HIDALGO, Mexico – Like most people who don’t drive an electric vehicle regularly, Mauricio Gonzalez has to check and see if the engine is even running. When he confirms that it is, the SUV made by Chinese manufacturer JAC Motors is flying.

“I think it’s a very nice car. It’s very powerful, and I think it’s very comfortable, also.”

But what Gonzalez is really excited about is that this SUV was assembled in the central Mexican state of Hidalgo. Gonzalez is the state’s undersecretary for economic development. His job is to attract companies here, and the plant where these SUVs are made already employs 200 people.

“Their priority is to create, more or less, 1,000 jobs,” he said.

JAC is one of three companies owned by the Chinese government with a presence in Mexico. Just last month, JAC started selling its SUVs here. They’re working in partnership with a Mexican company called Giant Motors.

Giant was started 10 years ago by a group of Mexican investors. They’ve also partnered with Chinese company FAW Trucks to make commercial vehicles. Giant Motors CEO Elias Masri said that for now, his company’s long-term plan doesn’t even include American consumers.

“The main issue is to make a Mexican product. And our main goal today is Mexico and Latin America,” Masri said.

“Mexico has a lot of other options,” said Kristen Dziczek, an analyst with the Center for Automotive Research in Ann Arbor, Michigan.

“Mexico has free trade with over half the market for new vehicles in the world, and they can very easily shift to being a non-NAFTA export,” she said.

Without a doubt, Dziczek said, Mexico is closely linked to the U.S. She estimates that about two-thirds of U.S. investment in Mexico comes from the automotive sector. But what’s already here won’t just evaporate if the North American Free Trade Agreement disappears.

“Right now, they’re making one in five vehicles for non-NAFTA export, and we see that rising in just three or four years to one in three.”

One possible new partner for Mexico is China. Dziczek said that with Mexico’s established ecosystem of carmakers and part suppliers, it’s a good place for Chinese companies to get a toe-hold as they seek to expand outside of China. Although it should be noted that Chinese presence in Mexico is not new, said Enrique Dussel Peters, the director of Center of Chinese-Mexican Studies at the National Autonomous University of Mexico.

“Well, China is Mexico’s second largest trading partner since 2003,” he said.

But, historically, Mexico has competed with China to export to the U.S. and elsewhere. And Dussel said that in 2016, Mexico’s import-export relationship with China was 13 to 1.

“So we are importing massively from China and exporting very little.”

Mexico could benefit more, Dussel said, but at least for now it lacks the government, business and academic infrastructure to fully exploit that relationship. “And so if we do not make our homework, we will not be able to sell tequila, no? Hah. Less aside other more sophisticated goods.”

Back inside the JAC Motors SUV, Gonzalez celebrates the Chinese investment in the state of Hidalgo. But he doesn’t want companies to come exclusively from one place, whether it’s the U.S. or China.

“That’s why we’re looking forward to promote the state of Hidalgo in Asia, in particular, also in Europe,” he said.

As it turns out, most people betting on whether automotive investments will become a long-term strategy from China are being cautious.

Polish President Andrzej Duda on Saturday starts an official visit to Mexico.

Along comes a score of Polish companies interested in increasing their footprint in Latin America. The five-day mission will include a Polish-Mexican Business Forum and meetings with local companies in Mexico City.
Poland eyes the country as an emerging regional power which may soon join the group of the world’s biggest economies.
Mexico now ranks 11th in the world in GDP-based standings and is expected to become the world’s fifth biggest economy by mid-21st century. The mission to the country is led by the Polish Agency for Investment and Trade (PAIH).
“This is a very important, historic visit to Mexico by our president and we are taking advantage of it to bring the Mexican market closer to Polish companies willing to expand their business overseas,” PAIH vice president Krzysztof Senger told our reporter Michał Owczarek.

Mexico’s top trade negotiator said he was heartened by a retreat from more protectionist rhetoric in the U.S. and that talks to redo the North American Free Trade Agreement may conclude as soon as January.

Economy Minister Ildefonso Guajardo said the January date would depend on the administration of President Donald Trump notifying Congress in time for negotiations to begin by the end of July.

