Higher levels of investment
César Salazar, a researcher at UNAM’s Institute for Economic Research, points out that Mexico has gained a lot Relevance in the automotive sector based on foreign direct investmentsince settling in the country means for companies their front door to the US market.
In interview with Expansion highlights that the recent ruling ensures this continuity of investmentsby implying greater facilities to access the North American markets.
Although, according to the National Auto Parts Industry (INA), from January to September of this year, Foreign Direct Investment in the country’s auto parts sector added 1,271 million dollars, the figure could be increased for later years.
“What is interesting about all this are the announcements that have been made in recent months, which have been analyzed for more than 10,000 million dollars in direct foreign investment for our country, and those that we have seen in this last quarter will be reflected already from the first months of the following year”, added Alberto Bustamante, general director of the INA, at a press conference.
Rosales points out that another factor for the higher levels of investment is the discrepancies between the commercial relationship between China and the United States, which motivates the relocation of companies in the North American region.
A boost to exports in the region
From January to November there have been 3,068,810 vehicles in Mexico, of which 85.4% have been destined for export, according to the National Institute of Statistics and Geography (Inegi). A stricter T-MEC might have motivated more automakers to put it aside and take advantage of the tariff.
From the perspective of Gerardo San Román, director of Jato Dynamics for Latin America, the recent ruling, which involves the commercial exchange of duty-free units, it will be an incentive for vehicle exports to the United States, being able to reach that 90% are destined to other markets or even a higher percentage.
As “unfortunately the local market is not characterized by being the most profitable, because we are more used to paying for the price”, the units assembled in Mexico will have other markets as their main destination. Exports have the United States as their main arrival destination, followed by Canada and Germany, according to the Inegi.
The interpretation given by the United States placed automakers at a disadvantage since, by not complying with the VCR, I was thinking of filing a tariff of up to 17%as suggested by some reports from the government of that country.
A surplus trade balance
The production of the automotive sector during yeshaving better results than the trade balances of petroleum products.
Mexico has, among its more than 20 assemblers distributed throughout the national territory, a installed capacity of up to 5 million units per yearof which just over 3 million are assembled on average, according to Inegi figures.
Both Salazar and San Román agree that the recent ruling could be an incentive to maintain a surplus automotive trade balance –which in the first semester of this year wasof 53,300 million dollars–, by motivating export.
The figures of the trade balance of the sector for the first half show that this year will have better results compared to the previous one. Throughout 2021, it generated a surplus of 84.893 million dollars, that is, it in the first six months of the current year it is already at 62.8% of last year’s total.