nafta works2015/11/01 · volume 19, issue 11 [email protected] page 2 increased six-fold,...

Volume 19, Issue 11 [email protected]

Mexico and the U.S. are Moving Toward a More Efficient Border

A MONTHLY NEWSLETTER ON NAFTA AND RELATED ISSUES

NAFTA Works November - December 2014 * Volume 19, Issue 11

INSIDE THIS ISSUE

1 Mexico and the U.S.

are Moving Toward a More Efficient Border

1 Trade Highlights

2 Brewing the Coffee

Economy in Mexico 3 NAFTA Related

Events 3 Diario Oficial

4 Success Stories 4 Selected Reading 4 Infrastructure

Projects in Mexico 4 Mexico Economic

Update 5 Profile of Nebraska 6 Profile of

Aguascalientes

On October 17th, customs authorities from the U.S. Customs and Border Protection (CBP) and Mexico’s Tax Administration Service (SAT in Spanish) signed an agreement to mutually recognize two customs security programs that are currently in place in both countries. The agreement allows stronger collaboration between both programs by creating a common structure aimed at streamlining and securing cargo trade across the border.

The two programs are the CBP’s Customs-Trade Partnership against Terrorism (C-TPAT) and its Mexican counterpart known as the New Certified Shipping Companies Program (NEEC). The programs’ goal is to promote cooperation between the public and private sectors by establishing requirements that participants in supply chains agree to meet in exchange for benefits such as

simplified cargo processing. The agreement will link the two voluntary business-government programs to create a unified and sustainable security environment that can assist in securing and facilitating global cargo trade, which will reduce processing times for cargo trucks at the U.S.-Mexico border.

The agreement provides tangible and intangible benefits to program members such as fewer inspections when shipping cargo, a faster validation process, common standards, efficiency for customs and business, transparency between customs authorities, business resumption, front-of-the-line processing, and marketability. Beginning in 2015, this arrangement will benefit immediately manufacturers, carriers, importers, exporters, and customs brokers by providing more agile

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border crossings aimed at reducing wait times from three or four hours to 25 minutes on average.

The new cooperation framework will contribute to reduce transportation costs and increase trade operations’ efficiency, which will have a significant impact on North America’s competitiveness. In 2013 alone, bilateral trade between Mexico and the United States set a new record of $506 billion, and almost 70% of this trade was moved across the border by motor carriers. Over NAFTA’s 20 years of existence, trade between Mexico and the U.S. has


increased six-fold, growing nearly 10% annually, a rate that exceeds that of the U.S. trade with the rest of the world (6.7%). Mexico is United States’ third largest trading partner and the U.S. is by far Mexico’s biggest trading partner. Accordingly, it is imperative for Mexico and the U.S. to work together in order to promote growth and prosperity throughout the region.

Additionally, industries in Mexico and the U.S. are increasingly becoming more intertwined and globally competitive through joint production efforts. Together, both countries produce flat-screen TV sets, airplanes, refrigerators, cars, trucks, beer and jeans to meet both regional and global demand. As a result of highly integrated production lines where the materials and parts zigzag back and forth across the border, U.S. exports are used to further manufacture and finalize products that are imported back to the U.S. from Mexico. As a result, U.S. value-added in Mexican final manufacturing exports to the U.S. is about 40%. This synergy has created a win-win relationship that requires a world-class border management system in order to successfully compete globally.

The agreement will further encourage a closer bilateral relationship by promoting both countries’ trusted traveler programs Viajero Confiable and Global Entry, that will expedite the flow of travelers, tourists and businessmen between Mexico and the United States.

Mexico is the ninth country to reach a mutual recognition agreement of this kind with the United States, joining Canada, the European Union, Israel, Japan, Jordan, New Zealand, South Korea, and Taiwan.

In the face of the challenges and opportunities of the global economy, North America’s competitiveness relies on its ability to take full advantage of its geographic proximity and the complementarity of its natural, human, and capital endowments. Thus, Mexico and the U.S. must continue working together to further deepen trade and economic integration to increase their prosperity. A comprehensive and modern border management system in North America contributes to building a more efficient border as required in the 21st Century.

