Mexico’s IP Advantage

Nearshoring Tag Archive

Mexico’s IP Advantage

24 April, 2024• Economy, Nearshoring

The relocation of investment flows, known as “nearshoring,” presents an opportunity for Mexico to boost investments in high-value-added technologies, ranging from cloud computing to artificial intelligence and Web3 solutions. However, to fully harness this potential, Mexico must strengthen its IP framework and create an innovation-friendly environment.

The Role of Intellectual Property:

IP plays a crucial role in the nearshoring process, as it provides legal protection for innovative technologies and know-how. A robust IP framework can attract foreign investment and encourage technology transfer, promoting the development of a local technology sector.

Mexico’s Potential:

Mexico is well-positioned to capitalize on the nearshoring trend due to its proximity to the United States, a strong manufacturing base, and a growing pool of skilled talent. However, to fully harness this potential, Mexico must strengthen its IP framework and create an innovation-friendly environment.

Recommendations for Mexico:

To consolidate an attractive innovation ecosystem for technology investors, Mexico should:

  • Update its IP regulations: This includes modernizing copyright, patent, and trademark laws to align with international standards and best practices.
  • Promote coordination among IP institutions: Strengthen collaboration between entities responsible for promoting and protecting IP rights to ensure efficient and effective enforcement.
  • Foster dialogue between the public and private sectors: Establish regular channels of communication to discuss IP-related issues and challenges, and develop joint solutions that benefit all stakeholders.
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Guanajuato’s Footwear Industry in the Era of Nearshoring

12 March, 2024• Economy, Nearshoring

In recent years, the global trade landscape has undergone significant changes, and amidst this transformation, the state of Guanajuato, recognized as a leader in footwear production in Mexico, emerges as a strong contender to capitalize on the nearshoring phenomenon. According to Héctor Salgado Banda, Secretary of Finance, Investment, and Administration of the state, Guanajuato is ideally positioned to benefit from this trend.

One data point that highlights this potential is the exponential growth in exports of Guanajuato footwear. Over a little more than a decade, these have risen from around 280 million dollars in 2007 to almost 1 billion dollars by the end of 2023. This notable increase, explained by the state official, reflects the vigor and adaptability of the local industry in the face of global market challenges.

Mauricio Blas Battaglia Velázquez, president of the Chamber of the Footwear Industry of Guanajuato (CICEG), underscores the importance of leveraging nearshoring in a competitive environment where China remains a dominant player. He emphasizes the need for innovation and adding value to products to meet the demands of an increasingly discerning consumer.

With over 70% of total footwear production in Mexico concentrated in Guanajuato, with León leading the way, the industry has contributed more than 53 billion pesos over the last 15 years, according to data provided by Battaglia Velázquez. This leadership has prompted the state government to collaborate with industrial chambers to implement initiatives aimed at enhancing the sector’s international competitiveness.

These initiatives include programs to promote innovation and technological development, as well as access to credits that support companies, which represent a crucial source of employment in the region, with around 6,000 sector companies. However, Battaglia Velázquez also calls for corporate social responsibility, urging companies to prioritize the well-being of their workers and contribute to social development and economic mobility in the communities where they operate.

However, despite these achievements and efforts, the footwear industry in Guanajuato faces considerable challenges, especially related to unfair competition. The massive influx of undervalued goods and irregular products, mainly from China, has created a challenging environment for local manufacturers. According to José Antonio Abugaber Andoni, national president of the Confederation of Industrial Chambers (Concamin), approximately 40% of footwear imports into Mexico are made under conditions of alleged undervaluation.

This issue not only affects the economic stability of the sector but is also reflected in Mexico’s trade deficit with China, which reached 95.575 billion dollars in 2023, according to data from the Ministry of Economy.

The sustained growth of footwear exports in Guanajuato and its potential to benefit from nearshoring are encouraging signs for the local industry. However, it faces significant challenges that require a collaborative approach between the private sector and the government to ensure its continued and sustainable growth in an increasingly competitive and globalized market.

