Mexico’s historic election in June saw the country elect its first female president amid unprecedented levels of violence. This has led to notable shifts, including the peso's devaluation, shifting market dynamics and an increased call for security, as outlined in the Q3 Cross-Border Index, released by Redwood Mexico, part of Redwood Logistics.
"The peso's devaluation post-election has been a double-edged sword for the Mexican economy," says Jordan Dewart, president, Redwood Mexico. "While it has provided relief for Mexican truckers and boosted export competitiveness, it also introduces new challenges for foreign direct investment."
Key takeaways:
- The peso, which had strengthened to 16-to-1 against the dollar before the election, devalued to 18-to-1 post-election. This shift has made Mexican goods more competitive in the U.S. market, potentially leading to an uptick in exports through the remainder of Q3 and all of Q4. Despite these economic fluctuations, Mexican carrier rates have continued to show remarkable resilience, sustaining ongoing increases.
- The competitiveness of Mexican commerce is on display as trade volumes through Laredo, Texas, have been on a consistent rise, surpassing traditionally dominant international ports. Laredo has seen a higher throughput for 15 out of the last 16 months than the Port of LA/Long Beach, an entry point that once processed nearly 50% of all foreign imports.
- Spurred by rising labor costs in Asia and ongoing trade disputes, Mexico continues to grow as a hub for manufacturing and commerce, and not just with the United States. Maquiladoras, or assembly locations, from foreign countries like China, have continued to pop up along the border as more countries are leveraging Mexico for manufacturing to continue trade with the United States.
- Imports from Asia into Mexico have also risen, pointing to the growth in Mexican ports as a way to work around American tariffs on Asian goods.
- Looking at specific industries, Mexico experienced a significant surge in cargo theft, with incidents escalating by 36%. This rise has impacted the grocery industry, which accounted for 38% of all new cases. The increase in grocery cargo thefts has coincided with the Mexican produce season, exacerbating concerns for suppliers, manufacturers and distributors who rely on timely deliveries to meet heightened consumer demand.
- Meanwhile, auto exports (cars, auto parts, and commercial vehicles) from Mexico to the United States totaled nearly $11 billion ($10.57 billion, according to available data) in May, accounting for roughly 25% of all exports to the United States ($44 billion) and 15% of total commerce ($73 billion). This robust performance suggests that automotive manufacturers have adapted effectively to the evolving nearshoring and cross-border landscape by diversifying transportation routes and enhancing security protocols for their shipments.
"Growth is abundant in Mexico right now," adds Dewart. "With its strategic location and skilled workforce, virtually anything currently made in China can also be manufactured in Mexico, making it an attractive option for businesses looking to diversify their supply chains and shorten cash-to-cash cycles. Everything that we can measure shows that importers are shifting to Mexico."
"Mexico is increasingly being recognized not just as a trade partner for the United States, but as a critical hub for all countries looking to access North America," adds Dewart. "The value of Mexico as a gateway for commerce is starting to gain global attention, with businesses from various parts of the world now viewing it as an essential foothold in the North American market. This transition reflects the broader changes in global supply chains, where Mexico's strategic positioning, skilled labor force and established manufacturing infrastructure provide a significant advantage."
