NAFTA the challenges 20 years later:
a Mexican perspective
Mirsha Saynes
November 17th 2015
NAFTA the challenges 20 years later: a Mexican perspective
• NAFTA: the context
• NAFTA: the economic results for Mexico
• The Mexican economy today
• Mexican challenges
• Conclusions
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NAFTA: the context
• US – MX has been economically linked for many years
before NAFTA.
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1831 – Friendship and Trade Agreement
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1942 – Bracero Agreement
-
1962 – Automotive Industry Decree (1972, 1977, 1983,
1989, 1990)
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1965 – PIF Agreement (Maquila Agreement)
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1971 - Mexican Maquila Decree
Source: CONEVAL 2014 / ECLAC
2014 / CEPR 2014
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NAFTA: the context
• The past: Import substitution policies. Today: The most
open economy.
• Economic crisis 80’s – Economic structural reforms
• 1986 – GATT / 1994 –NAFTA / 2015 TPP
• 12 FTAs – 44 countries / ACEs - APPRIs
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NAFTA: the economic results for Mexico
• The North America Free Trade Agreement was going to:
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foster the economic development of Mexico.
-
increase the economic integration with US and CA.
-
reduce the gap between developed and developing
countries.
-
decrease general poverty rate
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NAFTA: the economic results for Mexico
• The North America Free Trade Agreement results:
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MX-US 1993: 70% Imp/ 83% Exp – 2014: 51% Imp/ 80% Exp
-
growth of income per capita in Mexico: 19% 1994 - 2013. It
is an average annual growth rate of 0.9%. 18/20 in LATAM.
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Mexico’s national poverty rate. In 1994 it was 52.4%, in 2012,
it was 52.3%.
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Gini coefficient in 1994 was 0.54 and, in 2012 it was 0.49.
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annual immigration from MX to US: 430K in 1994 and 140K
in 2010.
Source: CONEVAL 2014 / ECLAC
2014 / SE 2015 / CEPR 2014
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NAFTA: the economic results for Mexico
Source: IMF 2014 / CEPR 2014
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NAFTA: the economic results for Mexico
• Was the NAFTA?,
• Was it despite the NAFTA?, or
• There was no other option?
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The Mexican economy today
• Economic specialization
• Sectorial competitiveness
• Macro economic stability
• Comparative and competitive advantages
• Deeper economic linkage with US
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The Mexican economy today
• Mexico is the leading exporter in LATAM, and it represents 34% of all trade in the region.
• During 2013, almost 83% of exports were manufactures.
• FDI is expected to reach almost 30 billions dollars in 2015. In 2013, Mexico was 10th
globally receptor.
• Global Benchmark Report 2014, Mexico 1st in terms of productivity per working hour
• According to MS, Mexico is a beautiful country to live, work and invest.
Source: ProMexico 2015
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The Mexican economy today
Automotive/Auto Parts Industry in Mexico
• 7° producer / 4° exporter worldwide / 15% manufacturing GDP.
• US imported 20% of total light vehicles from Mexico. 1/10 made in MX / 2015 MX may be the
primary supplier of light vehicles to US.
• 19 OEMs / +200 TIER1s / 3 models assembled in MX among ten best engines for 2015
• Leader in auto parts production LATAM and North America
• Investment in the automotive and auto parts sector in 2013 reached 3.535 billion dollars,
24% more than 2012.
Source: ProMexico 2015 / Wards auto
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The Mexican economy today
Aerospace
Electric
Electronic
Domestic Appliance
Source: ProMexico 2015
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The Mexican challenges
• Mexico follows the WTO Customs Facilitation Agreement principles.
• 2008 – Decree of Customs Facilitation:
- No more estimated prices (minimum reference price)
- No more Sectorial Importers’ Registry
- No more details in the Pedimento
- Facilitation in obtaining COs for some FTAs
- Simplification of Customs Clearance
- Regulatory improvement
• 2009 – Unilateral tariff reduction / +7,000 HTS codes
• 2011 – Mexican Single Window / AEO
• Automotive Decree 2003
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The Mexican challenges
• What happened on December 2013-2015:
- Estimated prices are back
- Sectorial Importers’ Registry is back
- More info in the Pedimento is back
- Authorized port of entries for some goods
- Different opinions by the different port of entries
- Regulatory improvement is only a desire
• Mexican Single Window – It is a pro but administrative burden
overcame it.
• No proper control by Government resulted in an increase of the
operational burden and higher costs for importers/exporters.
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The Mexican challenges
• Export Promotion Programs:
- Maquila
- IMMEX
- PROSEC
- Rule 8th
- NEEC
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The Mexican challenges
• Maquila
It is the tax regime for foreign entities to avoid a PE in Mexico.
• IMMEX
It is the customs program to import components to produce a finished to be exported.
• PROSEC
It is a Sectorial Program to import components under specific HTS codes to produce finished
goods.
• Rule 8th
It is a complement of PROSEC when this does not have the specific HTS code needed.
• NEEC
It is the Mexican Authorized Economic Operator
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- Mexican AEO - NEEC
• Requirements: Fiscal, Customs and Security (11 Standards)
• 46 benefits: Administrative, operational and customs.
• New subjects: Transport companies and Customs brokers. Next: Industrial parks, Couriers
• 473 AEOs – 896 facilities – 46% of total foreign trade operations
• 62 transport companies – 30 Customs brokers
• Mutual Recognition with US and South Korea. Canada next.
• Next: one single trusted program. VAT + NEEC
Source: SAT 2015
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The Mexican challenges
1. Concentrate efforts to facilitate trade but not losing control.
- Concrete the single trusted program
- Implement a better risk analysis to focus on real risks
- Unify regulatory frameworks and interpretations among the different port of entries and
different level of authorities.
2.
-
Build infrastructure according to the increase and type of operations, and the long-term
challenges.
Ports capacities and border lanes
Highways, railroads, airports connectivity
3. Recognize realities and create a comprehensive strategy to include the south to NAFTA
- Connection between Atlantic and Pacific, south and the north
- Regional economic specialization. Textile – Apparel, CAFTA.
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The Mexican challenges
For those who have facilities in MX, in order to reduce costs, improve competitiveness and
increase revenue:
1.
The customs compliance team is more than paperwork. It is a way to reduce costs.
2.
It is important to have an effective communication among the different areas.
3.
Carry out a process audit at least once in a life. There is always a way to be better.
4.
Take real advantage of the NAFTA by knowing the basics. I.e. rules of origin, correct filling
out of the CO, accurate tariff classification, etc. If need expert support call Sandler &
Travis.
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Conclusions
From a Mexican perspective:
 20 years later, NAFTA still has challenges to overcome.
 NAFTA is not a 4x4 off-road vehicle. It needs its own race track to show the best of it.
 The automotive and auto parts are two of the most representative sectors of how successful
the NAFTA is. These sectors may be the North America flag before the TPP.
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© 2015 Sandler & Travis | www.sttas.com | All rights reserved.
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Thank you.
Mirsha Saynes
Director – Consulting & Business Dev
SANDLER & TRAVIS DE MÉXICO
phone +52(55)5263.8465| fax +52(55)5255.3063
e-mail: [email protected] | Web: www.sttas.com
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