Wednesday, December 4, 2013

From The OC Weekly: Watch Out, America: Cina to Be Second-Largest Importer of Tequilaby 2018

You hear all that buzz about China taking over the world? About it becoming the largest economy on Earth, about it taking over all our industries slowly but surely, about every corporation on Earth rushing to the Middle Kingdom to tap into its billion-plus population? It's happening to tequila, too: earlier this fall, Mexico's tequila producers shipped over their first boatload of premium tequila to the Chinese. And the drink is already so popular that representatives with the Tequila Regulatory Council are already stating China will be the second-largest importer of tequila by five years.
The story is already making waves in Mexico, with many Mexicans angry at China for already making illegal tequila by growing agaves and distilling the results. What's most interesting for me, though, is how dependent the tequila industry is on exports: of the 254 million liters produced last year, 165 million of it left Mexico--almost 65 percent. Man, that's going to leave none for us Mexis right now?

The current #2 importer, by the way? Germany. Um, okay...

Friday, November 8, 2013

From The Wall Street Journal: Best Fish Tacos in Baja California, Mexico

OK, this article has nothing to do with trade, transportation, or manufacturing in Mexico, but the topic of the best fish taco in Baja California is often debated in the offices of Bill Hay International.

A pretty good article from the Wall Street Journal of all places.

ENSENADA, A QUIET sunny city tucked between the Pacific Ocean and Mexico's Sierra de San Pedro Mártir mountains, is built on fishing. Every day, long-line vessels and fiberglass sport-fishing boats come into port to unload their catch: sea bass and yellowtail, sea urchin and lobsters, red and blue parrot fish, bright-orange vermilion rockfish and other colorful species.
On a mild day, I walked from the port into the sedate downtown where, in countless stands made from painted plywood and Coca-Cola signs, much of that seafood was being turned into an iconic local dish: fish tacos. Chunks of mako shark and handfuls of shrimp were dipped in beer-based batter and fried in pork fat, piled onto corn tortillas and topped with mayonnaise, salsas and shredded cabbage.
The history of the Baja fish taco is somewhat murky. It is served throughout the peninsula, a narrow, mostly arid spit of land that extends for almost 800 miles along Mexico's northwestern coast (the state of Baja California occupies the peninsula's upper half). But two spots in the northernmost part of the region—Ensenada and San Felipe, a speck of a town between the parched landscape of the Baja Desert and the warm waters of the Sea of Cortez—claim to have invented the dish. The supporting evidence is anecdotal at best.The dish has been adopted by chefs around the world, from beach stands in Southern California to trendy restaurants in Paris. But nowhere else are these tacos as delicious as in their birthplace, the Baja California peninsula. The mako used there is richer and more flavorful than most varieties of white fish, and the shrimp (a species only available in this part of the world) are remarkably plump. The batter is not only tasty from its ride in the pork fat and the addition of some seasoning, but also cooked so expertly that each bite is extremely crisp. Add a touch of salsa and a drizzle of mayonnaise, and you have a most delectable combination of crisp and tender, warm and cool, savory and spicy.
In Ensenada, locals believe their seafood came in contact with Asian influences.
"In the 1920s, a lot of Japanese people immigrated to Ensenada," said Diego Hernandez-Baquedano, chef of the farm-to-table restaurant Corazón de Tierra, situated just outside the city in Ensenada wine country. "The fish-taco batter is like a tempura, but done in a Mexican way. And the instrument that is used to fry it, the disca, is like a Mexicanization of a wok."
San Felipe dwellers tell a different story. "In San Felipe, the hot weather is so bad you can't survive without mustard [which doesn't require refrigeration] and beer," Francisco Sosa, a resident who sells locally harvested salt to the town's chefs, told me. "And the principal ingredients for the fish taco [batter] are beer and mustard."
The San Felipe taco, which is served at large, open-air eateries that line the street across from the beach, is noticeably different from its Ensenada cousin. The fish is coated in a heavier batter and is fried in vegetable oil; the tortillas can be made of corn or flour and usually come rolled up into cylinders; and locals add guacamole and ketchup along with the usual salsas.

Most of these newer taco styles are found in Tijuana, served from street carts, food trucks and restaurants everywhere from Centro, the tourist-friendly downtown center, to the Zona Río, where many tech companies are headquartered, and out into the hilly suburban neighborhoods.In recent years, other seafood-filled tacos have become popular in Baja. Chefs are using a wide range of ingredients, and the many migrants who have arrived from other parts of Mexico in the last few decades—particularly from the neighboring states of Sonora and Sinaloa—have brought their native variations to the table.

"For seafood tacos, this is the capital of Mexico," claimed Bill Esparza, co-founder of the Baja-based Club Tengo Hambre, which runs food tours of the area. The city offers an astonishing array of taco fillings. Deep-red smoked marlin, prized for its dense, meaty quality, is paired with melted cheese in the marlin gobernador. Tender manta ray is stewed with vegetables or paired with equally soft, slightly gelatinous sliced tuna fins. Chunks of octopus are cooked with olives.
Some of these tacos are imports, like the gobernador, from Sinaloa, a coastal state just across the Gulf of California. But many of them were born here. The best example is the camarón enchilado. This taco of plump shrimp enrobed in a red sauce of chile de arbol and piled in a lightly fried tortilla may have stemmed from Sinaloans' expertise with seafood. But it is a Tijuana original that cannot be found elsewhere.

"I see [our new style] as a rebel kid who doesn't take orders from anybody and is just very free, very creative. Nobody's telling him what to do," says Javier Plascencia, a chef who serves a wide variety of seafood tacos at his 6-year-old Tijuana restaurant, Erizo Fish Market. "Baja California's very young. We're not Oaxaca or Puebla, which have all this history."The most recent additions to the city's taco menus emerged from the region's newest food movement, an upscale, post-colonial cuisine started by chefs in Tijuana and Ensenada. The cooks draw inspiration from local ingredients and Baja's long history of international influences, rather than from the Spanish flavors that inform food traditions in the rest of Mexico.