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8 Steps to Importing from China to Mexico

27 February, 2024• Economy, Logistics

Importing goods from China to Mexico can be a lucrative venture for businesses looking to diversify their offerings or tap into new markets. However, navigating the complexities of international trade requires careful planning and execution. To help streamline the process, here are eight steps to streamline your business venture. 

Step 1: Check Trade Laws

Ensure compliance with current regulations and restrictions for both exporting from China and importing to Mexico. Stay informed about changes in policies and identify necessary documents for smooth customs clearance.

Step 2: Decide What to Import

Research the demand for your products in Mexico and assess potential profitability. Consider market trends and customer preferences to make informed decisions about your merchandise selection.

Step 3: Choose a Shipping Method

Select a shipping method based on the type, weight, and quantity of your products. Options may vary, so seek recommendations if needed to ensure efficient transportation.

Step 4: Find a Supplier

Establish relationships with Chinese suppliers that offer quality goods aligned with your business needs. Utilize various methods such as online platforms, business fairs, or sourcing companies to connect with reliable suppliers.

Step 5: Estimate Tax Liability

Anticipate taxes and fees, including the 16% value-added tax applied by Mexican customs. Stay informed about trade regulations to avoid unexpected expenses and ensure compliance.

Step 6: Define Incoterms

Familiarize yourself with Incoterms to clarify responsibilities and liabilities between buyers and sellers during international transactions. Define terms related to payments, insurance, and customs procedures.

Step 7: Customs Clearance

Understand the stages of customs clearance, including information entry, declaration, assessment, permit acquisition, cost payment, warehousing, and goods exit. Ensure thorough preparation to expedite the clearance process.

Step 8: Hire a Freight Forwarder

Engage a reputable freight forwarder with experience in international shipping to manage transportation logistics. Benefit from professional assistance in handling inventory from factory to final destination.

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China’s Export Boom to the US Despite Economic Challenges

21 February, 2024• Economy, Logistics

In an interesting turn of events, the trade landscape between China and the United States presents a paradox: while China grapples with a series of economic challenges, including dwindling consumer confidence and a turbulent stock market, the volume of ocean container freight flowing from China to the US is surging, reaching its highest levels since May 2022.

The surge in shipments can partly be attributed to the customary pre-Chinese New Year rush, during which factories in China expedite the movement of goods to ports before the holiday hiatus. However, this year’s peak transcends the typical patterns seen in previous years, with container volumes steadily mounting despite the backdrop of economic uncertainty in China.

China’s manufacturing sector, as reflected in the Purchasing Managers’ Index, has contracted for the fourth consecutive month, signaling a downturn in industrial activity. Compounding these woes, the liquidation proceedings of Evergrande, one of China’s largest property developers, loom large, with significant debts overshadowing its assets. Moreover, Chinese stocks have witnessed a downward spiral, with major indices experiencing substantial declines over the past year.

Against this backdrop, the question arises: Why is the port of Shanghai, among others, witnessing an unprecedented surge in shipping volumes despite China’s sluggish GDP growth, which hit a 21st-century low of 5.3% in 2023?

It appears that rather than being driven by a resurgence in China’s manufacturing prowess, the surge in shipping volumes is propelled by the robust demand from US importers. Inventory levels in the US have depleted significantly, with inventory-to-sales ratios falling below pre-pandemic levels. Simultaneously, retail sales in the US have exceeded expectations, indicating strong consumer demand.

The months ahead are poised to be favorable for US ports, particularly those on the West Coast. Low inventory levels coupled with robust economic growth necessitate the swift movement of goods, tightening transportation capacity and leading to increased freight rates.

However, global supply chains face additional challenges stemming from geopolitical tensions. Attacks in the Red Sea have disrupted international shipping routes, compelling vessels to circumvent the Suez Canal, thus prolonging transit times and reducing available container ship capacity. These disruptions, coinciding with heightened shipping volumes from China, have propelled spot rates on the trans-Pacific route to record highs.

Commenting on the impact of these disruptions, Dave Bozeman, CEO of C.H. Robinson, highlighted the strain on global supply chains and the resultant escalation in container rates. With the Red Sea crisis showing no signs of abating, the strain on capacity and elevated spot rates are expected to persist, at least in the near term.