Brewing the Coffee Economy in Mexico One of the greatest assets of North America is the natural richness of its geography. This favors the production of a wide diversity of agricultural goods within the region. Mexico is no exception to this and its production of coffee is one prominent example. Its blessed geography and climatic conditions have allowed the country to become one of the biggest producers of coffee beans in the world. Mexico has ranked consistently among the top 10 locations in terms of coffee production and exports, according to the International Coffee Organization (ICO). No less significant is the fact that Mexican coffee is internationally recognized as one of the best in the world.

Mexico has a long tradition of cultivating coffee that dates back to the end of the 18th century when coffee was first introduced in Veracruz from the Caribbean by the Spanish. Currently, the states of Chiapas and Veracruz concentrate more than half of Mexico’s domestic production, followed by the significant production of 10 other states: Colima, Guerrero, Hidalgo, Jalisco, Nayarit, Oaxaca, Puebla, Querétaro, San Luis Potosí, and Tabasco. Production focuses mainly on the Arabica variety of coffee, accounting for 97% of total production, which is characterized by its light body and rich blend with fine acidity and elegant fragrance that is currently in high demand.

The diversity of the country’s regions provides the right topography, altitude, climate and soils that are key elements for

the production of excellent coffee. In fact, more than 70% of coffee fields in Mexico are located at over 600 meters in altitude, which along with the existence of microclimates, produce high quality coffee. In order to crystalize Mexico’s potential, growers and government have been working on an official quality certification program with great results. This quality has already been recognized internationally, and the Coffee Quality Institute, a renowned U.S. nonprofit organization, has awarded many Mexican producers with the prestigious Q certification, which is reserved only for the highest standards of production which allows producers to compete in the most demanding markets of the world. Mexico is also receiving new attention for its single origin, fair-trade and organic coffees that meet consumers’ increased interest in high-quality coffees that highlight the uniqueness of different regions that confer their own particular flavor. A very important feature of Mexican coffee is that its production has been acknowledged as environmentally friendly by preserving biodiversity and avoiding any negative impacts on nature. Moreover, more than 95% of coffee plantations are shaded, optimizing the use of resources without causing a disruption in natural processes. Another important feature of the country is its vast production of organic and fair-trade coffees that has distinguished it from other coffee producers. The bulk of the production of Mexican coffee, and particularly organic coffee, is carried out mostly in small specialized farms, predominantly indigenous, that accounts for 70% of the producers in Mexico. With the aim of strengthening its competitiveness, the Government of Mexico unveiled a new program for organic agriculture certification in October, 2013. The program is based on many requirements contained in the USDA National Organic Program (NOP) guidelines, and also on internationally accepted practices. As a result, Mexico is the main producer and largest exporter of organic coffee in the world, according to the Mexican Coffee Council. Also, Mexico’s coffee exports have steadily increased over the last decade from $186 million in 2002 to $763 million in 2012, recovering their historical levels. Annually, exports fluctuate between 2.5 and 3.5 million 60-kg bags which represent 60% of domestic production on average. In 2013, Mexico exported only $490 million in coffee due to adverse supply conditions. However, ICO estimates an increase to 4 million bags in Mexico’s coffee production for the 2014-2015 cycle, which will expand export supply. The U.S. is the largest export market for Mexican coffee, accounting for two thirds of its global sales, followed by European and Canadian markets.

The coffee industry also illustrates how the supply chains work in North America. Coffee grown in Mexico is actively sought out by specialty roasters in the United States due to its close proximity, quality and production capacity. Later, Mexico buys back roasted coffee to meet its growing domestic demand, fueling foreign and domestic investment in coffee shops. Chiapas coffee has become an important asset for major brewing companies such as Starbucks and Green Mountain, providing an essential source of export-oriented income to local economies in the southern regions of Mexico. From an economic point of view, the coffee industry is a strategic activity for rural economic development, taking into account that it involves more than 500,000 Mexican producers. Coffee producers in Mexico are taking full advantage of the tariff-free access to the U.S. and Europe, the world’s largest coffee-consuming markets, as a result of its network of free trade agreements. Trade in coffee increasingly represents an important business opportunity for Mexican farmers to successfully participate in the global economy.


