In the wake of Trump’s tariff chaos, Mexico’s economy needs a rethink: A perspective from our CEO, Part 2

Trump’s tariffs and accelerating trends successful robotics and AI should beryllium a wake-up telephone for Mexico.

Part 1: How did we get here?

Part 2: Why is simply a rethink of the Mexican system necessary?

Part 3: What could a rethink of the Mexican system look like?

The intent of this three-part bid is to bespeak connected the emerging trends of commercialized protectionism (tariffs), AI and robotics, see the imaginable impacts connected Mexico and foster a treatment connected imaginable solutions. Please stock your thoughts successful the comments conception and let’s person an inspiring and engaging treatment and debate.

Part 2: Why is simply a rethink of the Mexican system necessary?

Mexico’s system has go progressively reliant connected the manufacturing sector, and its manufacturing assemblage is highly reliant connected the United States.

How reliant? Nearly 80% of everything that Mexico makes is exported to the U.S…80%!!! Over 80% of vehicles produced successful Mexico spell to the U.S….87% of the car parts….80% of the aerospace products….86% of the electronics.

Now, ideate for a infinitesimal that the U.S. tin progressively nutrient much of its ain goods. Imagine that advances successful artificial quality and robotics marque it progressively imaginable to nutrient goods with importantly less people.

It mightiness dependable improbable fixed the past 30 years, but what if it isn’t going forward? What would beryllium the interaction connected Mexico and its workforce? Given this risk, what should Mexico do? What tin Mexico do?

Approximately 25% of each formally employed Mexicans, astir 14 cardinal people, are employed successful the manufacturing sector. On average, 50% of the Foreign Direct Investment successful Mexico successful a fixed twelvemonth is successful the manufacturing sector. Imagine for a infinitesimal the interaction connected the system and nine if determination were adjacent flimsy changes to those numbers.

So what benignant of rethink does Mexico’s system need?  

In the aftermath of Trump’s tariff chaos, Mexico’s system needs a rethink: A position from our CEO, Part 1

To statesman to reply those questions, let’s archetypal measurement backmost and retrieve the cardinal components of the Mexican economy. I volition simplify the investigation to support it easier to explain.

About 30% of Mexico’s GDP is related to manufacturing and industry. Tourism makes up 9%; remittances 4%; agriculture 3%; lipid 2%. The different astir fractional of the system is linked to different components of the Service Sector.

As mentioned previously, astir 80% of Mexican-manufactured goods are exported to the United States. Tourists from the United States marque up implicit 70% of the planetary visitors each twelvemonth to Mexico. Approximately 78% of Mexico’s cultivation exports spell to the United States. Nearly each of the remittances travel from the United States.

Mexico is the state astir babelike connected different state successful the world. A communal expression, attributed to erstwhile President Porfirio Díaz, is “Poor Mexico, truthful acold from God and truthful adjacent to the United States.”

Many radical I speech to suggest that Mexico needs to statesman to effort to trim its dependence connected the U.S. They suggest that Mexico should look southbound to markets successful Central and South America. Or make person ties to Europe. Or make a deeper narration with China. I deliberation that this reasoning is flawed for a fig of reasons:

1. No state consumes similar the United States. There simply is nary 1 other successful the vicinity of the Americas that buys adjacent adjacent to what the U.S. does.
2. Many different countries, particularly the larger economies of South America and Europe, person a demographic problem.  Their birthrates are declining, their populations are aging.  In short, it volition beryllium a agelong clip earlier they instrumentality to being “high consumption” economies that Mexico could merchantability manufactured goods to.
3. China has an overproduction occupation and commercialized deficits with astir everyone. It seems highly improbable that Mexico would beryllium capable to turn its system by selling to Chinese consumers.  
4. Protectionism is connected the rise. With declining populations, slowing GDP growth, expanding proviso concatenation concerns, and expanding nationalism, I don’t spot immoderate different important accidental elsewhere for Mexico to merchantability its manufactured goods.

As a result, I deliberation that Mexico needs to unequivocally judge that its destiny is tied to that of the United States, for amended oregon for worse, and for the agelong word foreseeable future.

The state besides needs to admit that its maturation exemplary arsenic a low-cost supplier of manufactured goods to the United States mightiness progressively beryllium astatine risk. Even if the “America First” tariff threats quiescent down, the rapidly expanding trends of robotics and AI successful manufacturing apt mean overmuch little employment successful this assemblage — perchance successful conscionable a fewer years if galore experts are to beryllium believed.

With declining populations, slowing GDP growth, expanding proviso concatenation concerns, and expanding nationalism, Mexico indispensable commencement looking to merchantability its manufactured goods successful caller markets. (Volkswagen de México)

Mexico indispensable urgently statesman to rethink what volition beryllium its cardinal economical drivers going forward. This is not successful immoderate mode to accidental that manufacturing volition nary longer beryllium important.

Mexico indispensable proceed to determination up the worth concatenation successful manufacturing to proceed to support and turn concern and employment successful this sector. But it seems progressively improbable that manufacturing volition beryllium the maturation and employment procreation motor for the system that it has been successful the past.

The state indispensable commencement by leveraging the galore strengths it has successful this progressively uncertain world. To sanction a few:

1. Geographic proximity to the U.S.
2. Relative debased outgo of living
3. Relative debased outgo of labor
4. Excellent weather
5. Service-oriented culture
6. Deep culinary traditions and history
7. Deep taste traditions and history

Taking into relationship those strengths and others, and with the hazard that the manufacturing assemblage is not the employment and economical motor of the past, Mexico needs to begin to put successful antithetic (non-manufacturing) sectors to further diversify its system and proceed to supply employment and economical maturation for its people.    

Each of these areas volition necessitate a measurement alteration successful thinking, focus, and concern from the nationalist and backstage sectors from what we person historically seen. The improvement to little dependence connected manufacturing arsenic an motor of economical maturation and employment volition instrumentality time, and occurrence successful each of these areas is acold from guaranteed.  But I powerfully judge that by proactively redirecting, prioritizing, accelerating and incentivizing concern into the pursuing areas, Mexico tin amended power its ain destiny.

They are arsenic follows: 

1. Tourism
2. Health attraction delivery
3. Senior care
4. Housing/living for expats
5. Food
6. Wellness
7. Infrastructure to enactment each of the above

In Part 3 of this series, I volition research each of these areas, wherefore I deliberation each is important, and however Mexico could thrive successful each of them.  The 3rd and last portion of the bid volition beryllium successful tomorrow’s MND.

Travis Bembenek is the CEO of Mexico News Daily and has been living, moving oregon playing successful Mexico for astir 30 years.