Among Mr. Plascencia's taco offerings are a delicious swordfish pibil, a fish-based take on the Yucatan's popular dish of suckling pig marinated in citrus juice and annatto seed paste; an oyster tempura taco that marries Japanese and Mexican techniques; and even a traditional fried-fish version, an elegant homage to the taco that started it all.

1. The Classic: Tacos Fenix
Plastered with Coca-Cola logos, this stand may seem indistinguishable from the many others in Ensenada, but it's the oldest in town. The mako shark used in the fish tacos is dense and flavorful, the shrimp are plump and toothsome and the batter turns out perfectly crisp. The fish is so good, in fact, that toppings are almost extraneous. Corner of Calle Juárez and Calle Espinoza, Ensenada
2. The Saucy Choice: Tacos La Floresta
This stand in downtown Ensenada serves excellent fish and shrimp tacos, accompanied by a wide array of salsas and toppings. These include pickled onions, chipotle mayonnaise, whole pickled jalapeños and long slivers of fresh cucumber. The sauces are made daily by the members of an extended family who take turns running the stand. Corner of Calle Juárez and Avenida Floresta, Ensenada

3. The Myth Maker: Taqueria y Mariscos Adriana

The oldest taco stand in San Felipe is painted turquoise and has been run by Maria Soledad Solorio since the mid-'80s. While no one knows which stand inspired the founder of the popular U.S. taco chain Rubio's, many consider this the most likely contender. Ms. Solorio's crisp fried fish—which customers enjoy at a long picnic table or a folding table covered with a colorful blanket—is perhaps the best in town. Ave. Malecón 196, San Felipe
4. The Non-Conformist: Tacos Marco Antonio
This informal eatery may be in the heart of Ensenada, but its offerings are far from local classics. Proprietor Marco Antonio serves his tacos filled with guisados (stews) like siete mares, a mix of octopus, shrimp, clams, mussels and other seafood; tuna cooked in a cilantro-based sauce; and specialty items like fried fish skin. The tacos are sold from folding tables in a large courtyard in front of Mr. Antonio's old cannery. Avenida Rayon between Calle Tercera and Calle Cuarta, Ensenada
5. The Innovator: Mariscos El Mazateño
Although this enormous open-air restaurant in Tijuana's Mesa Otay neighborhood is mainly a Sinaloan seafood spot, its most popular dish is Tijuanan: the camarón enchilado, aka the "mazateña." This taco of shrimp cooked in a chile de arbol sauce is so popular, it has been copied by cooks all over the city. Calzada Tecnológico, No. 473-E, Tomas Aquino, Tijuana; 52-664-607-1377
6. The Immigrant: Mariscos Ruben
Specializing in seafood dishes from the state of Sonora, this food truck has occupied the same downtown Tijuana corner for more than 20 years. Co-owner Mirta Rodriguez makes an exceptional manta ray taco, and a taquito of smoked marlin topped with chipotle cream and avocado sauce. Her homemade salsas are among the best in town. Corner of Calle Octava and Quintana Roo, Tijuana
7. The Eccentric: Tacos Kokopelli
Oso Campos, the chef behind this quirky food truck, creates inventive dishes that are like nothing else in Baja. The "kraken" contains grilled octopus covered in a Mexican five-herb pesto; the "gringo en vacaciones," shrimp in a bright red chile sauce. The truck itself boasts bright orange walls, a thatched roof and a disco ball. Boulevard Sánchez Taboada between Misión de San Diego and Misión de Santo Tomás, Tijuana;
8. The Modern Master: Erizo Fish Market
A bright, airy seafood restaurant, with unadorned tables and a mosaic of salvaged wood decorating the walls, Erizo offers a long list of seafood-based tacos. They showcase chef Javier Plascencia's unique use of flavors, cooking techniques and ideas from across the globe. There's the "machaca de marlin," made from smoked swordfish cooked in onions, tomatoes, chilies and cilantro; a taco filled with tender oysters in tempura batter; a taco of sea urchin sautéed with onion, Serrano chile and tomatoes; and many more. Ave. Sonora 3808, Tijuana; 52-664-686-2895

Wednesday, November 6, 2013

From ABC News: Mexico Imposes Military Control Over Major Seaport

Mexico's military has taken control of one of the nation's biggest seaports as part of an effort to bring drug-cartel activity under control in the western state of Michoacan, officials said Monday.
Federal security spokesman Eduardo Sanchez said soldiers are now responsible for policing duties in the city of Lazaro Cardenas as well as in the Pacific seaport of the same name. The port is a federal entity separate from the city.
"We have received anonymous tips that lead us to believe there has been corruption and collusion from people at the port," Sanchez said.
Sanchez said navy personnel will take over as heads of the administration and port captaincy of the seaport. He said about 156 customs and tax inspectors and officials at the seaport will be rotated out of their positions gradually.
All 113 police officers in the city of Lazaro Cardenas have been replaced by soldiers while they undergo drug testing and police training, Sanchez added.
The port of Lazaro Cardenas is the country's largest in terms of cargo volume and it has seen a number of huge seizures of precursor chemicals used to make methamphetamines.
The Sinaloa and Knights Templar drug cartels have been identified as gangs that engage in the production of methamphetamine. The Knights Templar cartel is based in Michoacan and is fighting vigilante "self-defense" groups for control of the state.
The Knights Templar, a pseudo-religious gang that takes its name from the ancient monastic order, has set fire to lumber yards, packing plants and passenger buses in a reign of terror in the state.
The cartel's extortion of "protection" payments from cattlemen, lime and avocado growers and other businesses prompted some communities in a lime-growing region to form armed vigilante patrols in February. That drew more attacks from the cartel, which sought to punish the area by hampering the lime business.
Michoacan is the home state of former President Felipe Calderon and it is where he launched the federal government offensive against drug trafficking upon taking office in late 2006.

Tuesday, October 29, 2013

Joint U.S.-Canada-Mexico Statement on Strengthening Trade and Economic Relationship | Department of Commerce


Monday, October 28, 2013

Today, U.S. Secretary of Commerce Penny Pritzker, Canadian Minister of International Trade Ed Fast and Mexican Secretary of Economy Ildefonso Guajardo issued a joint statement on strengthening the three countries’ trade and economic relationship. The ministers participated in a discussion on the topic at the North American Competitiveness and Innovation Conference in San Diego earlier today.

