NEW ADMINISTRATION FACES SHIFT IN TRADE STANDARDS

GRACIELA MÁRQUEZ

Minister of Economy

Q: What will be the Ministry of Economy’s guiding principles during the current federal administration? A: The Ministry of Economy is responsible for generating wealth and increasing the well-being of all Mexicans, both of which are also the main objectives of President López Obrador’s administration.

Mexico closed the second decade of the 21 st century with a trajectory of low growth rates and enormous regional, sectorial and social disparities. Over the past 12 years, the country has averaged annual growth of 2.1 percent, of which 69 percent originates with foreign companies, while national businesses contributed 31 percent. Mexico still must take advantage of its close ties to the global economy and at the same time strengthen its productive force. In other words, the virtuous combination between the global economy and the domestic market will help the country find the path to sustained, sustainable and inclusive growth for the coming years.

Our objective is not only to reactivate growth at high and sustained rates but to do so with a focus on solving existing inequalities. This means generating wealth without leaving any social sector, production segment or region of the country behind.

We have set three main pillars that will guide our policies: innovation, diversification and inclusion. These pillars are not mutually exclusive; they complement each other. We are in the middle of the fourth industrial revolution, which is changing the way we understand production of goods and services. The challenge is to adopt these technologies inclusively to benefit the entire population.

Innovation is key for our economic policy. We are convinced that only by adapting to and adopting new technologies, will we be able to produce new goods and services based on an efficient, competitive and productive supply chain that integrates national added value. The Ministry of Economy will support innovation through programs such as Programa para el Desarrollo de la Industria del Software y la Innovación (PROSOFT) and Programa para la Productividad y Competitividad Industrial (PPCI). We are confident that innovation will help us close inequality gaps created in the past decades.

The second pillar – diversification – is essential to promote exports of goods and services of all productive fields in the country, integrating those sectors and regions that have been left out of global market participation. Investment in logistics, easier paperwork and the provision of market information will be the springboards that help national producers participate actively in international trade.

The third pillar that we will boost is inclusion, which means promoting collaboration of marginalized regions and population segments in high-productivity activities. The combination of these strategic pillars will allow us to contribute to the country’s growth and to the consolidation of our strengths according to our industrial calling and cultural identity.

We will articulate a real industrial policy through collaboration between the conjunction of the national industry, society and the government, which will increase the well-being of the national population. The greater challenge is to close the gap between regions and between segments of the population.

Q: What is the ministry’s strategy to strengthen the automotive industry while helping the local market to recover?

A: The automotive industry in Mexico is globally competitive. The country’s sixth position in vehicle production and fifth in auto parts manufacturing are proof of that. In addition, over the past decade, the country has achieved several records, mostly in vehicle exports.

Today, we enjoy a modern and productive infrastructure for automotive goods that complies with international standards. The foundations that have boosted the sector

will be reinforced during this administration. Mexico has a solid regulatory framework, a broad network of free trade agreements, a privileged location, as well as competitive production costs in workforce and logistics.

The automotive industry plays a very important role in Mexico’s economy and its leadership as a currency and employment generator makes it a strategic sector. This administration will foster actions that will

strengthen wealth generation through innovation, inclusion and diversification while contributing to the industry’s opportunity areas. Among these actions are strengthening Tier 2 and Tier 3 companies, boosting supplier development throughout the entire supply chain with a special focus on raw materials and tooling equipment, while fostering human capital specialization according to the industry’s demands.

The Ministry of Economy will support the entire sector, setting the stage for a more solid and more competitive market with effective rule of law to attract investment, liaise with different elements of the supply chain and promote companies’ participation across different industry levels. At the end of the day, all these elements have a positive influence on sales in different industries and sectors.

Q: How is the new federal administration planning to provide the needed certainty to investments in the automotive sector?

A: Mexico has broad competitive advantages in the automotive industry, not only regarding manufacturing. Today, we have engineering centers from global automakers and auto parts manufacturers. We know the automotive industry demands qualified labor to adequately supply in quantity and quality. Human capital availability and automotive industry infrastructure are main production elements that will bring a long-term impact to the industry. The new administration will offer opportunities to the population to develop the required talent, while incorporating them successfully into the industry.

Legal certainty and resource availability that promote greater specialization and inclusion from more companies into the global supply chain will be key in the industry’s development, both locally and internationally. Regardless, competitiveness in the automotive industry and the great business opportunities the country offers are the main guarantee that investments will maintain a privileged dynamism.

Q: What opportunities will USMCA’s implementation bring to Mexican automotive suppliers and automakers with operations in the country? A: The first thing we can highlight from USMCA is that Mexico maintains its preferential access to the US market. The changes agreed in rules of origin will boost a greater degree of integration for the automotive industry in North America. An increase in the regional content value (VCR) from 62.5 percent to 75 percent in light vehicles further reinforces and consolidates production chains and promotes greater use of inputs sourced in North America, providing greater opportunities for Mexican suppliers.

Operational costs for automotive manufacturing in Mexico are competitive and offer advantages over most countries in Southeast Asia. At the same time, VCR requirements are an additional incentive for companies to set up shop in Mexico. Although complying with stricter VCR standards will be challenging, the auto parts industry has developed significant capabilities.

Furthermore, Mexico offers greater competitive advantages when compared to other USMCA members. This treaty, in particular regarding the conditions established for the automotive industry, reflects US efforts to relocate manufacturing production to US territory, as well as the need for a strategic manufacturing partner in the region. Mexico has the opportunity to strengthen European and Asian production chains, creating more incentives for more companies to establish operations in North America.

It is important to highlight that the labor component included in USMCA’s rules of origin has several compensation alternatives through investments in R&D activities that will favor the profile of automotive companies established in Mexico.

Q: How will the Ministry of Economy help local suppliers to comply with USMCA’s new rules of origin for the automotive sector?

A: The federal government has programs that even though are not exclusive for the automotive industry, are available to support the industry in developing human capital, as well as investments and technology development. These programs, together with the addressing of specific needs, will have the potential to impact positively in developing local suppliers, having social benefits as they help to modernize production processes while they promote inclusion of new competitors.

The Ministry of Economy will provide guidance to companies regarding the availability of these federal programs, as part of a public policy that will boost industrial competitiveness.

Graciela Márquez is the first woman to lead the Mexican Ministry

of Economy. She was a professor and researcher at Colegio de

NEW ADMINISTRATION FACES SHIFT IN TRADE STANDARDS

GRACIELA MÁRQUEZ

Minister of Economy

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Graciela Márquez is the first woman to lead the Mexican Ministry of Economy. She was a professor and researcher at Colegio de México. Márquez majored in economics and has a Master’s in economics from UNAM and a Ph.D. from Harvard University