Growth on the U.S.-Mexico Border Increases Manufacturing Demands

Diana MaureExports, General, Imports, ManufacturingLeave a Comment

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When we talk of growth at the U.S-Mexican border, the thought of wall construction clicks into our minds. But, we should know that it’s more than a wall. There are factors that affect the freight transportation influence at the U.S./Mexico border. These are derived from the increase in demand for manufactured commodities.

Many things cause the need for transport services along the border. These include economic ventures as well as changes and trends in the regional and national economy. These all influence manufacturing and the distribution of goods. The common influence on freight demand is the volume of products consumed. The extension of the economies results in growth in the entire freight and manufacturing demand.

The demand for transport is associated with the processing component of gross domestic product. It calculates production of goods in dollars instead of volume or weight. The production of bulk or low-value goods, like agricultural products, creates a wider percentage of transport demand than their total value shows. The Bureau of Transportation has a record of the number of trucks crossing El Paso. It has increased from hundreds of thousands up to seven times from 2009 to 2015.

Growing Sectors

Among the developing sectors is aerospace. It has at least 350 companies carrying out activities in Mexico. Around 55 of these companies carry out their activities in the U.S. In 2015, the amount of aerospace parts exported went up to $7 billion. Queretaro City has become an aerospace manufacturing hub. It also developed to be a home of companies like Bombardier.

Aerospace is also available in Nuevo Leon, Baja California, and Sonora. The automotive sector in Mexico has also improved. Eighteen manufacturing complexes are based in 11 states. The light vehicle manufacturing companies in Mexico scored a new production record with at least 3 million vehicle sales in the year 2015. It’s also the world’s largest truck, car, and parts producer.

Pharmaceuticals and health are other sectors that are experiencing major expansion. Mexico is ranked number 12 in the world in terms of largest markets for pharmaceuticals. Out of the top 25 pharmaceutical companies in the world, 20 companies have a place in Mexico. The warehousing and logistics sector has also seen a major demand increase. Companies need space for building their warehouses and other structures.

As the U.S./Mexico border grows, demands of customers increase. The manufacturing companies are trying to adjust to the consumer’s needs. The aeronautical sector has pumped at least $300 million in a project expected to be completed in 2018. In the automotive sector, manufacturers are pursuing exposure in non-traditional markets. They are involved in developing good relations with the foreign suppliers to satisfy demands. The pharmaceutical companies are developing more complex and effective drugs to treat illnesses like obesity and diabetes. TPI Composites, a wind blade manufacturer, has also expanded in Juarez. It has built a second wind blade plant on 62 acres of land in Juarez and added extra logistics features to the new and improved design of Mexican plants.

There have been manufacturing innovations in the production process. Some recent technology changes facilitate fast processing and lower the cost of goods production. The Union Tribune of San Diego has plans to invest in the rail that cuts through the U.S./Mexico border to help in the supply chain management. The transport means has been renovated to fasten and simplify the exchange of commodities to suppliers among the border of the two neighboring countries.

The Political Relationship Between The Two Countries

The U.S.-Mexico political relationship has affected demand in the manufacturing sector. Starting with the North American Free Trade Agreement (NAFTA), the trade activities between the two countries has dramatically increased. The United States exports to Mexico have risen to around 150%. They have risen to 66% in Canada. This clearly shows that NAFTA has positively affected demand among the two countries. Foreign direct investment helped in pushing Mexico greatly from 1% to 3% of the GDP in the late 1990s.

The General Agreement on Trade and Tariffs (GATT) assisted in cutting off tariff charges by removing many non-tariff barriers. This program also supports manufacturers. They can produce commodities without fear of heavy taxes. Anxiety has risen amongst the small businesses around the U.S.-Mexico border due to the plans that Donald Trump is planning to impose on imported goods across the border. Donald Trump’s strict approach to immigration and border management will drastically affect the manufacturers since they directly rely on them.

Plans For the Future

Industrial developers are considering projects that will facilitate trading activities, especially freight and shipping, at lower cost at main border crossing spots. Among the kind of projects that have been improved are distribution sites, warehousing, and the TPI composite structures extension–a wind blade processor. The expansion of logistics features has brought an increase in warehouse demand on the Mexican part. This is due to the need for inventories and raw materials to be near the processing plants.

The increase in the type of user and space demand is supporting manufacturing in the neighboring south region of the border. This also proves the manufacturing demand along the border. Demand for cross-dock activities has been stable as more components and processes are transported across the U.S.-Mexico border.

Trump’s economic and migration policies have provoked fear in new companies. “Now, we can’t take anything for granted,” said a Juarez businessman to a Spanish newspaper. He has 17 years of experience and a large number of employees in his charge. The businessman was afraid of losing around 50% of his firm if Donald Trump put his policies into action and constructed the border wall.

In a fair situation, Juarez’s growth could fall to at least 4.1% in 2017 from 6.3% in 2016. The direct investment to foreign businesses went down to $1.2 billion in 2016. In the worst case scenario, the GDP would give 3.5%. Foreign investment would be expected to lower to $300 million. This outcome would mean a downturn in a city that highly relies on capital flow.

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Diana Maure
Recently promoted to Sales Manager, Diana started in 2004 as the Foreign to Foreign Manager for ShipLilly. Her unique background has allowed her to help improve the supply chain of many international clients and provide customized logistical solutions throughout the years.

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