“We, the ministers responsible for International Trade and Commerce for the United States, Canada, and Mexico held a joint meeting in La Jolla, California today, where we were participating in the North American Competitiveness and Innovation Conference. The conference is bringing together government and business leaders to discuss the economic and commercial advances that we have made in the 20 years since NAFTA was implemented, and how we can build on that progress to continue growing our economies and creating jobs.

A generation ago, with NAFTA, the United States, Canada, and Mexico established a new global standard for economic integration. We have achieved thriving commercial relationships and deeply connected supply chains. The North American economy, which is one of the most competitive economic platforms in an increasingly competitive world, remains strong and our workers, businesses and communities continue to thrive.

By demonstrating that increased trade drives job creation and economic growth, we have set a valuable example globally and have built a solid foundation upon which North American competitiveness can continue to be enhanced to the benefit of all our citizens.

We pledge to continue helping our businesses grow and our workers succeed through enhanced regulatory cooperation, and coordinated efforts to facilitate increased trade through many initiatives, including the ongoing Trans-Pacific Partnership negotiations. We have committed to ensuring that our competitive advantages as a continent are maintained and enhanced. 

We agreed to work on a constructive agenda to strengthen our trade and economic relationship. We are committed to crafting a roadmap that both promotes prosperity across the NAFTA region for the next 20 years and maintains our position as the most competitive region in the world.” 


Two decades after passage of the North American Free Trade Agreement, the top commerce officials from the United States, Canada and Mexico called Monday for strengthening their economic ties, saying a united trade bloc will be key to remaining competitive in an increasingly globalized world.
“How do we build on the success of NAFTA? How do we make sure this region remains an attractive place, and the foremost place in the world to invest?” U.S. Commerce Secretary Penny Pritzker said in a Monday interview with U-T San Diego during the North American Competitiveness & Innovation Conference in La Jolla.
Such questions are driving the agenda for the event, which opened Sunday and will end today. The conference brings together government officials from the three countries along with a range of CEOs, trade experts and promoters of cross-border business.
The potential for growth is vast: Taken together, the NAFTA countries represent a population of 460 million and $1 trillion in annual trade — a sum that the U.S. government wants to see doubled, Pritzker said.
The conference, hosted by the San Diego Regional Chamber of Commerce and the U.S. Department of Commerce’s International Trade Administration, marked the first time the three high-level officials met together.
Following a closed-door meeting with her counterparts, Pritzker joined them — Mexico’s secretary of the economy, Ildefonso Guajardo, and Ed Fast, Canada’s minister of international trade — for a panel discussion before a luncheon audience of 400 people.
“The supply chains that wrap themselves around the globe in a globalized economy have changed the game for all of us,” Fast said. “Our challenge is to take NAFTA, which was an incredible foundation to build upon, and move our trilateral relationship to a new level.”
To move forward, participants cited the need for addressing issues such as making border infrastructure upgrades, facilitating labor mobility across borders and collaborating on regulatory frameworks.
Guajardo said because of NAFTA, “the economic geography of Mexico has changed radically.” At the time of the agreement’s signing, manufacturing represented only 15 percent of the country’s exports — compared with 85 percent today, he said.
But NAFTA’S benefits have been uneven in Mexico, Guajardo said, with border regions and central states such as Queretaro “tremendously transformed” while in other states such as Oaxaca, Guerrero and Campeche, “you don’t see the effect. ... It’s like you have two Mexicos.”
Major reforms being proposed for the energy, education and tax systems will help bring improvements to the country’s poorer regions, Guajardo said.
The conference’s coordinators aim to raise the visibility of NAFTA’s successes and build support for increased collaboration among the partner countries.
“NAFTA has been very successful, but it’s yesterday’s news in some respects,” said Laura Dawson, a former Canadian trade official and currently a consultant on cross-border trade. “We can only do better internationally if we consolidate our competitiveness at home.”
Charles Shapiro, president of the Institute of the Americas at UC San Diego, called for returning the focus to North America on trade issues. “We’ve all fallen in love with East Asia, we’re falling in love with Europe, but the key point we need is to make this relationship work so that we can negotiate as a bloc.”
Looking ahead means adapting to a world that has changed rapidly in the past two decades, conference participants said.
“NAFTA was a market-access agreement” that focused on removing quotas and customs duties that limited the movement of goods across borders, said Patrick Kilbride, executive director of Americas Strategic Policy Initiatives for the U.S. Chamber of Commerce.
“Now we’re much more focused on integration issues like the ability to provide services across borders, the ability to finance projects across borders, to have supply chains go back and forth across San Diego and Tijuana, for instance.”
Chris Sands, a senior fellow at the Hudson Institute in Washington, D.C., said much remains to be done. “We have conflicting regulations, border security that’s become quite militarized. We’ve got a witch hunt for illegal aliens going on rather than having a dialogue about labor and mobility and how do we get jobs to people who need them,” he said. “A single North American market has not been realized.”
Monday’s conference schedule included panels on public-private partnerships, tourism, clean energy and green technologies, and the automotive and aerospace industries.
Today, interim San Diego Mayor Todd Gloria, Tijuana Mayor Carlos Bustamante and Eddie Francis, mayor of Windsor, Ontario, are scheduled to participate in a discussion on regional innovation and competitiveness. Other panels will focus on specific cross-border regions and the role of media.

