On Feb. 15, ANA will begin daily direct service between Tokyo’s Narita Airport and Mexico City, the only daily direct flight between Japan and Mexico. ANA added the flight in response to a growing economic link between the two countries, especially through the automotive industry. In the five years after 2010, Japanese direct investment in Mexico has increased 2.7 times, and the number of Japanese companies establishing operations in Mexico doubled, according to ANA.

MONTREAL — TransForce’s US$558-million acquisition of U.S. company Con-Way Truckload will make it easier for Canadian firms looking to ship goods to Mexico, CEO Alain Bedard says.

TransForce’s Transport America subsidiary did at least US$30 million of annual business shipping goods between the U.S. and Mexico, but almost nothing between Canada and Mexico.
The Con-Way deal will see the company’s U.S.-Mexico business grow to about US$200 million and give TransForce a network of more than 50 local partners across the U.S. southern border.
“I think we’re going to be the carrier with size and connection,” Bedard said in an interview Friday. “When you do 50,000 loads a year in and out of Mexico, you are somebody.”
Con-Way currently doesn’t serve Canada but its addition to TransForce will provide Canadian customers with access to employees who speak English and Spanish and are experienced in transborder shipping.
Bedard sees the partnership being advantageous to manufacturers in Ontario and Quebec and sectors like the automotive industry, which have operations in Canada and Mexico.
He anticipates cross-border trade with Mexico will continue to grow even if Republican nominee Donald Trump, who has vowed to build a wall and rip up NAFTA, wins the presidential election.
U.S. goods and services trade with Mexico was an estimated US$583.6 billion last year, while Canada did $37.8 billion of two-way trade with its third-largest trading partner, according to government statistics.

Several large Canadian companies, including Bombardier (TSX:BBD.B) and its offshoot, recreational vehicle maker BRP Inc. (TSX:DOO), have developed sizable operations in Mexico.
“The Mexicans are building products that are good at a better price than we can do in Canada or in the U.S. so trade is trade,” Bedard said when asked if a Trump election Nov. 8 would be a risk for the acquisition.
In addition to the Mexican connection, the purchase of Con-Way helps TransForce increase its U.S. revenues and gain critical mass for its American truckload business, he said.
The acquired business is expected to generate about US$530 million in annual revenue and boost TransForce’s U.S. truckload revenue to about US$850 million.
Overall, the United States will now account for half of TransForce’s total revenues of around $4 billion.

Goldman Sachs Group Inc. says the Mexican peso could gain back most of this years’ losses against the dollar if Hillary Clinton wins the U.S. election. But if Trump becomes the next president, it’ll more than double its losses.

The peso is the second-worst performer among emerging markets this year after Argentina’s currency, falling 11 percent as global sentiment toward developing nations soured. It hit a record low this week before recovering after democratic candidate Hillary Clinton was perceived to be the winner in the first televised debate. The peso edged higher Thursday, trading at 19.3674 per dollar at 1:37 p.m. in New York, reversing losses after the central bank raised the benchmark interest rate half a percentage point to 4.75 percent.
The U.S. is by far Mexico’s biggest export market, buying more than 10 times as much from Mexico last year as the second-largest, Canada. If he wins, Trump has promised to rewrite the North American Free Trade Agreement, which governs commerce between the countries and has helped transform the Mexican economy in the last two decades.
“A significant part of Mexican peso underperformance cannot be attributed to global macro factors and likely reflects a ‘U.S. elections premium,’” the New-York based bank said in a note to clients by analysts Mark Ozerov and Kamakshya Trivedi. Were Clinton to win, the peso could potentially gain 9 percent to 10 percent as that premium is removed.
In case Trump wins, the peso would lose as much as an additional 20 percent to near 24 pesos per dollar, the note says.
“It could be smaller if there is a potential shift of Mr. Trump’s rhetoric away from renegotiating trade agreements” or if a rapid depreciation prompts action by the Mexican central bank through more aggressive rate hikes.

