The Fast Lane to Economic Opportunity

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The Fast Lane to Economic Opportunity

For U.S. and Mexican companies, cross-border trade can unleash unreached potential.

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Potential growth abounds in #Mexico, for those willing to take it:
Friday, January 15, 2016 - 12:00pm

CAMPAIGN: Thought Leadership


Augie Picado | UPS 

Trade is often portrayed as a zero-sum game in which one nation can excel only at the expense of another. Nowhere is this fallacy more evident than in the burgeoning relationship between the United States and Mexico.

For context, the U.S. and Mexico exchange $1.4 billion in goods every day – that’s about $1 million a minute.

Even by today’s standards, when the rise of globalization has connected all corners of the world faster than ever imagined, the U.S. and Mexico enjoy a number of unique advantages.

Consider that on average, auto parts built in North America will cross the U.S. border eight times, traveling into Mexico and Canada – and back again – before a car leaves the assembly line, according to a report from the Mexico Institute at the Woodrow Wilson International Center for Scholars. We also know that 40 percent of the content of U.S. imports from Mexico was originally made in the United States.

That’s not a typo.

We can’t talk about North American trade gains solely as a U.S. or Mexican enterprise. When Mexico succeeds, so does the United States – and vice versa.

I say this from my experience on the ground at the U.S.-Mexico border. Many of those who were once skeptical about entering the cross-border arena have since watched their business take off in the neighboring country.

And for Mexican small business owners, now is the time to break into new markets and leverage exports to win over previously unreachable customers. As access to technology has improved around Mexico, traditional barriers to building a global business model are fading away.

The most successful companies in this export movement are those that strengthen their supply chains to give their clientele greater value.

For this symbiotic relationship to prosper, however, it must get even easier to move goods across the U.S-Mexico border.

Time is money

With Mexico gaining ground over China and other low-cost manufacturing locations, the U.S. is now Mexico’s largest trading partner. Many U.S. companies are moving all or part of their supply chains from Asia to Mexico to be closer to consumer markets in North America. And manufacturing is moving closer to demand.

But we can – and must – do more to stimulate this growth in Mexico.

Customs proceedings, risks, delays and shipment tracking are just some of the challenges that exporters need to see resolved in their foreign trade activities. Knowledge about how to select materials, how to break into new markets and how to analyze export laws and regulations is a growing requirement for all companies.

In today’s business environment, goods have to arrive in absolute synchronicity – that’s about more than punctuality. Given the nature of just-in-time supply chain management between the United States and Mexico, one misstep can wreak havoc on your entire operation and prove the difference in whether your business thrives or fails to keep pace with demand.

According to the recent UPS Exports in Mexico: Challenges and Opportunities study (Spanish version), 90 percent of companies said opportunities exist for more efficient exports. Survey respondents also said speed and reliability of deliveries are their top priorities when exporting to the United States.

Delays are obviously bad, but as we tell customers, you don’t want your items to show up two days early, either.

Unpredictability undercuts the greatest asset for the U.S.-Mexico trade lane: efficiency. While the exporting opportunities for companies have increased, so too have consumer demands.

Get smart

Mexican and American businesses alike say border inspections are seemingly random and overly time-consuming. They also want greater end-to-end visibility for all goods leaving the country.

That’s why it’s so critical to have a logistics partner with specialized expertise and an extensive presence on both sides of the border.

Nearly 90 percent of companies relying on one transportation provider for cross-border trade said they were satisfied, compared to a 56 percent satisfaction rate among businesses using more than one provider, market data shows. This underscores the importance of setting up a one-stop shop for moving goods across the border.

UPS this month is rolling out enhancements to its cross-border solutions and freight portfolio to meet customers’ evolving needs and reduce transportation costs and streamline shipments crossing the U.S.-Mexico border.

This will effectively unlock new growth opportunities for Mexican exporters and combat supply chain interruptions that have stymied their expansion efforts.

At the same time, a growing Mexican middle class, rising e-commerce sales and a major uptick in manufacturing activity are driving U.S.-Mexico trade. Mexico is Latin America’s second largest online retail market and has the fastest-growing Internet penetration rate in the world. By 2017, the country will have 78.2 million Internet users, according to eMarketer. And broader trade reforms are on the horizon.

In addition to NAFTA, otherwise known as the North American Free Trade Agreement, Mexico is involved in the Trans-Pacific Partnership, the largest and most substantial free trade agreement in history. The nations involved represent close to 40 percent of the global economy and a third of the world’s trade.

The historic free trade agreement, pending parliamentary approval by members, would open up new opportunities for both big and small companies looking beyond their home markets for growth.

In today’s global marketplace, opportunity is everywhere. The key is having the right team in place to take advantage of it. When moving goods around the world, you’ll only get as far as your knowledge to navigate the system.

Thanks to the U.S.-Mexico trade lane, however, economic expansion is there for the taking, regardless of the size of your company or how long you’ve been in the export business.

Augie Picado is Mexico Country Manager for UPS.

Keywords: Business & Trade | Global Economy | Latin America | UPS | exporting | supply chain | trade policy

CAMPAIGN: Thought Leadership