Monday, October 28, 2013


San Diego needs a new vision for economic development, one that is broader than a few downtown projects favored by special interests.
Our city is largely built out, which means that future economic development must rely on revitalizing existing neighborhoods and by connecting employers and workforce training providers to San Diegans looking for work. In my Blueprint for San Diego’s Future, I present a comprehensive plan that provides local businesses with the infrastructure, regulatory reforms, and support to continue San Diego’s growth into a global economic powerhouse. You can read the entire blueprint at
The cross-border economy is the key to the worldwide competitiveness of our region. By working together as a region, San Diego and Baja California can compete with China and bring more investment back to San Diego. Our border has some of the busiest land ports of entry in the world, and border delays cost the San Diego region $2.5 billion in economic output annually. Eliminating these delays would yield the economic equivalent of hosting 18 Super Bowls every year. I have championed the San Ysidro Port of Entry modernization project, the new Otay II commercial border crossing, and the Cross-Border Airport terminal. The city must demand local, state, and federal investment to upgrade our ports of entry to encourage cross-border commerce.
The city also must continue to invest in economic development on Otay Mesa, the engine of San Diego’s border economy and a new center for jobs and economic development in San Diego. Because of my leadership, the City Council unanimously approved a $1 billion project to redevelop Brown Field, a catalyst for further economic growth on Otay Mesa. It will take leadership from the mayor’s office for the immense potential for new jobs in manufacturing and trade on Otay Mesa to finally be realized.
Helping small businesses and entrepreneurs get their ideas off the ground must be a priority for the city’s economic development. With bipartisan council support, I pushed for a Regulatory Relief workshop that resulted in the implementation of more than 30 reforms to assist small businesses. As mayor, I will create a Small Business Task Force made up of economic development agencies, members of small business and entrepreneur organizations, and the city’s Office of Economic Growth Services to evaluate existing services for small businesses, determine gaps, and proactively advocate for additional services from the city and the state.
San Diego is a new hub for emerging and growing industries such as biological and life sciences and clean, renewable energy manufacturing. To grow with these new sectors, it will be critical to align city programs with state initiatives to allow these industry clusters to attract new companies and create high-wage jobs. A major incentive for these companies to grow and expand in San Diego is a talented workforce. That is why I will collaborate with San Diego’s public schools, apprenticeship programs and community colleges to ensure that training programs enable San Diegans to fill the jobs these employers provide today and in the future.
From investing in our cross-border economy to supporting small businesses, I have a proven record of achieving results that help improve San Diego’s business climate. As mayor, you can count on me to invest the city’s resources wisely in growing our entire economy, not just downtown.
Alvarez, a Democrat, is a first-term councilman who represents the city’s southernmost neighborhoods.

From Inside Tucson Business: New Mariposa port spurring Nogales industrial development

By Curt Prendergast Nogales International | Posted: Friday, October 25, 2013 7:23 am

Nohe Garcia’s face lights up when he starts talking about his vision for Nogales, particularly the businesses his 215-acre development near Mariposa Road could bring to the city.
He is carving an industrial park out of the rolling hills northwest of the Mariposa Port of Entry in anticipation of the $200-million port expansion, slated for completion next year, and the increased cross-border flow of products from the growing assembly plant industry south of the border.
Garcia’s 215-acre spread, known as the La Loma Grande project, will be a hefty addition to the industrial area along Mariposa Road, adding large lots that could be used by manufacturers, border logistics companies, produce distributors, and customs officers, among others.
His is just one of several industrial projects being planned along the corridor stretching north from the port of entry, according to city of Nogales building records.
Long-time Nogales customs house Suarez Brokerage is planning to build a 38,000-square-foot office and warehouse facility on North Calle Cobre, just off of Mariposa Ranch Road. And a mile north of the La Loma Grande project, Maval Warehouse is expanding its operations to include a new 25,000-square-foot warehouse on Industrial Park Drive, said owner Marco Valenzuela.
The company deals primarily in cross-border trade, such as importing fruits and vegetables from Mexico and shipping automobile parts and raw materials to foreign-owned factories in Sonora, he said.
The expanded Mariposa Port of Entry promises to increase cross-border trade, making the decision to build a new warehouse a simple one, Valenzuela said. “Because of expanding business we are foreseeing that we will require more capacity,” he said.
Also in the works is a 90,000-square foot produce warehouse on North Target Range Road, according to city building records. Other projects, such as a 100,000-square-foot warehouse and a 5,000-square-foot office complex, both on Freeport Drive, are still in the preliminary permitting phases.
As Garcia walked around the La Loma Grande property, he pointed out a long, curving road that creates a loop from the existing industrial park on Mariposa Ranch Road, through the property, and then back to Mariposa Road.
“The loop is what gives life to the development,” he said, adding the loop will be as wide as Mariposa Road so that tractor-trailers can pass easily through La Loma Grande.
His hope is that tractor-trailers will be making the rounds through the development for customs brokers, logistics companies, and any other company that wants to set up shop near the expanded port of entry.
For Garcia, the port expansion already is bringing positive feedback from potential investors. “For a couple of years there was nobody calling. Now, people are calling,” he said.
The port serves as “a very important link in our logistics corridor,” he said. “It’ll give us the possibility for real growth.”
In particular, the port should ease the crossing of products from the growing assembly plant industry in Sonoran cities such as Nogales and Guaymas, which could mean more products passing through Nogales in coming years, Garcia said.
By January, Garcia expects his project to be far enough along to show businesses the first round of properties, which he said would be seven acres each, although they could be expanded if the client so desired.
The development’s large lots will allow Nogales to better compete with other ports of entry on the border, such as Otay Mesa in California and Laredo, Texas, he said. “We need to compete with them and Nogales doesn’t have any large lots,” he said.
Garcia is also working to bring what he calls “value-added manufacturing” to Nogales, in which an existing assembly plant in Nogales, Sonora sends products across the border for finishing or packaging, an idea that is in line with a recent University of Arizona study of Santa Cruz County businesses that called for greater integration with the plants south of the border.