Data from the Port of Los Angeles further corroborates the surge in container volumes, with TEU volumes in Week 6 registering a substantial increase compared to the previous year.

So, while China grapples with economic headwinds, its role as a key driver of global trade remains unyielding. The surge in container shipments to the US underscores the resilience of trade dynamics amid challenging times, albeit with complexities and disruptions that necessitate agile responses from stakeholders across the supply chain.

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Mexico’s Industrial Success in 2023

6 February, 2024• Nearshoring

2023 marked a year of significant growth in Mexico. In this article, we’ll break down the 3.0% growth in industrial production, highlighting the stellar performance of construction and the exciting narrative of the automotive industry. Additionally, we’ll provide a glimpse into optimistic expectations for 2024.

An Overview of 2023

The past year saw a 3.0% increase in industrial production, led by a spectacular 19.3% growth in construction. However, manufacturing took a slight dip, registering a -0.4%. What lies ahead? We anticipate a 3.8% growth in the industrial sector for 2024, surpassing the overall GDP growth of 2.6%.

October 2023, Behind the Numbers

In October, industrial production continued its upward trend of 3.0%, though at a more moderate pace. Construction shone with a 19.3% growth, while manufacturing took a breather with a -0.4%. But the real star was the automotive industry, boasting a 4.9% growth, driven by relocation and foreign investment.

Automotive Industry: Beyond Expectations

The automotive industry dominated in 2023 with nearly 3.78 million vehicles produced, establishing Mexico as the seventh-largest global producer. General Motors led with a 19.1%, followed by Nissan with 16.3%. A 14.1% growth and mid-term expectations indicate a bright future.

Exports and Local Market

Of the total production in 2023, an impressive 87.6% was for export. Mexico stands strong as the fourth-largest global exporter of vehicles. General Motors leads exports with 21.9%. On the local front, sales surprised with a 24.4% increase, thanks to employment, wages, and automotive credits. Good news for 2024-2025!

Sustained Industrial Momentum

With construction booming and the automotive industry leading the way, the outlook for 2024 looks exciting. Relocation and foreign investment are key. We are eager to see how these trends will continue to transform the Mexican economy in the coming years.

2023 was a year of industrial success, with construction and the automotive industry standing out. Our projections suggest that the industrial sector will remain a crucial driver for Mexico’s economic growth.

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Challenges and Uncertainties in the Red Sea Trade Route

30 January, 2024• Nearshoring

In the post-COVID scenario, where supply chains once operated with precision, we now find ourselves in a more unstable landscape, driven by conflicts between nations, especially in the Red Sea trade route. Approximately 10% of global maritime transportation is facing difficulties, with major shipping giants suspending routes due to maritime insecurity. This situation significantly impacts European companies that heavily depend on the Suez Canal route.

The Enigma in the Suez Canal

The Suez Canal, a vital link between the Mediterranean and the Red Sea, has become the epicenter of concerns for European supply chains. The suspension of these routes not only raises uncertainties about security in the Red Sea but also underscores the urgent need to rethink the resilience of these chains in adverse times.

Since the incident of the Evergreen cargo ship blockage in 2020, companies have begun to reconsider strategies, considering the option of bringing production closer to Europe to avoid logistical complications on extensive routes.

Impact on Maritime Transport Costs

The closure of routes has triggered a frantic search for alternatives, with one of them being the journey around the Cape of Good Hope in South Africa. Increasing the distance by 71%, this longer route implies not only higher costs but also significantly longer transit times. Companies opting for the Suez Canal route will face growing demand and, as a result, an escalation in maritime transport prices on the Asia-Europe route.

Shipping companies, in an attempt to counter insecurity, are implementing additional security measures, introducing what is now known as “Piracy Risk Surcharge”, Although necessary, this surcharge poses additional challenges for companies already grappling with tensions in their supply chains.

