Mexico’s Paint Industry Targets U.S. Trade Facilitation

Mexico’s national paint and coatings association, Asociación Nacional de Fabricantes de Pinturas y Tintas (Anafapyt), is taking a new diplomatic tack to attract U.S. finance and technology, with the aim of boosting exports.

Anafapyt officials met in early March with American Society of Mexico (AmSoc) directors and U.S. government representatives, including Brent Neiman, the deputy undersecretary of the U.S. Treasury Department, with a goal of facilitating U.S.-Mexico trade in the paint and coatings industry.

Flor de María González Mariblanca, the general director of Anafapyt, said “it is necessary for [U.S.] companies to have more suppliers,” according to an Anafapyt statement.

She also highlighted the importance of facilitating the legal and fiscal framework for companies that want to invest in Mexico.

The meeting comes on the heels of an AmSoc memorandum-of-agreement (MOU) with the Texas Association of Business (TAB), aiming “to combine efforts that support companies looking to do business on both sides of the border,” AmSoc said in a statement.

“As Texas’ top trading partner, our relationship with Mexico is critical to the state’s overall economic health. Trade with Mexico supports about half of the one million jobs in Texas connected to international trade. Trade between Texas and Mexico amounted to $231 billion during 2021,” said Glenn Hamer, TAB’s CEO.

Two-Year Old USMCA Comes of Age

While state-to-state and organization-to-organization meetings by counterparts on either side of the border have been increasing with the advent of nearshoring, there is a strong bilateral framework in place on federal levels: the U.S.-Mexico-Canada Agreement, ratified in 2020. USMCA modernizes its predecessor, the 20-year-old North American Free Trade Agreement, or NAFTA.

“Nearly three years after its entry into force, the United States-Mexico-Canada Agreement has been instrumental in ensuring the competitiveness of the North American region’s economy in a complex and unprecedented global environment,” writes Claudia Ruiz Massieu, a senator in the Mexican Congress, and chief of the Special Committee for USMCA Implementation.

“Now, it is precisely this unprecedented context that calls us to expand and deepen our integration, consolidating and creating new value chains through strategies such as nearshoring,” Massieu recently wrote for the Brookings Institute.

$150 Billion at Mexico’s Nearshoring Doors

Reshoring is no small trend at this point. “At the recent North American Summit, the partners agreed to relocate 25% of Asian imports to North America, adding up to 2% GDP growth to Mexico,” according to a February statement by Lourdes Melgar, a research affiliate for the Center for Collective Intelligence at MIT, writing for the Brookings Institute.

“In 2022, $30 billion in investments have been allocated in strategic sectors, such as semiconductors manufacturing and advanced packaging, critical minerals mining, batteries, electric vehicles, logistics and medical supplies,” noted Melgar.

Longer term, the investment implications for Mexico are vast. “According to financial analysts, over the next decade, between $60 billion and $150 billion could flow into Mexico as part of the efforts to move production closer to consumption centers,” Melgar added.

FDI, Tech Transfer Key to U.S.-Mexico Trade Growth

Foreign direct investment (FDI) in Mexico is advancing rapidly. The $35.3 billion in vested during 2023 was the strongest year since 2015, according to Mexico’s Secretaría de Economía (SE), the economy ministry.

Real estate investments in Mexico are hot, anticipating nearshoring movers. Tijuana is said to be attracting investment of $635 million to develop industrial warehousing demands that are expected as a result of nearshoring, according to Economic and Industrial Development of Tijuana (Deitac), cited by BN.

Perhaps the most visible announced new Mexico investment is the $5 billion that Tesla plans to invest in an EV factory at a site near Monterrey, in Nuevo Leon state, the company revealed in early March.

Tesla’s investment will boost business opportunities in the automotive and auto parts sector in Mexico, according to Industria Nacional de Autopecas, INA, Mexico’s National Auto Parts Industry. More than 120 Tesla parts suppliers are spread out between Nuevo Leon, Coahuila, Tamaulipas, Chihuahua, El Bajio and Mexico states, reports BN.

INA also reckons that 21% of the value of U.S.-assembled EVs are made in Mexico. Further, auto parts has secured 37% of all national nearshoring of late, INA adds.
Global sources of FDI in Mexico last year were dominated by the U.S, with a $15 billion contribution. Canada followed with $3.8 billion, Argentina with $2.3 billion, and Japan and the U.S., both adding $1.8 billion. China trailed the majors list with a mere $300 million FDI injection.

Bilateral Trade Rides The Heels of FDI

Global trade volumes will help FDI to rise in Mexico. January 2023 trade data from the U.S. Census Bureau showed for the second consecutive month Mexico is the top U.S. trade partner. Two-way trade in January amounted to $64 billion, a jump of 12% in comparison with the year-earlier month. During January, Mexico exported $27 billion to the United States, while the United States exported $37 billion to Mexico.

Exports from Mexico jumped to $80 billion over the first two months of this year, led by border factories, according to Supply Lines. Exports increased 25.6% in January compared to the same month of 2022, the national statistics agency Instituto Nacional de Estadística y Geografía (INEGI) reported in late February.

The Mexican auto industry provides most of the country’s exports to the United States. “The top American imports from Mexico were commercial vehicles ($3 billion), passenger vehicles ($2.9B), motor vehicle parts ($2.7B), computers ($2.3B) and oil ($1.6B,” according to FreightWaves.

Expansion of USMCA?

While the scope of the original year 2000 Nafta treaty was tightly limited to the United States, Mexico and Canada, there are now discussions of expanding the new 2020 version.

For example, in December, Costa Rica’s new president Rodrigo Chaves messaged the White House that his country is interested in becoming a member of USMCA.

Costa Rican trade minister Manuel Tovar said that joining the USMCA would be an “immense advantage” for his country, which sends 42% of its exports to the United States and brings in 38% of imports from the United States.

However, the USMCA is not the only treaty on the bloc. Mexico is member to a host of international trade treaties, says a February opinion published by the Brookings Institute. “Mexico could be a base for exports globally – it has in place 14 free trade agreements with 50 countries, and 30 investment promotion and protection agreements,” said Melgar.