From Forbes: Mexico Takes On New Roles In Outsourcing

Mexico is fast becoming a major player in the “nearshoring” sector for tech and business process exporting. During a recent trip to the city of Guadalajara I visited the Centro del Software, an incubation hub for start-up tech companies. In an article for Americas Quarterly called “Mexico’s Silicon Valley” Iexplained “Mexico is quietly emerging as a capital of Latin America’s growing information technology (IT) outsourcing industry.”
With more than 600,000 people already working in IT and another 65,000 new professionals graduating each year from the country’s technical and engineering schools the U.S.’s southern neighbor is already home to more than 2,000 IT companies. Tech companies in Mexico range in size from start-ups like the ones in Guadalajara’s Centro del Software to veteran industry heavyweights such as Xerox, Softek, HP, IBM, and Intel. During a recent visit to the border city Ciudad Juarez I walked through the call center at Genpact, a subsidiary of Xerox and also visited several other tech companies. In Juarez, the IT and BPO sector is growing. While IBM and HP, global heavyweights that reported $104.5 billion and $120.4 billion in revenues in 2012, have a presence in Mexico, there is also a growing space for smaller companies.
For instance, Infolink, a company which handles customer service and product support for US software companies tripled its work force between 2011 and 2012. The company and now employs more than 100 English-speaking engineers and customer support specialists in its Juarez office.
As I explained in an article for The Global Post, “Affiliated Computer Services Inc., or ACS, a business process outsourcing company, now employs 3,000 people in Juarez.” ACS senior executive Miguel Hidalgo told me that the company processes and shuttles 16,000 pounds of documents back and forth across the US border in vans every day, helping to contribute to the $22.4 billion in revenues that Xerox earned in 2012. In addition to established IT and BPO hubs such as Guadalajara, Monterrey, and Juarez Mexico has a number of other cities that are pushing into the sector.
In a recent article for Nearshore Americas I explain, “While lesser known for outsourcing than cities such as Guadalajara, Monterrey, and Mexico City, Puebla has a strong industrial base that a number of entrepreneurs are using as a launching pad for business process exporting companies.”
Edgar Moreno, a public policy analyst and Latin America-focused political risk specialist from Impacto Social Consultores, who grew up in Puebla, told me“the state has huge strengths in high skilled workers. Five of the top hundred universities in Latin America are based in Puebla, all of them offer several options to pursue careers in engineering, communications, and technology.”
“Plus the incumbent governor is promoting pro-business regulations and working to attract more long-term, capital-intensive, and high-tech investment projects to Puebla,” Moreno added.
In my article for Nearshore Americas I explain “Puebla’s capital city, with 1.5 million residents, is the fourth largest metropolis in Mexico. Situated on the trade route between Mexico City and the port of Veracruz, Puebla was designed and built up by the Spanish during the colonial era. Many of the city’s historic buildings still stand, but today trucks carry automobiles and auto parts along the trade route between the coast and Mexico City.” Overall, industry serves as the major engine of Puebla’s economy, the sector accounts for about 80 percent of the state’s total economic output.”
Ulises Mejia, the CEO of Evolucione, a human resources and payroll outsourcing company that directly employs 100 people and pays 2,000 contract workers in Puebla, told me that the automotive sector can provide opportunities for IT and BPO support services. “We have Volkswagen and Audi here,” he said.
Juan Pablo Jimenez, the head of the Puebla office of Mexico’s federal government’s Ministry of Economy explained, “Puebla has enough strength to develop a strong service outsourcing and business process outsourcing sector.”
According to Fernando Macias, CEO of Validata, a company with a sales office in Austin Texas that runs an operation a total of 800 employees in Puebla and Mexico City that provides document processing services to U.S. financial sector clients, “As a location for BPO businesses, Puebla stacks up well.”
“There are a lot of call centers here and several very prestigious universities here,” he told me.
Daniela Dibs, a communications representative from Endeavor, a non-profit whose Puebla office works to foment small business growth and provide entrepreneurs with consulting and mentorship told me that in Puebla’s nearshoring sector, “what we see is consulting more than business process outsourcing.”
Perhaps what Puebla needs is an incubator to help small start-ups grow. During my visit to Guadalajara’s Centro del Software, Jesus Michel, an executive at IBM de Mexico, told me that due to a “triple play of collaboration between the government, private businesses and universities Guadalajara is becoming the Silicon Valley of Mexico.”

Angel Banuelos, one of the cofounders of a Centro del Software based company called MasFusion, told me “The Centro del Software is an ecosystem,” a place where young tech entrepreneurs can learn the real world business skills that are difficult to acquire in a classroom. “It’s helped a lot to see other [businesses] working with big clients,” Banuelos said. The tech sector has emerged as an important part of the economy in Guadalajara. Entrepreneurs in Puebla are trying to follow suit.

Thursday, October 24, 2013

From The Canadian Trade Commissioner Service: Three ways to manufacture in Mexico

Transcript of a recent podcast focused towards Canadian manufacturers and manufacturing in Mexico follows:

Looking to cut costs by manufacturing abroad? Good idea. But where are you going to go, and how can you be sure the investment you make in your chosen foreign market will pay off?
Canadians have many options of course, and one of those is Mexico. Today we are looking at how Canadian companies can determine if Mexico is right for them, and, if it is, how they can set up a presence there and do it right.
I’m Michael Mancini, Editor-in-Chief of CanadExport, the official e-magazine of the Canadian Trade Commissioner Service, Canada’s most extensive network of international business professionals.
With me on the phone is Brad Knight of Riverwood Solutions. Mr. Knight brings more than 25 years of international manufacturing and operations experience, working with original equipment manufacturers and electronic manufacturing service providers in six countries.
Brad, thanks for being here.
Brad Knight: My pleasure.
Michael Mancini: Given your experience, why would Mexico be an attractive option for Canadian firms?
Brad Knight: I think that one of the benefits Mexico brings is a substantial, well-educated labour base right next to the largest market in the world. So literally across the border from Mexico, your labour rates quadruple or more. And since 2000-2010, in that time period, we’ve seen a lot of investment in companies actually designing products and building complex subsystems down in Mexico. So they’ve sort of moved their way up the food chain. The auto industry and aerospace industry are good examples of people making major investments in Mexico to design, build and fabricate in-country.
Michael Mancini: Now, it seems to me that this is maybe mostly attractive for large firms, multinationals. How realistic is a manufacturing set-up in Mexico for smaller or medium-size enterprises?
Brad Knight: Well, you know, the – as the big boys come in, what usually happens is they drag their supply chain with them. And that’s an excellent opportunity for a smaller firm to come in, in support of one of the major multinationals. There’s also the EMS industry, the electronic manufacturing service sector is extremely well represented in Mexico. So if your product is small and you’d like economies of scale, and you don’t want to have to do the toils and tribulations of building your own facility down there, you can always come in through somebody else’s services, like a contract manufacturer.
Michael Mancini: OK, so what would a Canadian company assess when figuring out if Mexico is right for them?
Brad Knight: You know, I think if it’s an in-house versus a out-of-house decision, one of the most basic is the amount of labour that you have to put in your product to build it. If labour is a significant percentage of your product cost, or you have a significant amount of labour involved in production, then I think you need to be thinking about lower-cost regions for that assembly. If you’ve made that decision, then you need to think about the size, the bulk and the mass of this product. If it’s big and bulky, that will force you onto the surface if you’re coming across an ocean, which then adds a lot of time to the process.
Another component to measure in here is whether you have a significant reverse logistics requirement. If you need spare parts, if you need labour to fix your broken thing, then being geographically located close to your end-market certainly is advantageous.
Michael Mancini: How big should one’s operation be here in Canada for you to even begin to think that a move to Mexico will actually be worth it?
Brad Knight: I think one of the difficulties with that is most people are in the “aspire-to-be” mode. And so if you – if your total sales are insignificant today but your product is the next thing, you really need to be planning for production at volume. So I think my answer on that varies on the actual growth plan of your project. If you don’t build many of these things and you don’t put much labour into those things, you’re probably in a very competitive place where you are.
If you put quite a bit of labour in it and you don’t build many of them, you’re going to spend a lot of money working with logistics, getting to and from the – you know, working from your headquarters with your Mexican facility, and there’s quite a bit of money involved in moving engineers back and forth and training and programs. So you really need enough scale to justify the expense of the set-up. Normally what happens, though, is everybody’s planning on building more and more and more every quarter. And so you sort of need to project that into the future and say well, you know, I only do a million dollars’ revenue this year, but next year I’m going to do ten. Where in that curve does my reduction in labour justify the investment? So I think you got to do some math on that one.
Michael Mancini: OK. Well, let’s talk about the options that we can consider.
Brad Knight: Well, I think you really have two choices that are blatantly clear. One is you could build your own facility. Now – well, there’s three. You can build your own facility down there, you can employ a shelter corporation, or you can outsource your product’s manufacturing to somebody else.
So I think what’s happened over the last 20 years is the rise of the multinational contract manufacturers has made it so competitive. In years gone by, people like Hewlett-Packard and IBM have sold their entire manufacturing complexes—and Motorola too – have moved all their manufacturing complexes off, sold entire facilities, product lines and everything to the EMS sector. And what’s happening is, is these very, very heavily automated facilities just get more competitive at scale.
It also allows the EMS to use some of this capital equipment for you for a couple of hours a day because that’s all the demand you have, and still use that equipment for somebody else during the day, so they can even load the capital equipment. And what’s happened literally over the last ten years is it’s almost prohibitive to build your own facility unless you have some niche that few can help you with, and then you got to sort of go it alone. But there’s less and less of that happening.
Literally – because the larger players aren’t doing that, it’s almost impossible for the little guys to do that. And so what the little guy can do is jump on the coattails of the big guy and use the economies of scale of this infrastructure that’s been in place to serve the RIMs and the Apples of the world, and you can niche a little corner off to build your products. I’m very pro EMS sector.
Michael Mancini: Now, you also talked about a corporate shelter service. What is that, and what does that involve?
Brad Knight: Well, there are companies in Mexico who will literally, say, own a building. They have infrastructure, power, electricity, sewer, water. And you can come in and say I would like to rent 4,000 square feet from you. Maybe it needs to be air conditioned, I need 250 employees. And that shelter company will hire the employees for you, they’ll manage the employees, they’ll manage the facility infrastructure. You bring in your technical competence and your product, and perhaps your capital equipment, and you have a ready-made facility sitting there for you. It’s a nice stepping stone to getting into your own facility. So some big companies even use a shelter company as a way to enter a market. Because in the end, if it doesn’t work out for you, really all’s you owe is a long-term lease to the shelter company.
Michael Mancini: Right. Would you say that this is perhaps a very attractive option for SMEs?
Brad Knight: You know, I think it’s one of the safer options for an SME, though if you’re in – if you’re in a sector serviced by the contract manufacturing, the – by design the industry only demands four or five percent profit margins. So you don’t have to share much So I think the shelter organizations, if you’re thinking that you’re going to have a very large facility yourself because your economies work that way, I think a shelter organization is absolutely the way to get started – or one excellent way to get started.
Michael Mancini: OK.
Brad Knight: You know, like if you’re going to move anywhere in the country, if you’re going to build a facility anywhere in the world, if you’re going to build a facility, the infrastructure support is critical. And how much power’s at the curb? Is there power at the curb? When we built in Guadalajara, Mexico we had to run seven miles of high-tension electrical out to our campus. Billions of dollars. We also had to put in our own sewer treatment facility. So we were out there treating our own sewer, making our own electricity. It makes it much more difficult making this decision with wildcard variables like, can I get access to a data line. You come into a shelter organization or a contract manufacturing, all that infrastructure’s in place. You can touch it, you know it’s there, you know how much it’s going to cost, and you can begin using it immediately.
Michael Mancini: What are some of the main differences in terms of cost?
Brad Knight: Yes. Normally the shelter costs are individual, and you commit to them individually, like I need 5,000 square feet of space. So that’s kind of tricky. Do you need 5,000 square feet of space, or do you really need 10,000 square feet of space? And I might need 3,000 square feet today but I need 15,000 square feet in two years. So trying to understand that in a shelter organization is the variables in the cost. The building probably costs the same, the labour costs the same. The margins will be a little higher in the shelter business than the contract manufacturing.
But with the contract manufacturing solution, they price by unit price. They come back and say your handset is a hundred dollars if you buy 10,000 of them, it’s 97 cents if you buy a hundred thousand of them. So it’s much easier for you to run your business with the known variables of cost per product than it is the unknown variables of infrastructure.
Michael Mancini: And how long would it take to set up this corporate shelter corporation?
Brad Knight: You know, if you go into a shelter corporation, if they have space available it can happen very, very rapidly. That’s one of their biggest advantages, is they have facilities wired, plumbed and ready to operate. And so literally weeks and you could be building something in Mexico under the shelter organization. If you were going to build your own facility, when we built the Flextronics campus in Mexico we bought land in August and began first articles on the 4th of July the next year.
But that was, you know, a major effort. There were three, 400 contractors on that campus.
Actually the contract manufacturing option, you don’t worry about any of that. That’s the – that’s the problem of the EMS, is he has to hire the people, he has to worry about the duties, he has to worry about the taxes, working with the unions. All of that happens with the contract manufacturer or the shelter organization. Now, with the contract manufacturer, you literally say I want 10,000 cell phones please, and negotiate when you’re going to get them. With a shelter organization, you say I need 10,000 square feet and 300 people to build 10,000 cell phones. And then if you go do it yourself, you need to worry about the permitting, the building, the construction - everything falls upon you and your responsibility to figure that out.
So in the progression of regulation ease, I guess you would say, the contract manufacturer, you can literally place a purchase order with their parent group and they worry about the rest of it. The shelter organization, you’re more intimately involved with the technology and the production of the product, but you’ve sheltered yourself from the real estate and the labour issues. And then the most complicated of all is to go down and buy a piece of land.
Michael Mancini: Brad, thanks for taking the time to chat today.
Brad Knight: You’re welcome. Any way we can help, please give us a call.
That was Brad Knight of Riverwood Solutions speaking to me from Las Vegas.
Well, that’s all for this podcast edition of CanadExport. Go to for more audio podcasts and feature articles on international business topics.
You should also visit for more information on how our trade commissioners can help you in Mexico.
You can also stay connected to us and other leading Canadian companies by joining the Trade Commissioner Service Group on Linked In. So go to and search for the TCS.
I’m Michael Mancini signing off for now.

