After 20 years of NAFTA, trade between Mexico and our region is strong – but challenges remain
The North American Free Trade Agreement (NAFTA) marks its 20th anniversary this year, and Upstate Global Professionals of The International Center of the Upstate and the Hispanic Alliance hosted a panel of Mexican business experts to talk about the agreement’s impact on the Upstate and the continent.
Javier Díaz de León, consul general of Mexico, was part of a panel that also included Iciar Balza Echita of Gonvarri Steel Services, Pablo Martinez of TI Automotive’s quality and warranty division, Reinaldo Panico Peres of No Borders Consulting Group and Denis Csizmadia of the local U.S. Commercial Service.
Continental Change
There is no doubt that NAFTA created changes in North America, said León. “It hasn’t been an easy road. It has created tremendous transformation for all of us.”
In 1993, before NAFTA, total exports from South Carolina to Mexico were about $140 million per year, he said; in 2013, the number was $1.8 billion.
Trade between Mexico and the U.S. totals approximately $500 billion (U.S.) worth of goods in a year, he said, approximately $1 million each minute, and Mexico is the second-largest purchaser of U.S. products in the world.
“Of every product that comes into the U.S. from Mexico, 40 percent of that product is from American parts,” he said.
Room for Improvement
There is room to improve and focus on making the entire region of North America competitive, León said. “The U.S. economy is one of the most powerful, but it’s also part of North America, Mexico is part of North America. We need to be thinking about how we can work together as a region.”
Asia, Europe and South America are very aware of their status as economic regions, León said.
Denis Csizmadia addressed the trade deficit with Mexico, which he called a “perennial issue.” According to the Office of the United State Trade Representative, the U.S. goods trade deficit with NAFTA was $86 billion in 2013, a 7.5 percent decrease over the previous year. On a macro level, Csizmadia’s office works with small- to medium-sized companies to help determine their top markets around the world. Mexico is usually one because of proximity and free trade, he said.
Maquiladoras [factories that enjoy special tax breaks] are seeking companies to help them produce goods and export them worldwide, Csizmadia said. Mexico has a booming aerospace and auto industry, added León.
NAFTA has improved the Mexican economy significantly, said Reinaldo Panico Peres. The deficit is misunderstood, and is not a zero sum, he said. For every dollar that Mexico earns through exports, half is spent on American products, Peres said.
Though there is free trade between the countries in North American, barriers to business still exist. All countries need to simplify regulations, León said. “They make commerce complicated and trades cumbersome.”
Improving both border security and infrastructure will also make trade more efficient, he said. No new ports of entry have been created between Mexico and the U.S. in more than 30 years, before NAFTA was signed.
The panel also discussed issues of corruption and crime in Mexico. Csizmadia recommended due diligence for any investor in Mexico and the need to stop generalizing about the country and focus on individuals when doing business.
Martinez said Monterrey was the best city in which to invest in 1999, but by 2008, had become very dangerous. Economic recovery is happening so fast, however, that companies are coming back to the area, he said. Franchises and real estate are good investments in Mexico right now, especially in smaller, growing cities, he said.
Immigration Ramifications
NAFTA is helping to restore the Mexican middle class, which was wiped out in economic crashes in the 1980s and 1994, León said. The standard of living increase is also affecting immigration, he said: Mexicans are now weighing the higher income available to them in Mexico against the potential jobs in the U.S., and many are deciding the U.S. wages are not worth the sacrifice of leaving Mexico.
While the agreement has been beneficial for the continent, Mexico is a complex country, León said. “One single brush stroke is not enough to paint the country of Mexico.”
