Alternative shores

Mexico has trade agreements with 50 other nations outside of NAFTA and container trade options, the liner carrier Maersk notes    Mexico can grow containerized trade in both directions in 2017, and into the future, if shippers continue to diversify customer and supply bases beyond the United States and Canada, Maersk Line said in its latest country report.
  More than 80 percent of Mexico’s exports by value go to the United States and it imports more from its northern neighbor (47 percent) than any other country in the world, according to World Trade Organization figures. Mexico is a member of the North American Free Trade Agreement (NAFTA), under which trilateral trade has tripled in the 23 years since the treaty was enacted. Mexico has arguably benefitted the most from the arrangement, having created incentives and a regulatory environment to attract manufacturers able to take advantage of low tariffs and other available trade preferences.
   U.S. President Donald Trump has harshly criticized NAFTA for harming the American manufacturing sector and says he will renegotiate the deal – or even withdraw from it – and take other steps to rebalance trade with Mexico, which could severely impact the Mexican economy.
   Analysts have said Mexico should take advantage of numerous free trade agreements it has around the world to reduce its dependence on the United States.
   “Mexico has bilateral accords with about 50 countries, a weak currency, a strong producer and finished-goods manufacturing base that allows the country to open new markets and reduce the country’s trade reliance on the U.S.,” Mario Veraldo, managing director for Maersk Line in Mexico, said in the report.
   The top commodities ripe for global expansion include agriculture (especially fruit), petrochemicals, minerals and beverages, according to the Maersk analysis.
   The world’s largest container shipping line forecast that its Mexico ocean container imports will increase 7 percent in 2017 and its export volume will grow 3 percent. Company representatives declined to provide raw numbers on container volumes last year.
   During the last quarter, total Mexican maritime container exports grew 4 percent, although a quarter of that gain could be attributed to a one-time series of metal shipments that will not be repeated, Maersk said. Imports climbed 7 percent on the strength of strong holiday orders.
   In an interview, Veraldo said Maersk has seen signs of Mexican companies diversifying overseas markets during the past 18 months. The carrier has reacted accordingly, adding a backhaul stop in Yokohama, Japan, on one of its Asia-Mexico services to support auto manufacturers.
   Maersk currently operates three services between Asia and Mexico. It commenced the AC1 service in December 2015 with 11 vessels on a rotation of Asia-Oceania-West Coast South America- Central America-Mexico and back to Asia, with a first stop in Yokohama, according to Maersk and BlueWater Reporting, a shipping database and analytics provider and sister organization of the Adam Smith Project. Mediterranean Shipping Co., SeaLand and Safmarine are also on this service.
   The AC3 service also underwent an extensive revision last summer that hived off a leg to Africa to focus on an Asia-Japan-Mexico-South America route.
   More agriculture producers have recently begun using the service to ship bananas, avocadoes and other fruit to Asia, but instead of slowing vessel speeds on the under-utilized return trip,
   Maersk vessels are stopping in Japan to meet new customer demand, Veraldo said. Mexican auto suppliers, for example, are shipping parts from Mexico to Japan because the new port-of-call has made them more competitive, while car producers in Mexico are importing “knock-down” assemblies from Japanese suppliers to be integrated into vehicle production.
   The 15- and 17-day transit times between Japan and the ports of Manzanillo and Lázaro Cárdenas, means produce is still very fresh on arrival on the outbound side and meets automakers’ inbound supply chain requirements for reliability, Veraldo said.
   Japan is Mexico’s fourth largest trading partner.
   The report also said further investment in freight transportation infrastructure, especially intermodal facilities, is necessary to reduce bottlenecks and fully unlock potential trade opportunities.
   Sister company APM Terminals is helping in that regard with the opening this month of a $900 million semi-automated container terminal at the Port of Lázaro Cárdenas, located on the West Coast.