Tuesday, October 22, 2013

From Global Atlanta: Mexico and the Southeast U.S.: Partners or Foes?

Trevor Williams 


When Audi chose Mexico for its first factory in the Americas this year, it left Southeast U.S. states wanting.

Tennessee, home to parent company Volkswagen AG's 2-year-old plant churning out diesel-powered Passat sedans just across the Georgia border in Chattanooga, was especially chagrined to see the $1.3 billion investment head south of the Rio Grande. 

As China's competitiveness declines due to rising labor and shipping costs, Mexico's manufacturing star has once again risen. 

Not only does the country enjoy convenient and duty-free access to the world's largest economy, but it also boasts low labor costs and has undertaken a set of sweeping reforms under President Enrique Peña Nieto. Of course, free trade agreements with powerhouses like Brazil and the EU haven't hurt.

Southern U.S. states hoping to capitalize on a U.S. manufacturing renaissance now find themselves competing with one of their key trading partners for investment projects. Instead of just Alabama and South Carolina, Georgia has to reckon with Mexican states like Queretaro and Guanajuato, key aerospace and automotive hubs, respectively. 

So are Mexico and the Southeast partners or foes? 

Some competition is inevitable, but it the regions can also be complementary, said Moisés Peraza, trade commissioner at ProMexico in Miami. 

"We are all competitors, but not necessarily excluding each other. There are a lot of markets that you can't access through the United States and be competitive that you can through Mexico," Mr. Peraza said while visiting Atlanta for a business seminar at the Consulate General of Mexico Oct. 17. 

For instance, Mr. Peraza envisioned American products being made in Mexico and sold in growing Latin American markets like Colombia, Chile and Brazil, where Chinese products have made inroads. 

Alejandro Coss, president of the Latin-American Chamber of Commerce of Georgia, added that the supply chains of many companies are also integrated across the U.S.-Mexico border, said

Of the top five products represented in the $216.3 billion worth of U.S. exports to Mexico in 2012 - machinery, electrical machinery, mineral and fuel oil, vehicles and plastic - all except one were also present in the top five import categories, Mr. Coss noted. 

That shows that the North American Free Trade Agreement, or Nafta, which will see its 20-year anniversary next year, has created ties that so strong that they're sometimes taken for granted, Mr. Coss said. 

"The relationship that the U.S. has with Mexico is not only very deep, but it is also very special," he said. 

Georgia-based companies are using Mexico in a variety of ways. 

Delta Air Lines Inc. sees the country as one of its key aviation markets and has even taken a 4 percent stake in its alliance partner, AeroMexico. The partner airlines last year invested in a new maintenance facility in Queretaro. Savannah-based Gulfstream Aerospace, the private-jet manufacturer, also has operations in the Mexican state.

Duluth-based AGCO Corp. entered Mexico in 1992 when it acquired the Massey Ferguson tractor brand, moving its factory to Queretaro in 1997. After selling some Brazil-made tractors in Mexico, making full use of the countries' FTA, AGCO is now making 10,000 tractors per year in Mexico with more than 100 employees.

"It is very interesting how Mexico is transforming into a country that offers a hub in multiple industries from all over the world," said Francisco Vidales, AGCO's business process manager for global purchasing, who spoke at the seminar. 

It takes stories like these to reconfigure the stereotypes many Americans hold toward their southern neighbor, Mr. Peraza, the trade commissioner, told Global Atlanta. 

"The biggest misconception is that we still ride donkeys and wear big hats," he said. 

After growing at 3.8 percent last year, Mexico has revised growth projections downward to 1.2 percent for 2013, expecting growth to pick up again next year as the U.S. economy gains steam. About 80 percent of Mexico's exports go to the United States. 

