Mexico.

Copyright: European Union Public License, version 1.2 (EUPL-1.2).

Table of Contents.

1. Overview.
2. Benefits of Mexico.
3. What to import from Mexico.
4. What to export to Mexico.
5. Workforce demographics.
6. Regulatory environment.
7. Cryptocurrencies in Mexico.
8. Opportunities created.
9. Contact us.
10. Sources.

1. Overview.

Mexico has a well-established, robust, and complex trade economy. Ranked as the world’s 11th largest population at 126 million and the 11th largest economy at US$2.4 trillion (see source 4), Mexico leverages its extensive network of trade agreements to be a valuable economic partner. Mexico currently runs a trade deficit of US$12.8 billion (see source 9) and an increasing GDP of US$1.15 trillion (see source 12), reflecting its growing consumer base as well as opportunities for local industry to be developed.

Mexico boasts a wealth of social, industrial, and natural resources. From its high skill workforce and ability to produce electronics, computers and smartphones, machinery, and agricultural goods, to its land, minerals, oil and gas, and solar, wind, and renewable resources (see sources 4, 9, and 16). These resources, in conjunction with newly appointed Pres. López Obrador’s focus on supporting workers, have created major trade opportunities. Namely, supporting local manufacturing of technical products, capitalizing on Mexico’s drive towards sustainable development, and connecting high skill workers with decentralized work opportunities.

2. Benefits of Mexico.

Nowhere are Mexico’s industrial, natural, and social resources better exemplified than by its capacity to produce and benefit from renewable resources. For example, if the cost of emitting CO2 were set as low as US$10/ton, Mexico could viably replace much of its fossil fuel use with low-carbon technologies such as hydropower, biomass, geothermal, cogeneration, and wind (see source 7). Where Mexico is at its narrowest between the Pacific Ocean and the Gulf, high-quality wind and viable land provide some of the most cost-effective wind power in the world (see source 7). Mexico also has some of the best sun coverage in the world, helping produce high crop yields (see source 19). In 2018, Mexico’s exports for fruits and nuts rose 18.5% despite poor rainfall (see sources 15 and 17), securing Mexico’s position as a leader in combating food scarcity around the globe (see source 14).

Mexico offers opportunities to market agricultural technology and infrastructure, either through trade or domestic manufacturing. Opportunities exist in: better utilizing agricultural residues to create a biofuel industry (see source 18), as well as developing a more sustainable, though still profitable, corn industry (see sources 4 and 15).

Now is the perfect time to capitalize on trade through Mexico. With 12 Free trade agreements in 46 countries across the Americas, Europe, Asia, and the Middle-East, as well as being the primary connection between North and South America, Mexico has access to over a billion consumers and 60% of the world’s GDP (see source 15). Policy and infrastructural developments, coupled with a growing consumer class have led to a rise in cross-border e-commerce (see source 8). With the US demonstrating that it is unreliable and China establishing connections to Latin America, Mexico may seek to diversify its trading partners. Additionally, Pres. López Obrador will look to trade as one of the few sectors capable of funding his social initiatives (see source 1).

Mexico possesses an underutilized high skilled workforce. Both in terms of technical proficiency and education, Mexican workers are often unable to find work that matches their skills. As such, there is significant space to support local industry, especially advanced manufacturing (see source 16). Similarly, decentralization of labor and knowledge can provide opportunities for the highly educated to find employment and create at the real value of their work.

3. What to import from Mexico.

Due to its history with colonialism as well as relations with the U.S. and other developed nations, Mexico’s export economy is dependent on selling its resourced, produced, and manufactured goods. Of note, agricultural products comprise a relatively low portion of Mexico’s exports despite the fact that Mexico devotes over 50% of its land to agricultural purposes (see source 17), indicating room for more efficient and innovative farming practices. Though investment into manufacturing infrastructure has greatly improved Mexico’s capacity to provide quality jobs (see source 16), Mexico remains an exporter of human labor. This is especially true amongst its high-skilled and educated citizens who cannot viably maximize value for their work, creating significant opportunity to better utilize Mexico’s workforce.

Top 10 Exports:

1. Vehicles: US$101.7 billion (24.8% of total exports).
2. Electrical machinery, equipment: $81.6 billion (19.9%).
3. Machinery including computers: $65.9 billion (16.1%).
4. Mineral fuels including oil: $22.6 billion (5.5%).
5. Optical, technical, medical apparatus: $17.5 billion (4.3%).
6. Furniture, bedding, lighting, signs, prefab buildings: $10.7 billion (2.6%).
7. Plastics, plastic articles: $9 billion (2.2%).
8. Gems, precious metals: $7 billion (1.7%).
9. Vegetables: $6.7 billion (1.6%).
10. Fruits, nuts: $6.6 billion (1.6%).

4. What to export to Mexico.

Mexico focuses on importing the equipment necessary to maintain its production economy. In consideration of its trade deficit, Mexico spends more on importing the machinery to produce its exports. Though Mexico exports produced goods around the world, it has little control over its own ability to produce. Importantly, this indicates that Mexico would benefit greatly from an improved capacity to produce such machinery domestically.

