NAFTA negotiations not Mexico’s only problem
Some two weeks ago in Mexico City, we organised and ran our second Automotive Leaders Summit. Although highly successful, and providing significant insights into many of the issues affecting the Mexican auto industry, the elephant in the room was, and is, the future of NAFTA, the North American Free Trade Agreement. I doubt if there was a delegate in the conference room who was not, at the very least peripherally, concerned about what the outcome of the current tripartite negotiations might be.
Last week saw the fourth round of talks between representatives of the three governments with several more scheduled. Thus far, at the time of writing, we seem to be no closer to resolving what is becoming an implacable impasse. In this respect, one cannot help likening the process to that of Brexit, another set of negotiations that appear to be going nowhere. The main focus of the talks appears to be the United States’ insistence on reducing its trade deficit with its southern neighbour, a deficit of $66 billion of which the automotive sector accounts for $54 billion.
NAFTA is not, however, the only issue confronting Mexico’s automotive industry. The Summit heard, from a variety of speakers, of the stultifying congestion, both at the ports - Vera Cruz being the prime example - and on the toll roads which is threatening Mexico’s ability to provide a satisfactory logistics infrastructure. Nobody seeks to decry the phenomenal growth of the Mexican auto industry, a growth which is forecast to continue, but the question must be asked - how much longer can the dearth of infrastructure support such growth?
This is not a new challenge. We have been talking about and bemoaning this issue for a very long time now. The Mexican government has been promising investment into the logistics sector for almost as long. All three governments agree on at least one thing: the NAFTA agreement is mutually beneficial and must not be allowed to collapse. But is President Peña Nieto’s administration not guilty of shooting itself in the foot? Mexico has gained more from NAFTA than either Canada or the United States and the automotive industry has been the driver of that. To snatch disaster from the jaws of success would be folly of the highest order. It is high time the Mexican government put its money where its mouth is and invests to secure the future of the automotive industry.
Simon Duval Smith
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