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Gabriel González: Trends and new players in foreign trade

Gabriel GonzalezGabriel González Source: Courtesy

The vaccine to prevent COVID-19 is already a reality and the numbers do not lie, at the beginning of this week the United States registered more 52 million people vaccinated, 15.98 doses applied per 100 people, Canada, which bought more than the vaccines necessary to cover its population, has 3.23 doses per 100 inhabitants, Mexico already exceeds the 0.56 doses applied per 100 inhabitants and accelerates its vaccination program. This is undoubtedly a very important trigger to expect economies to reactivate rapidly and therefore foreign trade will report two digits of growth.

The Economic Commission for Latin America (Cepal) argues that Mexico is the Latin American country with the best perspective to benefit from the reconfiguration of world trade from the Covid-19 pandemic and therefore exports are expected to reach a growth rate between 15 and 25 percent in 2021.

In this regard we obviously consider a better macroeconomic environment, with the caution that these figures should have assuming the recovery of the United States and that there is a boost to North American value chains. The countries with greater commercial ties with the North American neighbor could benefit from relocation, through which multinational companies seek greater proximity to the market of the largest economy in the world and Mexico will benefit the most.

The growth estimates For this 2021, the 5.1% of the US and 3.6% of Canada should boost the economy of Mexico, hence the specialists project a growth for our country of 4.3%, this growth will be concentrated mainly in exports of the manufacturing sector and agricultural.

There is a general recovery in volumes that began last August, although demand shows a variation in the Cross-border service due to the fact that consumer preferences in the United States have changed due to confinement.

Among other data in 2020, the Mexican agricultural exports reached a value of 18,682 million dollars, reflecting an increase of 4.7% compared to that reported in 2019, according to official data, in a highly atypical year impacted by the health crisis caused by COVID-19, where different sectors showed heavy losses. Among the structure of the country’s total exports, agriculture and livestock reached 4.5% last year, according to data from the Bank of Mexico.

The high demand for food due to confinement not only increased the volume of exports of agricultural products and their processed products, but also resulted in an increase in the production of products necessary for their packaging, hence we are happy to see new Mexican players exporting packaging material, mainly to the USA, which used to only cover the domestic market.

We are neighbors of the main consumer of this type of products and that gives us the enormous opportunity to arrive with large volumes, in short times and at competitive costs, without a doubt our country is competitive in this sector and its consolidation will depend on how quickly we react to the challenges ahead.

In this regard, it must be taken into account that the thousands of producers in Mexico who send large volumes of merchandise and who cross the border daily to the United States or Canada, have increased their demands for the movement of their shipments, triggering a greater specialization among the trucking companies, customs brokers and distribution warehouses.

The main demand that has been established is the ability to maintain the temperature throughout the shipment and at the ideal level to extend the life of the products, to reach the shelf or restaurant with the highest possible quality or freshness, hand in hand others such as lower transit times, merchandise visibility and traceability technologies, as well as flexibility and service availability.

The borders of Pharr, TX and Laredo, TX saw their volumes increased in this sector, on his occasion Luis Bazán, director of the Pharr International Bridge pointed out as an important fact that despite everything that happened in 2020 with the Covid-19 had the best year of crossings in perishables on that bridge, almost 200,000 shipments in 2020, each month had been representing a growth of 25 or 35% of all the product, and at the end of the year it was estimated that 70% of agricultural product of the total number of crosses, which came from Mexico to the United States.

Despite the increase in volume that we saw from the second semester, in general, the value of Mexican merchandise exports in 2020 was 417 thousand 670 million dollars, which represented a decrease of 9.34% compared to the previous year, giving as a result, the worst fall in 11 years, according to data from the National Institute of Statistics and Geography (Inegi).

Shipments abroad registered their worst fall since the 2009 crisis. On that occasion, exports sank 21.16%. In addition, they finished with three consecutive years of progress. Non-oil exports registered 400,256.9 million dollars or a decrease of 8% during the past year, its worst fall in eleven years.

Shipments from manufactures totaled 374 thousand 166.9 million dollars, that is, a drop of 8.9% was observed compared to 2019. In a disaggregated manner, automotive exports decreased 16.8%, while non-automotive exports advanced 4.5%.

As a reference we have to point out that exports by Nuevo Laredo 2021 begins with great rhythm, after the inevitable decrease in the crossing of goods through the most important commercial border of Mexico, exports recovered their rhythm since the beginning of the second semester, and not only that, but the beginning of 2021 has registered an important rise in demand.

Finally, a relevant point to follow up is that the Ministry of Economy and the Tax Administration Service seek incentivize reliable exporting companies. The head of the secretary Tatiana Clouthier stressed that one of the challenges for the short term is how to increase the national content of products, especially those for export.

There is much to do, but the reality is that Mexico is well positioned in foreign trade and the response to the challenges that our commercial activity must overcome in the future will be put to the test.

At P&P Global Logistics, we provide a diversified portfolio of transportation management services, as well as solutions in supply chain management, including warehousing and Mexican customs clearance.

We are also proud to own P&P Transport, a company focused on providing international ground transportation services in dedicated 53-foot boxes. Our exchange agreements with well-established and reputable Mexican carriers allow us to provide door-to-door freight service between the United States, Mexico and Canada.

At P&P Global Logistics we help manufacturers, retailers and distributors optimize their supply chain operations and increase performance, from small and medium-sized businesses to global brands. By offering the optimal combination of operational experience and use of technology, achieving greater control of your transport operations, greater visibility and reduction in transit times.

The author is Managing Director at P&P Global Logistics.

Give your opinion: ggonzalez@ppgloballogistics.com

This is an opinion column. The expressions used here are the sole responsibility of the person signing them and do not necessarily reflect the editorial position of El Financiero.