The peso recovered from losses of about 0.5 percent after the central bank boosted the lending rate for the third time this year on concern the peso’s tumble may fuel inflation and threaten to roil the nation’s financial markets. Economists surveyed by Bloomberg before the decision had never been so divided, with 12 expecting no change and 15 others forecasting increases of 0.25 percentage point to as much as 0.75 percentage point.
Thursday’s increase “isn’t going to stop it depreciating if Trump pushes ahead in the polls,” said Chris Lawrence, a rates and currency strategist at Rabobank NA in New York. “And if Trump wins this election, the currency will depreciate meaningfully and the central bank will have less firepower to combat it.”
One-week implied volatility on the peso, a gauge of traders’ expectations for price swings, has climbed to the highest in the world. Net short positions on the peso jumped to a record in the week ending Sept. 20, according to the most recent data from the Washington-based Commodity Futures Trading Commission.
The peso’s real effective exchange rate — its trade-weighted value versus a basket of other major currencies, adjusted for inflation — shows it’s undervalued compared with historical norms. The measure fell to the lowest since 2009 on Monday, according to a Barclays index, and is 16 percent below its 10-year average.
Miguel Benedetty, a currency analyst at INTL FCStone Ltd., said the minutes from the bank’s meeting to be released on Oct. 13 will be a key indicator for the peso. He’ll be looking to see whether policy makers talk up the possibility of higher interest rates or intervening in the market, or are more sanguine about risks for the peso.
“If the minutes are hawkish, the peso could move past 19 per dollar,” he said. “But if the market thinks it lacks the hawkish tone, it could move back to record weak levels around 20.”

US companies with maquiladora operations in Mexico will be able to avoid double taxation by entering into a unilateral advance pricing agreement (APA) with Mexico’s tax agency, the Servicio de Administración Tributaria (SAT), the US’s Internal Revenue Service (IRS) announced.

The IRS’s position comes as a result of two years of negotiations between the US and Mexican competent authorities to address a backlog of approximately 700 pending APA requests from the maquiladora industry. Maquiladoras, mostly located along Mexico’s border with the United States, manufacture goods for export, typically under a contract manufacturing arrangement with a foreign multinational.

The new agreement between the countries updates and expands on a 1999 agreement, which governed transfer pricing and other aspects of maquiladoras owned by US multinational corporations. Under the new agreement, the two countries are implementing a transfer-pricing framework that both countries have agreed will produce arm’s-length results. It allows qualifying taxpayers with pending unilateral APA requests to elect to apply the new framework, and the IRS will treat the transfer-pricing results as arm’s-length under Sec. 482 of the Internal Revenue Code.

Taxpayers that elect not to apply the new framework may apply the safe harbours provided for in the 1999 agreement or request a bilateral APA from the Mexican and US competent authorities under the provisions of IRS Rev. Proc. 2015-41.

The SAT is expected to release details of how to make the election and the steps taxpayers must take regarding pending unilateral APA requests shortly. The IRS also said it will release future guidance on the tax consequences of the unilateral APAs.

Citigroup Inc (C.N) is investing another $1 billion in its Mexican bank and renaming it Citibanamex in the strongest signal from management that the business is worth keeping for the long run.

New York-based Citigroup said on Tuesday that the investments will be completed by 2020 and will improve digital tools, ATMs and branches.

The new funds come in addition to Citi’s 2014 commitment to invest $1.5 billion in the business, formerly known as Banco Nacional De México, or Banamex.

“These investments in Citibanamex reaffirm our commitment to Mexico and our confidence in its prospects,” Citigroup CEO Mike Corbat said in the announcement.

Corbat’s decision is a rebuttal to calls by some investors and stock analysts for Citigroup to consider selling Banamex. Some large Citigroup investors have privately questioned the wisdom of keeping Banamex after Republican presidential candidate Donald Trump has roused sentiment for restrictions on trade and travel with Mexico that could hurt the economy there.

Banamex contributes about 15 percent of Citigroup’s global consumer revenue, which makes Mexico second only to the United States in importance. It also earns about 15 percent return on shareholder equity, significantly better than Corbat’s goal of at least 10 percent for the whole bank.

Citigroup said the investments will be directed to five areas: digital banking, information technology, branches and ATMs. It will add 2,500 new ATMs to the 7,500 it has now.