Key Points and Possible Resolutions

While shipping companies seek to safeguard their assets and increase prices, Suez Canal managers claim to have improved security. The lack of a coordinated response from the European Union and U.S. intervention in the region present uncertainties about possible solutions.

The U.S is working alongside other countries to form a naval force that protects ships in the Red Sea. Although their primary focus is to demonstrate their ability to maintain global security, this initiative could also provide relief to affected supply chains. Supply chain management faces a period of uncertainty. The instability in the Red Sea translates into increased prices in maritime transport, tighter deadlines, and logistical complexities for this year.

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Key Trends in Shipping in 2024

23 January, 2024• Logistics, Nearshoring

In a world of constant motion, the shipping and logistics sector faces a time of rapid transformation. Looking ahead to 2024, six trends emerge that completely reshape how we conceive and execute global shipments. From digitization to sustainability, these trends will not only overhaul the movement of products but also shape the future of the entire industry.

For 2024, these six pivotal trends will set the course:

1. Digitization: Both major shipping companies and small firms are embracing digital practices. This streamlines shipment tracking and reduces paper usage.

2. Economy: Despite positive signs, concerns persist about inflation and soaring fuel costs, impacting shipping expenses.

3. Sustainability: With increasingly frequent natural disasters, the industry is moving toward cleaner fuels and measures to mitigate environmental impact.

4. Last-Mile Delivery: Major retailers like Walmart now take more control over their final deliveries, seeking faster options, and even exploring autonomous trucks!

5. Supply Chain Resilience: Post-pandemic, businesses seek flexibility and smarter strategies to manage risks in their supply chains.

6. Cybersecurity: With the rise in digitization, safeguarding information becomes crucial. Expect substantial investments to protect data.

These trends signify a fundamental shift in the industry, where adaptability will be essential to tackle economic and environmental challenges, ensuring that shipping operations keep moving forward!

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How digitalization will impact aerospace

16 January, 2024• Nearshoring

In a joint initiative, the Mexican Federation of the Aerospace Industry (FEMIA) and 3D CAD, a leading software developer, are shining a spotlight on the critical necessity of digitizing processes within the aeronautical sector. The call for this digital evolution is not just a mere recommendation; it is a strategic imperative for companies looking to streamline operations and harness the potential of nearshoring to drive unprecedented growth.

During the insightful webinar, “Document Management for the Aerospace Industry,” organized by FEMIA, industry leaders underscored the invaluable lessons learned from the challenges posed by the COVID-19 pandemic. The consensus is clear: companies, irrespective of size, must embrace technological advancements to not only meet current standards but also to propel themselves forward in the dynamic landscape of the aeronautical sector.

Angel Diaz, Senior Industrial Processes Consultant for North America at 3D CAD, emphasized that the size of a company is no longer the sole determining factor of its success. Instead, it’s the adoption and effective utilization of cutting-edge software and technologies that will define a company’s ability to meet the ever-evolving demands of the sector.

FEMIA highlighted the current rebound in investment and production volumes within the aerospace industry. As the supply chain gears up for increased demand, there arises a unique opportunity for local and foreign companies to play a pivotal role in providing components, subassemblies, and services.

The specialist stressed the importance of optimizing collaborations, ensuring regulatory compliance, and establishing traceability of essential documents. These measures, he noted, are instrumental in expediting procedures and formalities, enabling companies to navigate the resurgence of the aerospace sector effectively.

According to data from the Ministry of Economy (SE), Foreign Direct Investment (FDI) in the aerospace sector reached $38.6 million during the second quarter of 2023. Year-to-date figures for Foreign Direct Investment in Aerospace Equipment Manufacturing totaled $156 million, with a significant portion attributed to reinvestment of profits.

This clarion call for digital transformation resonates as a guiding principle for aeronautical entities aiming not just to survive but to thrive in the post-pandemic era. As we witness the resurgence of the aerospace industry, companies must seize the opportunity to embrace digital innovation, fortifying their position in a rapidly evolving and globally competitive landscape.