NAFTA Related Events

INTERMODA 2015 January 13th – 16th, 2015 Exhibition of the fashion industry in Mexico. Location: Expo Guadalajara. Guadalajara, Jalisco Phone: +52 (33) 3122-4499 E-mail: [email protected] Website: www.intermoda.com.mx EXPO ESPACIO 2015 January 13th – 16th, 2015 Trade show of the gifting industry. Location: Centro Banamex. Mexico City Phone: +52 (55) 5276-6380 E-mail: [email protected] Website: http://www.espaciosalpro.com/ EXPO ESTAR SALUDABLE January 17th-18th, 2014 Healthy living expo related to naturism, alternative medicines, and herbalist. Location: Cintermex. Monterrey, Nuevo León Phone: 52 (55)5741-3990; 52 (55) 5740-7593 Website: http://www.expo-estar-saludable.com.mx/2expo/ EXPO DECOESTYLO 15 January 19th – 23rd, 2015 Exposition of decoration, gifts, jewelry and crafts Location: World Trade Center. Mexico City Phone: +52 (55) 1166-0200 Email: [email protected] Website: http://www.decoestylo.com.mx/ 21st MAGNA EXPOMUEBLERA January 21st – 24th, 2015 Trade show that brings together furniture manufacturers along with industry suppliers ranging from machinery to wood, hardware and fabrics. Location: Centro Banamex. Mexico City. Phone: +52 (55) 1346-9055 Email: [email protected] Website: http://www.magnaexpomueblera.mx/ EXPO AGROTECNOLÓGICA January 22nd – 24th, 2015 Conferences and trade show for the agribusiness sector. Location: Centro de Espectáculos Calle 2. Zapopan, Jalisco. Phone: +52 (33) 1316-58343; 52 (33) 3133-6625 Email: [email protected] Website: http://www.expoagrotecjal.com/ MEXICO GRI 2015 January 27nd – 28th, 2015 Forum focused on investment opportunities in the Mexican real estate market. Location: St. Regis Hotel. Mexico City. Phone: (1) 866-399-1210 Email: [email protected]; [email protected] Website: http://www.globalrealestate.org/mexico2015 EXPO JOYA MEXICO January 27th – 29th, 2015 Exhibition of finished jewelry, silverware, watches, machinery, gems, and jewelry. Location: World Trade Center. Mexico City. Phone: +52 (33) 3121-9238 Email: [email protected]; [email protected] Website: http://www.expojoya.com.mx/

Diario Oficial Notices http://dof.gob.mx

Supplement to the National Standardization Program for 2014. Oct 3rd

Amendments to the catalog of tariff items classifying goods subject to import and export regulations by the Ministry of National Defense. Oct 6th

Amendments to the tariff rate quota and the allocation mechanism to export new light vehicles to Brazil, according to Appendix II related to trade in the automotive sector between Brazil and Mexico, under the Economic Cooperation Agreement (ACE) No. 55 signed by Mexico and the MERCOSUR members. Oct 7th

Resolution that discloses the identification numbers of canceled IMMEX programs along with the names of the corresponding owners. Oct 8th

Final resolution of the sunset review of the countervailing duty order imposed on imports of ferrosilicon manganese originating from Ukraine (Mexican tariff item 7202.30.01). Oct 9th

Final resolution of the antidumping investigation on square construction galvanized carbon steel wire cloth or mesh originating from China (Mexican tariff items 7314.19.02, 7314.19.03 and 7314.31.01). Oct 9th

Initiation of the antidumping investigation on imports of epoxidized soybean oil originating from Argentina (Mexican tariff items 1518.00.02 and 3812.20.01). Oct 10th

Initiation of the antidumping investigation on imports of children bicycles originating from China (Mexican tariff item 8712.00.02). Oct 10th

Decree enacting the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization to the Convention on Biological Diversity, adopted in Nagoya on October 29th, 2010. Oct 10th