The bank has more branch offices in Mexico than in any other country, with 1,500, compared with 700 locations in the U.S.

Citigroup shares were up 2.4 percent at $48.17 in early afternoon trading.

Corbat has made allegiance to Banamex a hallmark of this four-year tenure as chief executive.

In 2014 he went to Mexico City to pledge support for the unit to the president of the country. He also oversaw executive changes and new controls following the discovery of more than $500 million of fraudulent loans to an oilfield services company.

Mike Mayo, an analyst at CLSA who has long urged Citigroup to sell Mexico, said a sale is now off the table, at least for the short-term.

The new investment will add value, Mayo said. “The question is whether a sale and redeployment of the proceeds into stock buybacks and having a more simple structure would be even better,” he said.

Cisco Systems (CSCO) plans to spend as much as $4 billion in Mexico through 2018 to expand production, creating jobs in the country even as the American company cuts its global workforce by 7%.

The spending will lead to the 270 new direct jobs and 77 related positions, according to a statement from the Mexican government Tuesday. The biggest maker of equipment that runs the internet plans to upgrade its factories and increase production through contract manufacturers, a person familiar with the matter told Bloomberg News. The investment figure includes some spending that had already been planned.

The plan aids Mexican President Enrique Pena Nieto as he seeks to show his economic reforms are attracting more investment. The timing could be delicate for Cisco, coming just after the U.S. presidential debate this week in which Republican candidate Donald Trump threatened to increase taxes on companies that move jobs to Mexico and other countries.

Cisco, based in San Jose, Calif., announced about 5,500 job cuts six weeks ago, without saying which countries would lose positions. Savings from the job reductions will be invested in newer businesses that Cisco expects to fuel sales growth, such as cloud computing and connected services, the company said.

Including the new jobs, the spending plan will affect 4,830 direct employees in Mexico, the government said. The expansion enables the manufacturing in Mexico of products including routers, servers and video-conferencing screens.

“These facilities are expected to supply products to more than 110 countries, and directly complement our manufacturing efforts in the U.S. and around the world,” Cisco Chief Executive Chuck Robbins said in a blog post Tuesday after meeting with Pena Nieto. “Mexico is rapidly becoming one of Latin America’s economic success stories.”

Cisco started operations in Mexico in 1993 and now has more than 1,000 employees there, Robbins said.

The Cisco plan is one of the first major investment announcements by a U.S. company in Mexico since April, when Ford Motor (F) said it would spend $1.6 billion on a new small-car factory in Mexico, drawing a rebuke from Trump. It’s one of the top five spending announcements since Pena Nieto became president in 2012.

Ford has begun fighting back against Trump’s accusations and took to Twitter during the presidential debate to rebut the Republican candidate’s assertion the company is cutting U.S. employees to move work to Mexico. The second-largest U.S. carmaker tweeted it “has more hourly employees and produces more vehicles in the U.S. than any other automaker.” Earlier this month, Ford Chief Executive Mark Fields went on CNN to say the company is “absolutely not” cutting U.S. jobs.

In June of last year, AT&T (T) said it would invest about $3 billion to extend mobile internet service to Mexico in addition to spending $4.4 billion earlier in the year to acquire Iusacell and Nextel Mexico.

The Toyota Motor Corp. plant in San Antonio can’t build trucks fast enough, operating at full throttle six days a week with new Tundras and Tacomas rolling off its production line every 60 seconds.

“We’re pegged out. We can’t run any faster,” said Toyota Motor Manufacturing Texas spokesman Mario Lozoya.

The company is trying to relieve some of the pressure on its assembly line here by upping production at its facility east of Tijuana, in Mexico’s Baja California state. Toyota is investing $150 million in the Baja California plant to increase its production of Tacomas by 60,000 a year by 2018, adding roughly 400 jobs in Mexico.

The Mexico investment comes despite a slowdown in overall truck sales. Toyota has sold 177,055 Tacoma and Tundra pickups through August — 304 less than the same time period in 2015. The drop is due to lagging Tundra sales, which are down 8.5 percent year-over-year through August. Tacoma sales are up 5.5 percent during the same time period.