“The U.S. has to trigger the mechanism,” Guajardo said in an interview with Bloomberg TV’s Erik Schatzker in Buenos Aires. “What I keep hearing is that after Congress comes back from recess, they will be able to be notified by the end of April.” In that case talks can start by the end of July, followed by “six months of negotiations, and then we send it to the legislative branch for them to approve it.”

Investors have shed their doomsday outlook on Mexico in recent weeks after White House officials repeatedly said that both Mexico and the U.S. stand to benefit from a renegotiation of Nafta. The peso has rebounded from a record low in January and is now the best performer of all currencies tracked by Bloomberg, and companies that had put investments on hold as then-candidate Trump railed against Nafta are racing back into the country.

“It will be in the best interest of both countries involved to make this process very efficient,” Guajardo said, noting that Mexico has presidential elections in mid-2018 and the U.S. has a midterm vote in November of next year.

Still, Guajardo warned that even minor changes may be difficult to negotiate. On one of those changes, raising the average percentage of auto inputs that must be made in the North American region to 70 percent from 62.5 percent seems reasonable, Guajardo said on the sidelines of the World Economic Forum’s Latin America meeting in Buenos Aires. However, pushing it to 95 percent would be extreme and hurt the region’s competitiveness.

“Mexico will be willing to buy more from the U.S.,” Guajardo said. “We can make an additional effort as long as you have the supply process already in place to be able to supply in Mexico at a competitive cost.”

The Trump administration has softened its rhetoric notably from January, when then President-elect Trump tweeted that he’ll slap heavy taxes on businesses that move jobs to Mexico. Since then, U.S. Treasury Secretary Steven Mnuchin has said redoing Nafta could spell a win-win for both sides. Commerce Secretary Wilbur Ross said he anticipates a sensible deal, and Peter Navarro, who leads the White House National Trade Council, said he wants Canada, Mexico and the U.S. to become a global manufacturing powerhouse.

Some of Trump’s early stumbles, such as the collapse of the health-care bill and court orders against two attempts at a travel ban have also underscored how hard it is to make any drastic changes in Washington.

For example, House Speaker Paul Ryan has been pushing to replace corporate income tax with a tax on businesses’ domestic sales and imports, exempting exports. The border adjustment tax proposal raised alarm bells among importers in the U.S., as well as government officials in Mexico as they feared it would reduce shipments north of the border. But support for the measure has waned in Washington.

That border tax may run the risk of violating principles of the World Trade Organization, and Mexico reserves the right to file a complaint against it, Guajardo said in the interview. In addition, if the U.S. reduces its corporate tax rate, the nation would have to rethink its own tax policy to keep being attractive for foreign investment.

A March 22 draft proposal to rework Nafta signed by acting U.S. Trade Representative Stephen Vaughn states that the U.S. will seek to give preference to domestic companies for government procurement while finding opportunities for U.S. companies to bid in Mexico and Canada procurement markets. While noting that the White House has backed away from the letter, Guajardo said that if the U.S. wants access to Mexico’s public purchases, it will have to give Mexico access to its own public purchases.

Trump must issue a formal 90-day notice of his intent to Congress to revisit Nafta, but the administration so far has been vague about what the U.S. will seek from Mexico and Canada in the talks. Ross said March 10 that the White House would give its notice to Congress within weeks, but it has yet to happen. Mexico has been lobbying for a swift renegotiation that could be concluded before the mid-2018 presidential elections.

Trump may bluster about keeping jobs in the U.S., but not many firms seem to be listening.

At first President Donald Trump’s biggest problem, at least when it came to his vows to keep American jobs from being sent to Mexico, is that he overstated both the magnitude of that particular problem and his own achievements in keepings jobs in this country.

Now, though, the problem is that companies are simply not intimidated by his populist rhetoric.

Companies like Illinois Tool Works Inc. in Mazon, Illinois; Triumph Group Inc. in Spokane, Washington; and TE Connectivity Ltd. in Pennsauken, New Jersey, are reducing the size of or outright closing plants in the United States to move to Mexico, according to a Bloomberg report.

Alan Russell, the CEO of a company in El Paso that helps relocations, told Bloomberg that “this isn’t about taking jobs from the U.S. It’s about saving companies.” Similarly Ross Baldwin, the CEO of a San Diego company that performs a similar service told Bloomberg that “there’s cautious optimism and a hopeful attitude that cooler heads will prevail in Washington.”

