In June 2015, the Global Chamber, an international networking group of business executives, hosted a meeting at the New Consulate of Mexico in Tucson, Arizona. Mexican consul Ricardo Pineda spoke to Arizona private sector companies about the growing value of trade with Mexico. Economic partnership between the U.S., Mexico and Canada has flourished under the North American Free Trade Agreement, and a recent article in The Arizona Daily Star reports that Mexico - behind only Canada and China - is now the third largest trade partner for the U.S.
Pineda told The Star that for Arizona, Mexico claims the No. 1 spot with more than $21 billion in exports for 2014.
What makes Mexico matter?
An April 2015 report from The Boston Consulting Group, a global research and services firm, shows there are good reasons for Arizona exports to flourish in Mexican markets.
- Mexico has implemented broad-based reforms to education and taxation.
- Foreign countries currently invest billions of dollars each year into infrastructure to capitalize on the emerging high-tech, aerospace, automotive and medical device manufacturing industries.
- Mexico has a young, educated and budget conscious population. These talented, youthful Mexicans are entering the workforce, many for the first time. The Boston Consulting Group said that even with modest economic growth, Mexico should see a 1.6 million increase in middle-income households in the five-year period from 2013 to 2018.
This all points to opportunities for Arizona - and U.S. - companies to work Mexico into their business plans. For some, Mexico might simply be a set of target markets for exported goods. However, companies are also looking to establish a more substantial, permanent presence in Mexico. For many, a shelter program may the best way to try the waters south of the border while easing into the regulatory and legal requirements of a standalone operation.
Trade is a two-way street
The flow of commerce between Mexico and U.S. states like Arizona benefit both sides of the border. The Arizona Daily Star reports that 40 percent of the material components in U.S. imports from Mexico are originally manufactured in the U.S.
"Mexico is becoming a serious player in the global economy."
What we're seeing is Mexican manufacturing supporting domestic jobs in the U.S. Pineda told The Arizona Daily Star that more than 6 million U.S. jobs are dependent on trade with Mexico. This mutually beneficial trade relationship is changing the historical export and import math between Mexico and the U.S.
While the U.S. maintains a trade deficit with Mexico, that deficit is decreasing relative to trade volume. In 1995, just a few short years after NAFTA was signed, trade between the U.S. and Mexico totaled roughly $108 billion with the U.S. running a deficit of nearly $16 billion, the U.S. Census Bureau reported.
In 2005, shared trade had risen to $390 billion with the U.S. $50 billion behind Mexico. In 2014, trade between the two countries totaled more than $534 billion. Blossoming Mexican markets are warming to U.S. exports, however. In 2014, the Bureau reports that the U.S. trade deficit with Mexico rose only 8 percent to $54 billion, as compared to the corresponding 37 percent increase in overall trade.
Mexico is changing. Across many industries and in fundamental ways, Mexico is becoming a serious player in the global economy. For U.S. companies, access to deep and talented labor markets is a key strategy for manufacturing success. For strategically positioned states like Arizona, Mexico also promises to be a hot consumer export market.
Thinking about manufacturing in Mexico? Download this ebook and start moving your due diligence forward.