Monday, October 21, 2013

From Reuters: Mexico drives North American auto investment, challenges China

(Reuters) - The Mexican auto industry is about to go on a $10 billion factory building spree, illustrating the nation's rising economic challenge to rivals from the United States to China.
Japanese and German auto manufacturers are spearheading the drive, say parts suppliers and researchers who see more auto factories built south of the border than in the United States between now and the end of the decade.
The United States will consume the vast majority of the new cars, but Mexico's domestic market has rebounded from a long slump, and in a sign of Mexico's growing global role, auto exports outside of North America will rise faster than those to the United States.
BMW AG, Toyota Motor Corp and Daimler AG's Mercedes-Benz are expected to announce at least $2 billion of deals in the next year or two, according to supplier and other industry sources. That's on top of nearly $6 billion in announced plants by Nissan Motor Co, Honda Motor Co, Mazda Motor Corp and Volkswagen AG.
U.S. automakers, all of whom have been building cars in Mexico since before World War II, will spend another $1 billion or more to upgrade Mexican plants. And Nissan and VW also are considering expansions at existing factories that could total $1 billion or more, according to sources familiar with their plans.
Mexico "is quickly turning into the China of the West," said Joseph Langley, a senior analyst at Michigan-based research firm IHS Automotive, pointing to Mexico's low wages, a strong supply base and a global web of free-trade agreements.
Mexican auto exports beyond North America are growing even faster than those within, according to the Federal Reserve Bank of Chicago. They accounted for nearly 30 percent of the 2.4 million exported last year. Altogether Mexico built 3.0 million cars and trucks, according to Automotive News, compared with 10.4 million in the United States and 2.5 million in Canada.
By 2020, Mexico will have the capacity to build one in every four vehicles in North America, up from one in six in 2012, according to IHS.
The investment shift has implications for auto jobs and labor unions north of the border, particularly in Canada, which will see a 20 percent decline in production, IHS projects. Output will soar 62 percent in Mexico.
U.S. auto production will rise 12 percent, and Detroit-based automakers are expanding domestic production by ramping up the pace at existing factories to as many as three shifts running six days a week, said IHS. By those calculations, Mexico is building more auto plants than in the United States or Canada through 2020.
"It's all about lower production costs and lower export costs," said Michael Tracy, principal at the Agile Group, a Michigan-based auto consultancy. "That's what Canada used to be — the place for low-cost manufacturing and shipping. Now, everybody is targeting Mexico."
Mexico's economy is seen growing faster than Brazil's next year, underscoring the success of Mexico's export-driven model versus regional economic powerhouse Brazil's more protectionist policies. The promised auto investment could help Mexico challenge regional dominance byBrazil. Analysts are warning of excess Brazilian auto production capacity within five years.
Suppliers say the Detroit auto makers, with more than half the production capacity in Mexico, have not signaled any plans to expand vehicle output there. But General Motors and Chrysler this year have said they will install additional engine and transmission production capacity in Mexico.
In the competition for jobs with the United States and Canada, "Mexico's momentum, combined with its increasingly dense and capable supply chain, its persistent cost advantage and its trading relationships may give it a leg up," said Brookings Institution researchers in a report released last week.
Auto employment in the U.S. South, where Japanese, German and Korean automakers all operate non-union plants, is holding relatively steady at 18 percent of North American auto workers, according to Brookings.
Pay ranges as low as $12 per hour for temporary workers at plants in the U.S. Southeast, compared with about $35 an hour for skilled union veterans at U.S.-owned plants. Union workers in Canada on average are paid even more; a year ago, GM Chief Executive Dan Akerson described Canada as "the most expensive place to build a car in the world."
But at around $2.50 an hour, manufacturing wages in Mexico are nearly 20 percent cheaper than in China, according to a mid-year Bank of America study. That study put U.S. manufacturing wages at just under $20 an hour, on average.
A shortage of trained engineers and concerns about crime and security may hold back Mexico, according to research firm PwC Autofacts.
Energy costs also are considerably higher than in the United States, but they are lower than in China, according to Boston Consulting Group. And because of Mexico's proximity to the United States and Canada, transportation and logistics costs are lower than for parts coming from China.
The largest producer in Mexico, Nissan, opens its third factory next month, the $2-billion Aguascalientes No.2. Nissan built 683,520 cars in Mexico last year, and the new plant will add capacity for 250,000 more, mostly compact models such as the Nissan Sentra for North America and other markets, company officials said.
Moreover, an expansion of Aguascalientes No.2 is already in planning, according to two sources familiar with Nissan's plans. Slated to open in 2016, the sources said, it likely will be dedicated to production of compact luxury vehicles for Infiniti and Mercedes-Benz, which has a platform- and engine-sharing agreement with Nissan.
Nissan said it had nothing to announce, while a Mercedes spokeswoman said joint production of compact cars was an option, but that no decision had been made.
Nissan also is expanding a complex in Cuernavaca, which will take the automaker's total capacity in Mexico to 1.1 million vehicles a year by 2020, two supplier sources said.
Nissan's closest rival south of the border is Volkswagen, which opened a complex in Puebla in 1967. A new $550-million engine plant in Silao, as well as a $1.3-billion assembly complex in San Jose Chiapa that is slated to be opened in 2016 by VW's Audi subsidiary, will raise total VW group annual capacity by 100,000 vehicles to 850,000 by 2020, according to IHS.
VW and Toyota are battling for global sales leadership, but the Japanese automaker lags well behind its rivals in Mexico, where it has only a small truck assembly facility in Tijuana.
Now, the automaker is scrambling to catch up with its competitors, according to two supplier sources who say Toyota is actively shopping for a site. Toyota executives in recent months have said the company needs additional production capacity in Mexico, without providing specifics. A Toyota spokeswoman said the company "would not comment on any potential plant announcement" in Mexico.
BMW, which operates a U.S. assembly plant in South Carolina, also is shopping prospective plant sites south of the border, according to Mexican government officials.
Supplier sources said BMW already has mapped out a production timetable for Mexico, with a tentative plan to begin assembly operations in late 2017, ramping up annual capacity to 200,000 by 2020.
A BMW spokesman said he had nothing to confirm.
Other vehicle and parts manufacturers are expected to set up shop or expand existing facilities in Mexico by 2020, said Tracy, of the Michigan-based auto consultancy.
IHS's Langley summed it up: "The level of activity in Mexico is insane."