As Bloomberg also points out, manufacturing jobs in Mexico increased by 3.2 percent in January from where it was in that month in 2016, while they fell by 0.3 percent in the United States within that same period.

This isn’t to say that businesses are unconcerned with the potential impact of Trump’s policies. In particular, the prospect of Trump trying to renegotiate NAFTA and a plan by House Republicans to impose a 20 percent border adjustment tax could impact the bottom line of retailers like Wal-Mart. At the same time, it seems that many businesses are deciding that the cost-saving advantages of using cheap labor in Mexico may outweigh the negative PR caused by sending jobs out of the United States.

If Trump really wants to be remembered as the president who saved American jobs, he may need to do something that his administration has so far opposed on principle — create regulations on American businesses.

G

Grupo Mexico, a mining and rail conglomerate, is buying the Florida East Coast Railway Holdings Corp. for $2.1 billion under an agreement announced Tuesday.

The purchase will enable the Mexican company to expand its U.S. freight transport business on Florida East Coast Railway’s 351 miles of tracks stretching from Miami to Jacksonville. Grupo Mexico has existing rail operations in Texas.

The transaction will be financed by $350 million in Grupo Mexico funds and $1.75 billion in debt, according to Grupo Mexico.

The sale of Jacksonville-based FEC Railway, which is owned by Fortress Investment Group, will have no impact on the company’s other holdings — including the Brightline passenger train operation in South Florida.

The investment group also owns Florida East Coast Industries, the parent company of All Aboard Florida, developer and owner of the Brightlight passenger train system being built from Miami to West Palm Beach and Orlando.

“The sale of the Florida East Coast Railway does not impact Brightline,” said a spokeswoman, AnneMarie Mathews. “Brightline is a separate company that has dual ownership of the corridor and the right to operate passenger service.”

ACAPULCO, Mexico (Reuters) – U.S. President Donald Trump’s push to force U.S. industry to bring jobs home is opening investment avenues for Chinese companies in Mexico, an executive with Industrial and Commercial Bank of China (ICBC), the country’s largest lender, said on Friday.

Fears of a hit to foreign investment ran high when Ford Motor Co canceled a $1.6 billion plant in Mexico’s central state of San Luis Potosi in January.

Trump, who had railed against U.S. manufacturers investing in Mexico, hailed the decision as a major victory, but Ford put it down to declining demand for small cars.

Yaogang Chen, head of ICBC’s Mexico unit, said U.S. industry’s loss could be China’s gain.

“If some U.S. investment projects don’t (happen), there has to be somebody to invest. … If Chinese companies think it is profitable, they will invest,” he said in an interview on the sidelines of a banking conference in the resort of Acapulco.

In February, China’s Anhui Jianghuai Automobile Group Co Ltd (JAC Motor) and Mexico’s Giant Motors, along with distributor Chori Co Ltd, said they would invest over $210 million in an existing plant to build SUVs in the central state of Hidalgo.

Prior to Trump’s campaign against U.S. manufacturers shipping jobs overseas, Chinese companies were making tentative inroads into Mexico.

China’s BAIC Motor Corp Ltd <1958.hk> in June 2016 started selling in Mexico its own cars imported from China and has said that it will look into building an industrial plant in Mexico to produce cars and electric vehicles.

BAIC is already a client of ICBC’s in Mexico.

ICBC, one of the world’s top banks by market capitalization and assets, received its banking license in Mexico in 2014 and started operations there in mid-2016.

“JAC, we think, will be a client of ours in Mexico too,” Chen said.

Still, Chinese foreign direct investment in Mexico is a tiny fraction of what U.S. firms have plowed in over the years.

State-controlled ICBC expects to grow its assets and loan portfolio in Mexico tenfold over the next three years to some 10 billion pesos ($533 million), Chen said.

The executive said ICBC aims to offer a service to allow clients to convert Mexican pesos to Chinese renminbi and vice versa, and make cross-border transactions cheaper.

MEXICO CITY (Reuters) – Mexico’s government on Tuesday warned Mexican companies that it would not be in their best “interests” to participate in the construction of U.S. President Donald Trump’s border wall, though there will be no legal restrictions or sanctions to stop them if they tried.