Final resolution of the antidumping investigation on imports of steel sheet plate originating from China (Mexican tariff items 7208.51.01, 7208.51.02, 7208.51.03, 7208.52.01, 7225.40.01 y 7225.40.02). Oct 14th

Preliminary resolution of the antidumping investigation on stainless steel sink imports originating from China (Mexican tariff item 7324.10.01). Oct 16th

Notice announcing the Decision No. 76 of the Administrative Commission of the Free Trade Agreement between Mexico and Colombia. Oct 27th

Notice announcing the adjustment and redistribution of the quota for the exportation of new light vehicles to Brazil according to the Appendix II related to trade in the automotive sector between Brazil and Mexico, under the Economic Cooperation Agreement (ACE) No. 55 signed by Mexico and the MERCOSUR members. Oct 30th

Notice that formally declares Mexico as Mediterranean Ceratitis capitata (Wiedemann) fly free territory. Oct 30th

Changes to the Law on Public-Private Partnerships. Oct 31st Regulation of the Law on Geothermal Energy. Oct 31st Regulation of the Law on Hydrocarbons. Oct 31st Amendments to the Law on Mining. Oct 31st Amendments to the Law on Foreign Investment and the

Foreign Investment National Registry. Oct 31st

Mexican Official Standards

Abolishment of NOM-004-ZOO 1994, NOM-010- ZOO-1994, NOM-011- ZOO-1994, NOM-014- ZOO-1994, NOM-015- ZOO-1994, NOM-016- ZOO-1994, NOM-017-ZOO-1994, NOM-02- ZOO-1995, NOM-021-ZOO-1995, NOM-028-ZOO-1995, NOM-032- ZOO-1996, NOM-034-ZOO-1996. Oct 9th


AT&T to Acquire Mexico’s Iusacell AT&T, the U.S. telecommunications corporation, has entered into an agreement with Grupo Salinas to acquire Iusacell, Mexico's third largest wireless carrier, for $2.5 billion, including all of its wireless properties, licenses, network assets, retail stores and 8.6 million subscribers. “Our acquisition of Iusacell is a direct result of the reforms put in place by President Peña Nieto to encourage more competition and more investment in Mexico,” said Randall Stephenson, AT&T Chairman and CEO. “Iusacell gives us a unique opportunity to create the first-ever North American Mobile Service area covering over 400 million consumers and businesses in Mexico and the United States” he added.

Huawei to Invest in ICT Facilities in Queretaro Chinese telecom gear maker Huawei is investing $1.5 billion in the construction of four ICT facilities in the Mexican state of Queretaro. This is the largest investment ever made by a Chinese firm in Mexico, eclipsing all the Chinese investments in Mexico put together in the last decade. The investment will generate 1,100 jobs over the next five years. An innovation center is already under construction and will be operational in 2015. According to Huawei, Mexico will henceforth serve as its base for selling telecom solutions in the western hemisphere.

Cirque du Soleil Expands Partnership in Mexico Cirque du Soleil, a leading Canadian entertainment company, and Grupo Vidanta, a developer of world-class resorts and tourism infrastructure in Mexico, plan to construct and operate a first-of-its-kind immersive theme park experience in Nuevo Vallarta, a resort town near Puerto Vallarta. The project may include water park and nature park elements and will feature an outdoor show accommodating up to 5,000 spectators animated by Cirque du Soleil artists. With an investment of nearly $900 million, the entertainment park will create thousands of new jobs. Construction is expected to be complete in 2018.

Constellation Buys Glass Plant in Mexico New York-based Constellation Brands Inc., one of the world’s biggest spirits makers, made a big bet on its beer operations by agreeing to buy, in a 50-50 joint venture with Owens-Illinois, a Mexican glass factory from Belgium’s Anheuser-Busch InBev for $300 million. Constellation closed a $5.3 billion deal to buy U.S. distribution rights to Corona and other Mexican beers, along with a brewery in Nava, Mexico, from AB InBev. The glass plant, which is adjacent to the brewery, will be operated by Owens-Illinois to bottle the beer production.