Ford Motor Co. Chief Executive Mark Fields said Wednesday the car maker will shift the production of its small cars from the U.S. to Mexico, a move aimed at “reinventing” Ford’s small vehicle business and cutting costs to help boost profitability.

“Within the next two to three years, a majority of our small vehicles will be built in low-cost areas,” Fields said at the company’s investor day, according to the archived audio provided by FactSet. “And for example, here in North America, we will have migrated all of our small car production to Mexico and out of the U.S.”

In August, Ford Chief Financial Officer Robert Shanks said the company was seeing “sort of [a] car recession,” according to a transcript of a conference call with analysts provided by FactSet.

A spokeswoman for Ford F, -1.94% said Fields’ comments weren’t new news as Ford indicated last year it would stop making the Ford Focus and the C-Max small cars at the its Michigan assembly plant by 2018.

Weak growth, low oil prices and difficulties in making promised spending cuts all threaten Mexico’s push for a budget surplus next year as credit rating agencies consider downgrading its debt.

After running primary budget deficits since 2009, Mexico last Thursday pledged to turn a projected primary deficit of 0.4 percent of gross domestic product into a surplus of 0.4 percent of GDP next year.

Standard & Poor’s and Moody’s put Mexico’s credit outlook on negative this year, flagging concerns that weak growth could keep pushing up debt after a collapse in oil prices hit Mexico’s income from crude sales.

Jaime Reusche, Moody’s senior analyst on Mexico, said higher-than-expected income from tax reform passed in 2013 had helped offset the decline in oil income. But if tax revenue doesn’t hold up, the government may not meet its targets.

“The budget continues to signal consolidation and that may indeed be favorable for maintaining the rating where it is, but the proof is in the pudding,” he said on Friday.

Mexico’s austere 2017 budget lays out deep cuts that fall heaviest on the education, communications and transportation and agriculture ministries. The government proposed cuts worth nearly 240 billion pesos, or about 1.2 percent of GDP, compared to the 2016 budget.

Moody’s and S&P are concerned that debt as a proportion of GDP could keep rising in the coming years.

But Luis Madrazo, the finance ministry’s chief economist, said the government has already made deep budget cuts in 2016 to stabilize the trajectory of debt to GDP. “We need to make sure the cuts are permanent,” he said on Sunday.

Meeting the goal may be tough. Last year, when sinking oil prices sent the peso into free fall, Mexico announced spending cuts of 124.3 billion pesos, nearly 3 percent of the budget.

While the government made some cuts, total spending still overshot its original budget by more than 4 percent, or 197 billion pesos last year.

The finance ministry said in a statement to Reuters that discretionary spending without financial investments, such as absorbing part of state oil company’s Pemex’s pension liabilities, was only 1.5 percent above budget.

Reaching a surplus “is not going to be easy, the pressure is enormous,” said Ernesto Cordero, a senator in the opposition center-right National Action Party (PAN) and a former finance minister.

Mexico’s central bank last month warned that the country faced a “unpostponable” deadline to cut back its debt in order to maintain the confidence of foreign investors.

Spending last year rose nearly 5.9 percent in real terms, the biggest increase since 2008, according to a Reuters analysis of finance ministry reports to Congress.

The finance ministry said the increase was only 2.6 percent, when excluding financial investments and pension costs.

Mexico was still able to cut its total public sector borrowing requirements last year with the help of a one-off boost to its balance sheet from a surplus transfer from the central bank.

“Even if Mexico does hit the target, the quality of the adjustment is always important, not to have too many one-off items in there,” said Pramol Dhawan, an emerging markets fund manager at Pimco.

Helped by better-than-expected tax revenue, Mexico was able to map out big spending cuts at Pemex this year, easing concerns the state oil company could require a major bailout.

But spending by the federal government has been harder to rein in. One measure of discretionary spending, known as current structural outlays, rose 3.7 percent last year in real terms, shooting past the 2 percent ceiling set by the Finance Ministry in its own austerity rule approved in late 2013.

The law allows the government to exceed the limit since its recent tax reform lifted government income, according to the finance ministry.

Analysts said it would also be hard for the government to contain expenditures ahead of state elections next year after President Enrique Pena Nieto’s Institutional Revolutionary Party (PRI) lost seven gubernatorial races in 2016.

