At a time when there are tensions between the governments of the USA and Mexico over immigration, the transnational trade between the two countries continues to thrive. One of the initiatives that are in the offing is that of the use of modern technology. For example, the marine terminal at the Port of Lazaro Cardenas has started a modernization move that includes a semi-automated platform for transactions.
Some of the benefits for the shippers and carriers is the availability of a full time containerized rail service that goes right up to the port. This will allow Lazaro Cardenas to connect to Manzanillo. Mexico has been at the forefront of using modern technology in order to cut down costs and improve efficiency. The benefits for the operators and customers include a significantly controlled time-lag. Previously one of the frequent complaints from shippers and carriers were the inordinate delays at the ports.
What Are the Mexican Ports?
A number of Mexican ports including Lazaro Cardenas and Manzanillo are poised to become the principal gateways to the prosperous market that is the United States marine industry. It is anticipated that technology will bring logistical competitive advantages that will make Mexico an attractive option for Americans that wish to import and export goods by sea. Mexico has long coveted the position of being a gateway to the Americas, an interesting market for both the USA and Canada in the north.
The significant investments in technology are also aimed at meeting consumer demands which are driven by the growing middle class in Mexico. This inevitably seeks consumer goods including those that are imported from the USA. Mexico has been diligently working on its manufacturing sector and those manufactured goods have to be exported somewhere. The United States seems like a natural market given its proximity and high incomes.
The Mexican “Big Two” Making the Mark
The biggest ports in Mexico have ambitions of providing an attractive alternative to USA shippers and carriers. They specifically targeted the US-bound imports for market expansion. Following the West Coast Labor Crisis of 2014-2015, many ports in that country were significantly weakened. Mexico provided an easy alternative in more ways than one. The only obstacles were distance and capacity. Those are the two aspects that the ports are focusing on in their development plan.
Mexico also needs this expansion given its anemic economic growth which hardly beats the 2% mark on an annual basis. The Peso is chronically weak against the dollar and fuel prices are spiraling out of control. A good shipping industry might go some way towards alleviating some of these concerns.
The Trump administration has promised to renegotiate NAFTA (North American Free Trade Agreement) which is bound to disadvantage Mexico in some ways. That means that the quicker the country latches onto the shipping bandwagon, the better for it.
Mexican Port Goals and Expectations
The Mexican ports anticipate and expect to be matching or even bettering their current dominance of shipping between the North and Americas. Currently, the annual load of goods is increasing by 4.6% on average. This easily beats the USA with its 2.7% growth rates. Lazaro Cardenas saw increments of about 10.2%. The downside is Manzanillo, with its very modest 1.2% growth. Nevertheless, these two major ports are still making an investment in large projects in anticipation of increased trade with the USA.
For example, Manzanillo is coming towards the end of a three-year project for the construction of a big tunnel that will give full-time access to freight trains. This would represent a major improvement on the highly restricted quartet of tours that are available on any given day at the moment. The tunnel will also help to avoid cargo going through the chaotic streets of the main cities. Another possible benefit is the increased capacity to handle even larger cargo, some estimates indicating a 200% increase in volume following the use of the tunnel. Manzanillo will better serve its 23 services to the tune of up to 12,500 TEUs.
Effects on the United States
For the USA, there is a mix of benefits and possible disadvantages. On the plus side, it will make importing much quicker, cheaper and easier than before. The automation will improve communication with the USA authorities and systems. However, that does very little to address the trade deficit which has become a major concern of the Trump Administration. The reality is that America will be importing more than exporting, a feature of the status quo at the moment.
Advantages for the United States
If the US uses the new investments as a launchpad for its move towards the Americas, this could turn out to be good news for it. Mexico is the gateway to the Latin American countries which have a growing middle class that will most definitely be in need of imported American goods. It also offers an alternative to mighty China, which is already retaliating against the tariffs and barriers that the Trump Administration has placed on its goods. These are opportunities that the US economy can only realize with a much more strategic view of international marine trade.
Disadvantages for the United States
The stark news is that the US manufacturing sector is not doing very well. Couple that with the strong manufacturing sector of the likes of Mexico and you have the makings of a huge trade deficit for the USA. Indeed, the Mexican government has plans to invest about $5 billion in all the ports within the jurisdiction. One of the industries that it is targeting is that of car manufacturing including the likes of General Motors, Fiat, Chrysler, and Ford which have opened up branches in Mexico. The upshot is lost opportunities for US car industry workers.
Conclusion
Mexico has long realized the importance of the USA as a trading partner. Even where the US administration has expressed unease about the trade deficits it has with Mexico, the thinking down south has to been to placate the USA as much as possible in order to facilitate international trade.
Mexico cannot lose in this war as the maritime trade continues to grow. Shippers and carriers will vote with their wallets by going for the cheapest and most convenient deals available. Mexico seems to be doing a very good job of developing its ports as the ideal conduit for an import-export industry that favors it over the USA. In reality, US exports may increase after the modernization of Mexican ports but that change will be more than offset by the imports from Latin America. This story once again demonstrates the complexities of international trade wars.
