This is How Mexican Companies Should Prepare for The End of NAFTA

Jose Miguel Zozyacorrea, Partner at Ernst & Young, thinks that Mexican companies should remain positive in the face of NAFTA's dissolution, as opportunity is just around the corner.

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With talks surrounding NAFTA reaching tipping point, you’d think that by now we’d have some answers for the sourcing industry. However, the “wait-and-see” era continues, as any actionable changes remain in limbo and the industry waits for a decision to be made.

Looking at it from the U.S. perspective, it is extremely difficult to forecast a mandatory decision by the government to dissolve NAFTA. The reason I say this is that Mexico exports 80% of its goods to more than 30 states in the U.S. and is the country’s first trade partner behind China and Canada, making it more of a key partner than the current administration wants to admit.

However, if we do lose NAFTA, we have to consider that Mexico has nearly 70 trade treaties or alliances with other countries around the world, making it a substantive attraction for direct and indirect foreign investment.

Likewise, it is necessary to bear in mind that foreign investment provisions allow for what we call “fully open doors” for exports and imports into Mexico.

Despite all of the negative elements that Mexico has — as is the case in many other jurisdictions — the country has positioned itself as the fourteenth economy in the world, and, in the following seven years, it will rise to the top ten, just by means of inertia, according to CCE.

Ultimately, Mexico will become a world force to be reckoned with in the next decade, becoming extremely productive because of its age and technical capabilities.

In our country, we don’t like to “put all of our eggs in one basket”, which is what has happened due to the geographical status of Mexico and the U.S., but both countries should be aware of this statement, as history has shown us that this can vary from time to time.

The important thing now is for Mexico to be prepared for such changes.

We need to be prepared for a higher level of education, because value-added services will prevail, not commodities.

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It might be necessary to make modifications to the country’s constitutional reforms, and abstain from looking at our history without a realistic soberness.

We should keep in mind that multi-jurisdictional transactions will be increased just because of globalization, which will be around forever due to the shifting tides felt in most of the world’s economies — this strength is extremely difficult to undo.

It would also be wise to expect a reduction of cost, but with the improvement of value-added services.

I cannot say that these are the only elements to be considered after the potential disappearance of NAFTA, but, although the process is being unhappily observed by some, we should still observe other latitudes and jurisdictions at the same time, as the U.S. is not Mexico’s only avenue.

Opportunities, capacities, entrepreneurs, and businesspersons, among others, are all over Mexico. It is not a time to fear, it is time to face realities and them as an opportunity for making the impossible possible.

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