Maersk report points to slowdown in the country’s trade growth.
Mexico’s openness to trade agreements is spurring more opportunities into various markets, but the strengthening peso and increasingly tight trucking capacity are creating challenges for the country’s trade growth.
Although Mexico’s trade growth was better than expected during the second quarter of 2018, the momentum is now fading, according to A.P. Møller – Maersk’s Q2 2018 Mexico Trade Report.
“The second quarter performed much better than expected, thanks to a weaker peso and inventory stocking, but we now see a slowdown in this strong growth, prompting us to remain cautiously optimistic for 2018 as a whole,” said Mario Veraldo, managing director for Maersk Line Mexico and Middle America.
Mexico’s total trade volumes with Asia and Europe — imports and exports — collectively increased 18 percent year-over-year in the second quarter of 2018, with shipments to Asia increasing 18 percent, shipments to Europe increasing 29 percent, shipments from Asia increasing 16 percent and shipments from Europe increasing 17 percent.
Additionally, Mexico’s intra-Americas volumes were especially strong. Compared to last year’s second quarter, Mexico’s North America exports rose 44 percent, North America imports rose 61 percent, South America exports rose 66 percent, South America imports rose 26 percent, Central America exports rose 20 percent and Central America imports rose 18 percent.
“We see a number of trends supporting growth across the intra-Americas trade for Mexico,” said Patricia Perez Salazar, general manager of SeaLand for Mexico. “Firstly, Mexico is building its position as a leading manufacturing hub for the Americas, supporting retailers into Central America, for example, while expanding auto opportunities north on the back of solid U.S. consumption.
“On top of this, concern about the future of NAFTA is prompting Mexican producers to look for new consumer opportunities into South America and take advantage of the Pacific Alliance Free Trade Agreement between Mexico, Colombia, Peru and Chile,” she added. “The trucking driver shortage has also led to exporters moving more goods by sea into Central America and U.S., adding to second quarter volumes.”
Jaap de Mots, trade and marketing manager for Mexico and Middle America, said, “In the second quarter, Mexican producers and industry started to look more keenly at new markets, following tariff increases between the U.S. and Mexico.”
In terms of vehicle exports, although the United States remains Mexico’s core market, the share of non-U.S. vehicle exports increased during the second quarter.
Veraldo said finished cars to both Asia and Latin America continue to grow tremendously.
Despite a strong second quarter, Maersk’s report said a strengthening peso, the end to a buildup in retailer inventories, more highway robberies and a reduction in trucking capacity are already taking the shine off Mexico’s trade performance in the second half of 2018.
“The enforcing of new trucking regulations, including a driving hour limitation and tandem chassis certification — whilst for the better — are putting a strain on available trucking capacity,” de Mots said.
Veraldo said Mexico has an estimated deficit of 30,000 truck drivers.
Meanwhile, Mexico continues to make headway in trade agreements with countries around the globe.
In April, Mexico and the European Union reached a renewed trade agreement, resulting in several goods between the EU and Mexico becoming duty-free, including agricultural products such as cheese and juice.
Also in April, Mexico became the first country to ratify the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade deal that also includes Australia, Brunei, Canada, Chile, Japan, Malaysia, New Zealand, Peru, Singapore and Vietnam.
CPTPP was signed in March by the 11 countries, and three have ratified the agreement so far, with Japan becoming the second country to ratify the deal, followed by Singapore.
“This agreement shall enter force 60 days after the date of which at least six or at least 50 percent of the number of signatories to this agreement, whichever is smaller, have notified the depositary in writing of the completion of their applicable legal procedures,” according to the agreement.
The deal will allow Mexican exporters to be able to take advantage of a near zeroing of tariffs across a $12.6 trillion market, according to Maersk.
“We expect to start to see the positive effects of the CPTPP agreement on Mexican trade in 2019,” de Mots said.
Tight capacity, stronger peso challenges for Mexico