Top 10 imports:

1. Electrical machinery, equipment: US$85.9 billion (20.4% of total imports).
2. Machinery including computers: $71.1 billion (16.9%).
3. Vehicles: $41.6 billion (9.9%).
4. Mineral fuels including oil: $35.5 billion (8.5%).
5. Plastics, plastic articles: $23.2 billion (5.5%).
6. Optical, technical, medical apparatus: $15.1 billion (3.6%).
7. Iron, steel: $10.2 billion (2.4%).
8. Articles of iron or steel: $9.4 billion (2.2%).
9. Organic chemicals: $8.7 billion (2.1%).
10. Rubber, rubber articles: $6.9 billion (1.6%).

5. Workforce demographics.

Mexico’s workforce includes 63% of the 15 to 60-year-old population and primarily lives in urban areas and commercial hubs. Younger generations are pursuing higher skill and education life trajectories, with STEM fields being the most popular among Mexican students (see source 16). Unfortunately, higher levels of education can increase the risk of unemployment in Mexico, especially among women. In 2012, Mexico was unique among OECD countries in this way. Typically, this disparity is caused by poor infrastructure and frameworks for supporting technical business (see source 11). Compiling estimates, there may be as many as 1.1 million people whose high levels of education are being underutilized and undervalued (see sources 12 and 7).

6. Regulatory Environment.

Existing regulation in Mexico supports a trade economy based on resource and product exports. Production materials and finished goods can even be traded tariff-free (see source 16). However, incoming regulation will shift Mexico towards high skill production. Under the new USMCA deal, Mexican automobile production will be significantly supported, with the US and Mexico securing 75% of auto production in North America (see source 3).

Newly appointed President López Obrador’s policy agenda will change Mexico’s trade objectives. His ambitions center on improving the lives of workers by addressing wages, working conditions, and job opportunities. New policy intends to use infrastructure to support the Mexican people and economy by reducing barriers to entering markets – additionally, Pres. López Obrador aims to make Mexico agriculturally independent, creating a window of opportunity to capitalize on farming innovation, technology, and sustainability (see source 1).

7. Cryptocurrencies in Mexico.

Within Latin America, Mexico is a leader for its openness to financial technology and cryptocurrencies. Mexico is home to the most crypto exchanges and Fintech companies among Latin American countries (see source 5), and was the first to establish a legislative framework that supports the use of cryptocurrencies for cash, debit, and credit (see source 2). Part of this framework gives Mexico’s central bank significant oversight and monitoring capabilities over Fintech companies and crypto users, with companies having to apply to operate in Mexico (see source 6), restrictions on which cryptocurrencies can be used in legal transactions (see source 2), and limits and fines controlling how cryptocurrencies are used (see sources 6 and 10). These measures largely serve security, anti-fraud, and anti-laundering purposes (see source 10), and will not impose significant obstacles onto users.

By utilizing Waves Platform, a program which allows for easy transactions between fiat and cryptocurrencies, Ubinodes operates well within Mexico’s regulatory regime. Mexican citizens and companies are eligible to use Waves Platform, however at this time Mexican Pesos are not directly supported by it. As such, the supplementary service Coinomat can be used to integrate Pesos into Waves Platform and transact accordingly.

8. Opportunities created.

In identifying the myriad ways importers and exporters can benefit in Mexico, it is clear that both large and small businesses have opportunities to thrive. At Ubinodes, we hope to especially support smaller enterprises, helping them to successfully expand into new markets.

A. Improving infrastructure.

A limiting factor for Mexico’s innovation, industry, trade, and labor is poor infrastructure (see source 11). Addressing this is among the most cost-effective ways Mexico can improve its economy. The United Nations has identified: improvements in transportation, making government and public buildings more energy efficient, installing street lamps, and developing geothermal power as the most efficacious actions Mexico could take (see source 7). Pres. López Obrador has also highlighted infrastructure as a focus of his administration (see source 1). Since Mexico may not currently have the manufacturing capabilities to implement these updates, importing may prove useful.

B. Supporting technical manufacturing.

Between Pres. López Obrador’s agenda, an abundance of high skill and high education workers, domestic need, and previous investment into manufacturing infrastructure, the time is now to support Mexico’s technically advanced industries. Increasingly, foreign markets are realizing the quality of Mexican machinery, with vehicles being Mexico’s third-fastest growing export sector by value, increasing 15.5% since last year due to international sales (see source 21). Additionally, the value, efficiency, and sustainability of domestic agriculture, infrastructure, energy production and use, and labor would be significantly benefited (see sources 4, 7, 12, 14). Ubinodes, having been founded by Love4aviation, a company dedicated to the trading in the heavily regulated aviation sector, is expertly equipped to especially support aerospace manufacturers, an already growing industry in Mexico (see source 16).

