with it some obstacles. Eduardo Solís, International Consultant and former Executive President of Mexico’s Automotive Industry Association (AMIA), explained to Forbes Mexico that less than 30 percent of producers in the automotive industry comply with USMCA’s new rules of origin, which will involve "a process that may contain a negotiation with the US government or the payment of a compensation fee." It should be noted that Mexico represents 14 percent of all US exports and 38 percent of these are automotive, according to AMDA figures.

A sector that sees a great opportunity with the arrival of the USMCA is agriculture. Bosco de la Vega, President of the National Agricultural Council (CNA) said "the Mexican countryside sees the trade agreement between Mexico, the US and Canada as a great synergy," in a note by UDGTV. On the one hand, Mexico mainly exports vegetables and meat, while the US sends grains to Mexico. "The products that benefit the most from the renewed alliance will be tequila, beer, berries, tomato, chili peppers, eggplant, pumpkins, papayas and mangoes," said de la Vega.

To deal with competition and the uncertainty surrounding the treaty, IMNC has generated strategies to support Mexican products abroad. Viviana Camargo, Director General of IMNC, said in an exclusive interview with MBN that “IMNC was created after the signing of NAFTA amid the perception that Mexican products were in danger because the country lacked production standards and because we could not compete at the same level or at the same speed as our new commercial partners in terms of production. IMNC was created with the goal of introducing, translating and implementing these standards to the Mexican industry. Our mission is to elevate the competitiveness of the Mexican industry, to take it where it needs to be.”

Some suggest that in addition to promoting products, it will be necessary to create opportunities for different players. Juan Alberto Porras, Treasurer at CONCAMIN, told MBN that “the authority needs to find ways to integrate micro and small companies into the supply chain of medium and large companies. While NAFTA has been fairly important for the country and is the treaty that allows the largest level of economic transactions for the country, one of its greatest flaws is that it has neglected the incorporation of micro and small companies into global supply chains.”

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Alessa Flores Alessa Flores Senior Journalist and Industry Analyst