The new Cold War is a business opportunity, and Mexico looks better placed than almost any other country to seize it.
US-China tensions are rewiring global trade, as the US seeks to reduce supply-chain reliance on geopolitical rivals and also source imports from closer to home. Mexico appeals on both counts—which is one reason it’s just overtaken China as the biggest supplier of goods to the giant customer next door.
On top of resurgent exports, Mexico boasts the world’s strongest currency this year and one of the best-performing stock markets. Foreign direct investment is already up more than 40% in 2023, even before Tesla Inc. starts building a proposed $5 billion factory. Not since the signing of the North American Free Trade Agreement in the 1990s has the country held the kind of allure for investors that it has right now.
A lot of people expect India to be the country that will displace China as the main manufacturing hub, but Mexico, Bangladesh and Vietnam are actually much better positioned to fill that gap. And there is no reason why a single country should be dominant over a whole industry.
I’ve already seen “made in” labels change from China to Vietnam and other countries. I recently got some Nike gym shirts that were made in Jordan, of all places.
Nike gym shirts that were made in Jordan
There’s a joke about Air Jordans in here somewhere.
India is well positioned for trading services with the west because so many of them speak English.
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Good analysis. Although one thing to note here:
Less Mexicans trying to jump the boarder and enter the US illegally because they can more readily find jobs in Mexico.
The net migration rate of Mexicans coming in and also leaving the US is fairly stable and has been for a couple decades. The main source of inmigrant for the US is Central American countries. But your point still stands that a stronger Mexican economy likely means less immigration to the US from those nations since it would be easier to simply go to Mexico where they speak the language.
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It’s because the US dollar is currently worth 17.14 Mexican pesos, and currently worth (as an example) 7.87 Guatemalan dollars, meaning they are functionally making less money in Mexico.
Keep in mind a lot of these migrants are men who send money home to their families, so exchange rates matter hugely.
I worked in logistics for a while, so I should add one small caveat:
A lot of that will be stuff that comes from China and is then re-exported. IRC exports from China to Mexico increased something like 30% last year. I’m sure Mexico’s lovely, but I don’t think Mexicans are suddenly buying 30% more Chinese goods.
I saw this often. There’d be tariffs on Chinese products, then suddenly the exact same product would be made in Vietnam, Thailand, or wherever, a country which just happened to not be subject to tariffs. You can’t move a rice field over the border in half a month, so yeah.
Sometimes it was obvious fraud. Stickers over the original stickers.
Sometimes it’d be repackaged or ‘reprocessed’ so it was technically no longer a Chinese product.
but I don’t think Mexicans are suddenly buying 30% more Chinese goods.
I’m afraid you’re wrong with that. Mexico is buying more than ever directly from China retailers. Sales have skyrocketed since pandemic started. Chinese online retailers like Shein, AliExpress, and now Temu are mainly at the top of online retailers charts in Mexico.
Man those tarrifs must be sky high considering how much expense this would add over directly going and that is not even considering mexico wanting a slice of what passes through.
As it should be, neighbors borrowing back and forth makes the most sense. We can use rails to transport and not fuel guzzling ships. Also boasting the economy of neighbouring countries makes the people want to flee less.
I’ve got a feelin’…that republicans will reject it because it relieves an issue they love railing about. Illegal immigrants. It seems their platform is just hating on someone or something
The U.S. doing business with Mexico over China is great. Some pros I can already think of:
With increased transport using rails, it’d be easier to smuggle shit, therefore you’d think the cartels would be more cooperative. Which means less violence, less turf wars, etc.
Better for the environment. Much less fuel to transport stuff.
If Mexico’s economy improves, a lot of the illegal immigrants that would normally come to the U.S. would probably go to Mexico instead (closer, similar in culture and language).
Pretty much can’t think of a single con, other than prices going up a little bit. It’s worth it.
similar in culture and language
US is a big place, plenty of areas that they can move which the majority speak the same language and have the same culture.
Also as for cartel stuff, if the people are able to make good livings not doing drug stuff then they will. So hopefully their economy keeps improving along with their quality of life.
Honestly, with the way Mexicos leadership/politics and economy is heading, it’s positioned to be a decent power, and potentially be a more desirable location to live than the US sometime in the next century. Big fan of AMLO and hope he is setting them on a good trend. It’s probably only a matter of time before the US intervenes and makes sure they don’t go too far left though, so maybe I shouldn’t get my hopes up.
Hard pass.
Violence is beyond Afghanistan levels. I just came from there. The country is declining rapidly. Truckers are robbed and killed in main highways every day in broad daylight. Hours upon hours of waiting in traffic because cartel blockades or protests against them, with little show of the National Guard. Pollution is horrendous. Small towns seemed abandoned.
Nah.
I hope the US is willing to protect its investments there.
“Sometime in the next century” not right now
Paywalled
It’s Bloomberg anyway, I won’t spend my brain cells reading their version of the story
Balanced portfolio
