Border Set To Divide Opinion at US-Mexico Summit

February 25, 2014

February 25th, 2014 – On Wednesday, February 19, the leaders of the United States, Mexico, and Canada will meet to discuss international policy in North America.

The summit is scheduled for the 20-year anniversary of the North American Free Trade Agreement, highlighting issues of trade relations between the three countries. Mexican president Pena Nieto is expected to emphasize the reforms and gains his nation has made in the economic arena, particularly in energy. Until President Nieto’s election, the Mexican government-owned the oil industry, but reforms have loosened the connection between the government and oil producers with successful results. On the Mexican side, the story of the summit will be the economic success of energy and other reforms, especially in the manufacturing sector. President Nieto will invite American manufacturing companies to place part of their supply chain in Mexico, as the country’s economic growth has made it more attractive as a place to outsource manufacturing work. Mexico manufacturing has evolved beyond the poor reputation of the nation’s past and now competes with China as a viable host for American production.

Shelter services in Mexico offer a variety of options for using Mexico as a production base. Under the shelter model, foreign companies manufacturing in Mexico can focus 100 percent of their energy towards manufacturing and quality control, allowing the shelter company to manage 100 percent of their administration, including Human Resources, Accounting, Import/Export services, Environmental and all related government compliance.

“Another benefit shelter companies add to the equation is enabling foreign companies to operate in Mexico without any legal liability,” says Scott Stanley, Sr. Vice President of NAPS, Inc., one of the largest shelter companies in Mexico. “In addition, shelter companies understand how to operate under the IMMEX program in Mexico, which requires a lot of expertise in the area of documentation and compliance.”

The presence of the NAFTA treaty is a key element for firms manufacturing in Mexico are they continue to enjoy an economic boom.  At the summit, the leaders will discuss ways to use the Trans-Pacific Pact to fill in some gaps in NAFTA’s treatment of North American border flows. The resulting improvement in border waiting times makes using Mexico as a low-cost manufacturing alternative even more attractive.

Currently, delays in customs mean that trucks carrying goods often spend time idling at the border, waiting for inspection. An improvement in customs speed would reduce these wait times, facilitating the transfer of goods.

The growth of manufacturing in Mexico under President Nieto and his economic reforms come as the Mexican government continues to crack down on cartel violence and orchestrate new efforts to combat organized crime. While traditionally American firms outsource their manufacturing to Asia, increased stability and growth in Mexico makes that country a strong contender, taking into account NAFTA and the existence of shelter companies who make the transition nearly seamless. The US-Mexico economic alliance will be on full display at the summit.