After a recent trip to the State of Zacatecas in Mexico, it is now abundantly clear just how the uncertainty and instability created in the United States have provided substantial motivation for national and state level governments to solidify and expand existing economic relationships and plenty of incentive to search out new global opportunities.
Mexico has benefited from billions of dollars in the auto sector investment due to its geographic proximity to the United States market. For several decades, this close relationship with the United States has provided beneficial trade relations. The depth of the relationship has provided Canada and the United States with access to strong production quality and the ability to leverage positive economics while Mexico has gained billions in social and physical infrastructure investments. In fact, prior to the 2016 US election, Mexican officials estimated the domestic automotive sector growth included the production of more than five million light vehicles across 13 different auto-brands through more than 30 facilities by 2020.
Currently, more than 80% of the domestic production is intended for export given generous access not only to North and Latin American markets but growing demand in both Asia and Europe. My trip to Mexico demonstrated the eager interest of States such as Zacatecas for diverse growth, not only in the auto sector but in information technology, Aerospace, tier two manufacturing among many others. The resource economy remains a strong counter with mining and agribusiness remaining strong in the State as well.
I witnessed first hand the massive facilities built by Nissan in neighbouring Aguascalientes. The complex was built in 2013 at a cost of roughly $2 Billion ($US) and created more than 9,000 direct and indirect jobs. This plant is nearly 6.5 million square feet of state of the art production facility. The Aguascalientes complex is just one of 3 that Nissan has in Mexico and typical of the kind of investments auto manufacturers have been making in Mexico since the mid-1990’s. Every major automaker has a substantial manufacturing and assembly presence, including the North American ‘Big 3’. However, this level of production has caused very public concern north of the Rio Grande.
President Trump’s protectionist policy framework has proposed that all import vehicles would be levied with stiff tariffs is meeting with substantial resistance, and not just from Mexico. Former US auto executives are helping to spell out what this would mean for the US economy, and the results would appear to contradict Mr. Trump’s intentions. A CBC report highlighted how Mr. Trump’s threat to “wall off the import of Mexican-made cars with a 35 percent tariff would be a disaster for the U.S. auto industry, according to Marina Whitman, a former vice-president of General Motors”. The report goes on to note that 40 percent of the parts that go into cars built in the U.S. come from Mexico.
Mr. Trump’s ongoing rhetoric of dismantling NAFTA remain a concern for both Canadian and Mexican officials. Trump recently noted that he has “very serious” concerns about NAFTA, stating that the agreement has been “a catastrophe for our workers and our jobs and our companies”. However, the Michigan-based Center for Automotive Research(CAR), concluded that dismantling NAFTA could cost more than 31,000 jobs in the US. Mr. Trump’s rather undisciplined approach to floating trial balloons on public policy are creating far more chaos than value.
The ongoing discussions about destabilizing of existing agreements in North America, and the potential for further dilution of the EU with several key elections this year in Europe, has created intense concern about the existing economic world order. At the national and state levels, progressive leaders such as those in Zacatecas are developing new strategies and approaches to developing progressive economic development and searching out new partnerships. Zacatecas continues its progressive approach to economic development, looking for diversification across a variety of sectors. In the face of this uncertainty, progressive leaders continue to pursue economic security and long-term development by building new relationships.