Polaris Industries to Increase its Presence in Mexico Polaris Industries, the Minnesota-based global manufacturer of snowmobiles, ATV, and neighborhood electric vehicles, will expand its manufacturing facilities located in Apodaca, Nuevo Leon. The expansion will add 90,000 square feet and 1,850 workers with a new investment of $110 million. The factory currently produces 600 vehicles per day, mostly RZR’s, for the U.S. and Latin American markets including the Mexican market. Polaris’ initial investment in the Mexican state of Nuevo León amounted $55 million.

Mexico’s Energy Reform: Ready to Launch Author: David Goldwyn, Neil Brown, and Megan Reilly Cayten. Atlantic Council. August 2014

Mexico poised for an energy renaissance. It has ample reserves of oil and natural gas, experience in energy production, promising economic fundamentals, and industrial expertise. Mexico’s leaders have found the will to reform and passed a set of laws that can transform Mexico into a major energy and industrial power. Much of the analysis on the reforms to date focuses on the upstream. However, the political and economic implications of success in the mid-stream and power sector reforms justify the detailed analysis provided by this report.

www.atlanticcouncil.org/publications/reports/mexico-s-energy-reform-ready-to-launch

Infrastructure Projects in Mexico

Tula Cogeneration Plant Sponsor: Petroleos Mexicanos (PEMEX) Location: Hidalgo Project Value: $820 million

Canada's ATCO has been awarded a contract to build a natural gas co-generation plant in Mexico for a Pemex subsidiary. The 638MW project at the Tula refinery located in the state of Hidalgo, will produce 1,247 tons of steam per hour. The $820-million plant will be developed in 50-50 strategic alliance with Mexico's Grupo Hermés and will enter operation in 2017. Cogeneration is a highly efficient, and environmentally attractive, process that produces both electricity and heat. The contract is the second major project in Mexico to be awarded to ATCO, having won a contract from state utility CFE to design, build, operate and maintain a natural gas pipeline, also near Tula.

Business Opportunities: financing, engineering, construction material, turbines, electrical equipment, precision equipment, control instruments, machinery and steel products.

Dominica I Wind Farm Sponsor: Federal Electricity Commission (CFE) Location: San Luis Potosi Project Value: $196 million

Italy’s Enel Green Power (EGP) has grid-connected its Dominica 1 wind farm in Mexico. The renewable power giant invested about $196 million building the wind farm, which is the first in the central-Mexican state of San Luis Potosí. The plant, using 2MW Gamesa turbines, is underpinned by long-term power-purchase deals worth about $485 million. The Italian group now has almost 300MW of wind operating in Mexico with another 200MW – including the Dominica 2 plant – under construction.

Business Opportunities: engineering, turbines, machinery, control equipment, precision instruments, transmission lines, substations, and electrical material.

Success Stories Selected Reading


Nebraska

In 2013, Nebraska's exports to Mexico reached $1.15 billion, up $1.04 billion from their level in 1993. In the first half of 2014, Nebraska exported $764 million worth of products to Mexico, an increase of 48.6% in comparison with the same period last year. Among all U.S. states, Nebraska was ranked 26th as an exporter of goods to Mexico in the first semester of 2014. In 20 years of NAFTA, Nebraska's exports to Mexico have increased by 964%, while those to the rest of the world rose 374%. This means that the export growth rate to Mexico is 2.6 times higher than its export growth rate for the rest of the world. Since NAFTA was implemented, Nebraska's sales to Mexico have grown at an annual average rate of 12.5%. In 2013, the exports to Mexico decreased by 35.9% with respect to the previous year. Mexico is an important trading partner to Nebraska. It was ranked as the 2nd largest export market for goods from Nebraska in the first six months of 2014, up from 3rd in 1993, illustrating the impact of NAFTA for Nebraska's growing businesses. Mexico accounted for 18.3% of Nebraska's exports worldwide in the January-June period of 2014.

Exports to Mexico 1993 - 2014 2Q (Billions of US Dollars)

Source: US Census with adjustments made by the World Institute for Strategic Economic Research (Wiser), and SE-NAFTA. 1993-1996 by SIC and 1997-2014 by NAICS.

nafta works2015/11/01 · volume 19, issue 11 [email protected] page 2 increased six-fold,...

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