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International Companies Triumph at Newest Mexico Airport: Flow, Efficiency, and Security

26 December, 2023• Logistics, Nearshoring

In a recent statement, Mathilde de Rocquigny, Director of Air France KLM Martinair Cargo in Mexico, expressed the benefits and operational efficiency experienced at the Felipe Angeles International Airport (AIFA). The relocation of cargo operations from the Mexico City International Airport (AICM) to AIFA, initiated in July 2023, has proven advantageous for both the airline and logistics companies.

Rocquigny highlighted the ample space provided by AIFA, which has streamlined tasks for cargo operations. Notably, the reduced traffic and improved loading and unloading processes contribute to a more efficient workflow compared to the previous scenario at AICM.

The director acknowledged the seamless transition, emphasizing that customers have adapted well to the change, and operational times have significantly improved. The presence of the Mexican Armed Forces at AIFA adds an extra layer of security, with Rocquigny praising the proficient management of the airport by the Secretariat of National Defense (Sedena).

Rocquigny expressed confidence that the airline industry will not witness abrupt changes affecting airport activities. The recent announcement of the restart of cargo flights to Guadalajara from Mexico City further solidifies the positive outlook, with each flight expected to transport around 80 tons of goods, predominantly fruits, and medicines. Besides KLM kanye companies will benefit from this enhanced efficiency and security measures.

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Strategic proposals for decongesting customs between Mexico and USA.

19 December, 2023• Nearshoring

The U.S.-Mexico border is a crucial gateway for trade and commerce, facilitating the exchange of goods between two neighboring nations. However, the ever-growing volume of freight passing through this border has led to significant congestion challenges, impacting efficiency and causing delays. In this article, we will explore innovative solutions aimed at alleviating freight congestion and ensuring smoother cross-border trade.

Technological Integration

Embracing cutting-edge technologies is paramount in optimizing border-crossing processes. Implementing advanced tracking systems, such as IoT-enabled sensors and RFID technology, can provide real-time visibility into the movement of goods. This data can be leveraged to enhance coordination among stakeholders, streamline customs procedures, and identify bottlenecks for prompt resolution.

Data Sharing and Collaboration:

Effective communication and collaboration among all parties involved are critical for reducing congestion. Establishing a secure and efficient data-sharing platform that connects shippers, carriers, customs officials, and other stakeholders can significantly improve information flow. This shared data can be used for predictive analytics, allowing for better planning and resource allocation to mitigate congestion.

Smart Border Infrastructure:

Investment in smart border infrastructure can go a long way in enhancing the efficiency of cross-border freight movements. Automated toll collection systems, advanced cargo inspection technologies, and intelligent traffic management systems can expedite the processing of goods and reduce wait times at border crossings.

Cross-Border Pre-Clearance Programs:

Implementing pre-clearance programs allows customs processes to begin before reaching the border. By conducting inspections and paperwork verification at designated facilities away from the border, trucks can move through the crossing more quickly. This approach has proven successful in other regions and can be adapted to the U.S.-Mexico border to alleviate congestion.

Capacity Building and Staffing:

Adequate staffing levels and well-trained personnel are crucial for efficient border operations. Investing in training programs and increasing the number of customs officers can help expedite inspections and reduce processing times. Additionally, utilizing technology to automate routine tasks can free up personnel for more complex decision-making processes.

Public-Private Partnerships:

Foster collaboration between public and private entities to jointly address border congestion issues. By combining the resources and expertise of both sectors, innovative solutions can be implemented more effectively. Public-private partnerships can also facilitate investment in infrastructure upgrades and the adoption of advanced technologies.

Predictive Analytics for Demand Planning:

Utilize data analytics and artificial intelligence to predict and manage fluctuations in cross-border trade volumes. By understanding trends and anticipating peak periods, authorities can proactively allocate resources and adjust operational procedures to prevent congestion before it occurs.

Addressing freight congestion at the U.S.-Mexico border requires a multifaceted approach that combines technological innovation, streamlined processes, and collaborative efforts. Implementing these solutions can not only alleviate current challenges but also pave the way for a more efficient and resilient cross-border trade system that benefits both nations and enhances the overall economic prosperity of the region.

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