C. Developing sustainability.

Mexico can easily benefit from sustainable resources. To quickly and effectively do so, trade will be a vital resource. For example, Mexico faces difficulties procuring the necessary equipment to utilize its high-quality wind. To rapidly begin harnessing this resource Mexico can turn to imports while domestic manufacturers catch up (see source 7). Mexico also has a surplus of agricultural residues that could be used for biofuels. Through trade and domestic use, such a biofuel industry would yield upwards of US$ 4.1 billion (see source 18). Biofuel production would also leverage Mexico’s already growing fuel exports, which rose 25% by 2017 (see source 21). As identified by the UN, for Mexico to achieve a low-carbon future it will need to develop a more sustainable forest products industry, such as for the production of paper, lumber, and biomass. Necessary for such an upstart industry will be finding and exporting those sustainable products to new markets (see source 7).

Another UN recommendation highlights the need for changes to Mexico’s corn production, focusing on ‘Minimum Tillage’ practices as an effective way to ensure a sustainable agricultural sector and reduce carbon emissions (see source 7). Minimum Tillage is a soil conservation and carbon sequestering method that requires specialized equipment but provides the same yields and economic viability as traditional intense tillage methods (see sources 7, 19, and 20). To obtain this equipment, Mexico can likely depend on imports. Alternatively, since few companies manufacture this equipment, there exists an opportunity for Mexican manufacturers to become leaders in minimum tillage, and then export their expertise to other countries seeking to develop their own sustainable agriculture.

There is significant space within Mexico to adopt more efficient goods. In the industrial sector, even minor increases to the efficiency of steam systems, kilns, and furnaces will have large benefits. Cogeneration, the process of combining heat and energy production, is also underutilized. With 80% of Mexico’s cogeneration potential being unused, imports could help it rapidly update. The same holds true in the private sector where there is a growing demand for efficient electronics, such as A/Cs, refrigerators, light bulbs, stoves, and water heaters, as well as cars (see source 7).

D. Nurturing high skilled labor.

Crucial to Mexico’s economic future is creating opportunities for its high skill and high education population. Doctors, lawyers, and academics must often find work as drivers, cleaners, and other informal jobs instead of maximizing the value of their credentials (see source 16). A key OECD recommendation for Mexico is to create better ties between its education and labor sectors (see source 11). A revolutionary way to do so would be through decentralization. In many regards, Mexico is primed as a laboratory for realizing Ubinode’s vision of the future. Developing platforms for Mexican workers to access a self-organizing global knowledge network would allow individuals to collectively contribute to projects, find employment, and create solutions.

E. Identifying partners.

One potential trading partner immediately identified by Ubinode’s consultant network is Nigeria. With a growing demand for imported alcoholic beverages, clothing, and electronics, Nigeria represents an important opportunity for Mexico’s smaller manufacturers looking for a new market. Though Nigeria does have a number of specific import restrictions, it is largely an import-dependent country and interested in developing greater relations with Mexico.

9. Contact Us.

To successfully access the Mexican market, you will need in-depth knowledge of Mexico’s trade economy and opportunities for entry. We make all this knowledge available for you and more, offering services such as freight forwarding, customs clearance, regulations, packaging, storage, designing websites, brochures, developing marketing campaigns, advertising, finding points of sales, and whatever is required to make your project successful.

With a focus on Small and Medium Enterprises, we provide profound analysis of your product(s) and its potential performance. If you are interested in exporting to or importing from Mexico, contact us.

10. Sources.

1. Americas Society – Council of the Americas. (2018). Mexico’s Future Trade Policy [online]. Available at: https://www.as-coa.org/events/mexicos-future-trade-policy
2. Bitcoin.com. (2018). Mexico publishes rules, puts central bank in charge [online]. Available at: https://news.bitcoin.com/mexico-rules-crypto-firms-central-bank/
3. Bloomberg. (2018). Mexico Trade Deal with U.S. Lets AMLO Focus on Domestic Goals [online]. Available at: https://www.bloomberg.com/news/articles/2018-10-05/mexico-trade-deal-with-u-s-lets-amlo-focus-on-domestic-goals
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5. El Universal. (2018). Mexico, Cryptocurrency leader in Latin America [online]. Available at: http://www.eluniversal.com.mx/english/mexico-cryptocurrency-leader-latin-america
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18. United Nations Conference on Trade and Development. (2012). Mexico’s Agricultural Development: Perspective and Outlook [online]. Available at: https://unctad.org/en/PublicationsLibrary/ditctncd2012d2ppt_en.pdf
19. United States Department of Agriculture – Foreign Agriculture Services. (2018). Mexico: Grain and Feed Annual [online]. Available at: https://gain.fas.usda.gov/Recent GAIN Publications/Grain and Feed Annual_Mexico City_Mexico_3-7-2018.pdf
20. University of Vermont. (2014). 2014 Minimum Tillage Corn Trial [online]. Available at: http://www.uvm.edu/extension/cropsoil/wp-content/uploads/2014-Min-Till-Corn.pdf
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22. World’s Top Exports. (2018). Mexico’s Top 10 Imports [online]. Available at: http://www.worldstopexports.com/mexicos-top-10-imports/