Mexico is trade’s next big thing. Here’s why

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Las razones que estan detras del exito comercial de Mexico
In the face of global economic challenges, Latin America continues to supply trade opportunities and signs of growth. Here’s four reasons why regional giant Mexico matters to global trade.

1) Location, location, location
Mexico sits slap-bang in the middle of major trade routes. Its location – between the US and Latin America, with coasts on both the Pacific as well as the Atlantic Oceans – makes it perfectly placed as the gateway to and from the Americas.

With the newly expanded Panama Canal open, once American ports become fully modernised to accommodate the bigger ships using the waterway, Mexico will be primed to benefit from passing trade.

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Time-lapse showing the construction of the Panama Canal expansion 0:16

Last year Maersk Line transported 250,000 containers to and from Mexico, with the largest trade lanes between it and Asia. The US is Mexico’s top trade partner, which means the country has reaped benefits of nearshoring, when the production of goods moves closer to the markets in which they’re sold.

The result? Lower transportation costs, and therefore lower costs of goods. Mexico’s location is a winner.

2) Business is booming
In the 23 years since the North American Free Trade Agreement (NAFTA) came into effect, Mexico has joined 45 free trade agreements. That’s enabled it to become one of the world’s top 15 manufacturing economies, fuelling both economic and social development across the country.

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Mexico’s thriving industries include cars and tech.

Mexico ranks in the top five automotive manufacturing economies, a position set to be bolstered by the recent arrival of Kia Motors from South Korea, which could add up to 10,000 new jobs in Monterrey.

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Mexico's automotive sector is at full throttle 2:55

80%

of Mexican goods are transported by road and rail.

In Guadalajara, the growing tech industry has people calling it the Mexican Silicon Valley. The export value of technology products and services from the area reached USD 21bn, attracting business from tech giants such as IBM, HP and Microsoft. The tech sector now supports 115,000 jobs in Guadalajara alone.

A promising area for growth is agriculture; trade in refrigerated containers grew by 17 per cent in the second quarter of 2016, with bananas the fastest growing perishable export. With Mexico’s 65,000-plus certified organic acres to produce on, it could well push its way into the top 10 agricultural producers in the world.

3) Port power will boost infrastructure
Mexico’s infrastructure is undergoing a dramatic transformation and nowhere is this more apparent than the sweeping Port of Lázaro Cárdenas. Trade has more than doubled here in the past five years and a USD 900m investment from Maersk Group is set to have a two-fold impact on its capacity, which already stands at 1.2 million 20ft containers.

But it’s not just scale that makes Lázaro Cárdenas so notable. Once up and running in 2017, it will be LatAm's first semi-automated terminal, enabling bigger ships to dock and reducing the carbon footprint on goods transported. Now inland infrastructure needs investment to ensure goods can easily move from the coast to the hinterlands.

You only have to look across the Atlantic to Ghana to see how infrastructure projects bring benefits to communities. There, the development of the Port of Tema will trigger a USD 1.1bn rise in gross value added to the country’s economy and bring 450,000 new jobs.

4) Tequila!
For Mexico, tequila is much more than just a drink. It’s a job creator and an economic jewel.

The industry represents around 70,000 Mexicans, 80 per cent of whom are out in the fields, reaping the fruits of their country’s soil. And the fruits are considerable. Tequila’s export value broke the USD 1bn barrier in 2014, with sales of premium tequila in the US, its biggest importer, soaring by a whopping 365 per cent over the previous decade.

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Learn more about Mexico's tequila industry 3:40

Not content with quenching the thirst of its American neighbours, tequila is now exported to 120 countries in total, and Mexico is entering new territories with international powerhouses such as China – the fastest growing market for the drink. In 2013, the two countries signed a bilateral trade agreement dubbed the ‘Tequila Pact’, elevating the spirit to become one of the major products Mexico will be exporting to China.

In the past five years, Maersk Line has shipped 1 million bottles of the spirit worldwide and Mexico’s expanding horizons in trade could see this figure soar yet further.

Salud!

Botelleas Tequila