(By Michael O’Boyle and Alexandra Alper. Additional reporting by Dave Graham; Editing by Simon Gardner and Jeffrey Benkoe)

Written by: Reuters

MEXICO CITY (AP) — One of President Enrique Pena Nieto’s closest advisers and confidants, Finance Secretary Luis Videgaray, resigned Wednesday in a move seen as linked to the unpopular decision to invite Republican presidential candidate Donald Trump to visit Mexico.

Pena Nieto has taken responsibility for inviting Trump, but a former government official familiar with the workings of the administration said Videgaray would have played a preponderant role in the decision. Newspaper columnists in Mexico have reported Videgaray was behind last week’s visit, after which Pena Nieto was criticized for not being forceful enough in rejecting Trump’s proposals and comments about Mexico.

Videgaray “was the architect” of Trump’s visit, because he was the adviser that Pena Nieto had “the most reliance on, and was closest to,” said columnist and political analyst Raymundo Riva Palacio.

Even Trump himself said Videgaray’s resignation was related to his visit. Trump told a televised U.S. national security forum Wednesday night that “the people that arranged the trip in Mexico have been forced out of government. That’s how well we did.”

Videgaray acted as Pena Nieto’s campaign manager during his 2012 election campaign and has been seen as the architect of many administration policies. He led Mexico’s Treasury Department and is sometimes referred to as treasury secretary or minister, but because he oversaw budgets and fiscal policies, his role was closer to that of a finance secretary.

He has shared both in the president’s triumphs and embarrassments. In 2014, Videgaray acknowledged he had bought a house from the same government contractor that sold a mansion to Pena Nieto’s wife, Angelica Rivera, in the administration’s deepest scandal.

Pena Nieto thanked Videgaray for leading financial reforms during a ceremony at which the president announced he was accepting the resignation. He did not announce a new post for Videgaray.

“He has been an official very committed to Mexico, and very loyal to the president,” Pena Nieto said.

Former finance secretary Jose Antonio Meade, who has since served as foreign relations secretary and social development secretary, will replace Videgaray. Luis Enrique Miranda Nava will take over the social development post.

Pena Nieto said Meade will be in charge of turning in a primary budget surplus for next year, meaning government spending will have to be less than revenues, not including interest payments on debt.

In comments to local media, Meade defended the president’s meeting with Trump, saying it had lowered the risk of confrontations and helped moderate some of Trump’s policy proposals, especially his vow to change the North American Free Trade Agreement. Pena Nieto has said the meeting was needed to build bridges in case Trump is elected.

But Pena Nieto was ridiculed for not confronting Trump more directly during the visit about him calling migrants from Mexico criminals, drug-runners and “rapists” and promising to build a border wall and force Mexico to pay for it. The wall proposal has been criticized widely and fiercely in Mexico.

Speaking at a town hall last Thursday where he fielded questions from young people, Pena Nieto sought to defend the decision to invite Trump to visit.

He said the easier path would have been to “cross my arms” and do nothing in response to Trump’s “affronts, insults and humiliations,” but he believed it necessary to open a “space for dialogue” to stress the importance of the U.S.-Mexico relationship.

“What is a fact is that in the face of candidate Trump’s postures and positions, which clearly represent a threat to the future of Mexico, it was necessary to talk,” Pena Nieto said hours after his annual state-of-the-nation report was delivered to congress. “It was necessary to make him feel and know why Mexico does not accept his positions.”

Pena Nieto acknowledged the “enormous indignation” among Mexicans over Trump’s presence in the country and repeated that he told the candidate in person that Mexico would in no way pay for the proposed border wall.

The president came under fire for not responding to Trump’s mention of the wall during a joint news conference after their meeting Aug. 31, something he has since sought to correct.

A day later, Trump tweeted that Mexico would pay for the wall. Pena Nieto fired back his own tweet saying that would “never” happen.

Democratic presidential candidate Hillary Clinton, also invited to visit by Pena Nieto, said this week that she won’t be coming to Mexico before Election Day. She called Trump’s quick stop in Mexico City “an embarrassing international incident.”