While some Mexican companies stand to potentially benefit from the controversial infrastructure project, residents south of the border view the wall and Trump’s repeated calls to have Mexico pay for it as offensive. That is putting public pressure on firms to abstain from participating.

“We’re not going to have laws to restrict (companies), but I believe considering your reputation it would undoubtedly be in your interest to not participate in the construction of the wall,” said Mexican Economy Minister Ildefonso Guajardo.

“There won’t be a law with sanctions, but Mexicans and Mexican consumers will know how to value those companies that are loyal to our national identity and those that are not,” Guajardo added.

His comments echo those of Mexico’s foreign minister Luis Videgaray, who said on Friday that Mexican companies that see a business opportunity in the wall should “check their conscience” first.

Mexico’s Cemex , one of the world’s largest cement producers, has said it is open to providing quotes to supply the raw materials for the border wall. Competitor Grupo Cementos de Chihuahua has also signaled a readiness to work on the project.

Both companies have a strong presence in the United States.

Commenting on a media report published last week that stated Cemex will not participate in construction of the border wall, company spokesman Jorge Perez told Reuters: “I confirmed that we will not participate in the bidding process. That is all we have said.”

Asked if Cemex would be willing to provide raw materials, such as cement, to the companies eventually selected to build the wall, Perez said he could not comment.

The only Mexican company, out of some 720 in total, to put its name down on the U.S. government’s website for business opportunities as an interested vendor for the wall construction, is a small, four-member concern from the central city of Puebla that wants to provide LED lights that it imports mostly from China.

Mexican activists have called on consumers and local government officials to boycott that company, Ecovelocity.

Italian oil company Eni has discovered “meaningful” reserves of oil off the coast of Mexico after drilling the first well by an international oil company since Mexico opened up its long closed oil sector to private investment under a 2013 reform. The …and more »
Eni hits oil in first offshore Mexico well – Financial Times

Commerce Secretary Wilbur Ross thinks a minimum wage hike is important — for workers in Mexico.

In a television interview Friday, he argued that one of the problems with NAFTA is that the minimum wage in Mexico hasn’t climbed as fast as it should.

“The theory of NAFTA had been [there would be a] gradual convergence of living standards between Mexico and the United States,” he said on CNBC. “That really hasn’t happened on the Mexican side. The minimum wage…has barely gone up in peso terms.”

That means that employers can still find significantly cheaper labor in Mexico. It also means that Mexican workers don’t have the money to buy higher-priced U.S.-made goods.

He made a similar point at his confirmation hearing. “The minimum wage in Mexico has barely changed in pesos for quite a few years. And the peso has depreciated quite a lot against the dollar,” he told senators. “So on a purchasing power basis, the average Mexican worker is far worse off than he or she was five or 10 years ago. That was not the original intent of NAFTA.”
Ross is wrong when he says that the Mexican minimum wage has “barely gone up in peso terms.” The Mexican minimum wage has increased 11 times since 2009, rising by about 50%. The U.S. minimum wage has not increased since 2009.
But even with all those increases, the Mexican minimum wage is a fraction of the U.S. minimum wage. Workers there must be paid at least 80 pesos a day, which works out to only about $4. The U.S. minimum wage is $7.25 an hour, or $58 for an 8-hour day.
Ross wasn’t asked on either occasion what he thought about the campaign to raise the minimum wage in the U.S. But in the past the billionaire secretary has opposed the idea. He argued that a higher minimum wage would hurt workers because they will be replaced by robots and automation.

“They ought to be running ads against the minimum wage increases saying ‘Only robots want the higher minimum wage,'” he told Fox Business in November 2015.
The Commerce department did not respond to a request for comment from Ross on the U.S. or Mexican minimum wages
During Trump’s campaign, he was all over the place on his minimum wage views. At one point he said it was “too high,” then he said he would support raising it to $10 an hour.
The U.S. minimum wage workers in the U.S. have also lost ground due to inflation. The U.S. minimum would need to be $8.21 an hour today to the same purchasing power that the $7.25 minimum wage had in 2009, the last time the U.S. minimum wage increased.