Jose Ruiz

By Jose Ruiz

Monterrey, N.L. (April 1, 2009) – The peso rose 0.8 percent to 14.1722 per U.S. dollar and the Bolsa stock index climbed 0.5 percent to 19,626.75. Both signs of optimism as Mexico’s President Felipe Calderon announced that Mexico’s public finances are in order and we’re able to take a line of credit from the IMF as soon as this week.

Overall Status of Manufacturing in Mexico
The outlook remains grim. Mexico’s industrial fell the most in almost 14 years in January as the country’s ties to the declining U.S. economy crimps manufacturing and trade. Mexico is one of the worst performers in Latin America because of its close business and consumer ties to the U.S. Geographically within Mexico the impact of the recession is felt the most in the northern cities that are tied closer to the U.S. business cycle. However some manufacturing sectors begin to show positive signs.

Transportation
It is expected that U.S. companies operating in Mexico will pay higher shipping costs after the U.S. scrapped a trucking program designed to eliminate daylong delays at the border. “The fact that we can’t have a truck go door-to-door generates a cost,” said Cesar Castro, president of the Mexico City-based National Council for the Exporting, Maquiladora and Manufacturing Industry.

Because of the suspension, companies that were in the program now must pay about $120 per trailer for a transfer service that hauls cargo across the border. Delays compound those costs because shippers must drop the trailers on the Mexican side of the border, hook them up and deliver them to the U.S. side, where an American trucking company picks them up.

Automotive Industry
Uncertainty currently looms on Mexico’s automotive industry and the automobile industry is Mexico’s largest manufacturing sector and a key employer.

 The Group of 20 nations suggests the global economic slowdown could last through the end of 2010. But most importantly the Obama administration said as it set the stage for a crisis in Detroit that would dramatically reshape the nation’s auto industry. The immediate future and strategic direction of GM and Chrysler will have direct short term impact on Mexico’s manufacturing environment.  President Barack Obama and his top advisers have determined that neither company is viable and that taxpayers will not spend untold billions more to keep the pair of automakers open forever. Protecting U.S. jobs will remain an will have an impact in GM and Chrysler’s operation in mexico.

Jose Ruiz is a Principal in Heidrick & Struggles’ Monterrey office. As an executive recruiter he has worked on executive search projects for multinational clients in industrial sectors and consumer markets. He can be reached at +52 (818) 8625-6521 or jruiz@heidrick.com

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