Mexico: Think Big

The trade between Mexico and the Netherlands was established almost two centuries ago. The trade relations have only strengthened after, with the most recent development being the renewed trade agreement signed in 2018 which has encouraged bilateral trade even further. Currently, Mexico is the largest export-driven economy in Latin-America. Exports are immensely stimulated by Mexico having more Free Trade Agreements than any other country in the world. It is expected that their exports will grow at such a rapid pace that the infrastructure supporting exports will have to expand. Due to this growth, Mexico is forecasted to have the 7th biggest economy of the world in 2050 –  the time to capitalize on this business opportunity is now. 

The low wages in the Mexican industry combined with its favorable geographical location bordering the United States make its market appealing. Of all its exports, 80% is shipped to the US as the production costs in Mexico are 25% lower than the costs across the North-border. Additionally, the country is a valued market for the Netherlands and a priority market for Dutch companies to invest in.

Furthermore, there is an abundance of expertise in the Netherlands regarding the upcoming sectors in Mexico and this knowledge is greatly appreciated by Mexican companies. Below you will find a more detailed description of Mexico’s promising sectors.

Sectors

Agriculture

Since the 13th century, indegeounous inhabitants of Mexico have been developing innovative ways of ensuring their livelihoods via agriculture by building ‘floating lands’ on which they grew crops. Today, Mexico covers a territory of 198 million hectares, of which 15% is devoted to agricultural crops and 58% is used for livestock farming.  The most profitable agricultural products of Mexico are coffee sugarcane and cotton, and the top production is avocado. Mexico has a competitive advantage as a result of its available fertile land, where the possibility of cultivation of diverse types of crops on a large scale exists.

 

The challenges for this sector today are to be found in productivity, infrastructure, sustainability, climate change and water quality and availability. These challenges result in an opportunity for fertilizer suppliers, for producers of machinery and equipment, waste water management improvement, and biotechnology implementation. All fields in which Dutch agricultural companies are very skilled and for which they are highly appreciated and acknowledged by Mexico. For these companies, the time to fill this void in the Mexican agricultural sector is now. 

Automotive

Mexico is home to one of the largest vehicle manufacturers worldwide. The beneficial geographic location and the fact that Mexico has more Free Trade Agreements than any other country make the country an outstanding global export base. Moreover, due to the longstanding history with automotive manufacturing, the country has become well known for an abundance of skilled labour forces that have experience in complex assembly and are able to work for cost effective wages

Furthermore, the country has built up a strong supply chain over the past century which ensures the excellent quality of Mexican automotive products. However, several factors, such as concerns about air pollution, urge the Mexican automotive industry to come up with innovations in the coming years to increase the environmental performance of the production and products. 

Chemicals

Mexico’s chemicals industry presents an enormous opportunity. The country’s vast wealth of natural resources, which include medicinal plants, oil, to minerals, timber, marine, and agricultural products, can serve as raw materials and create openings for developing new businesses and integrating multiple supply chains.

At the same time, top-down, government-led structural reforms have opened the economy for further investment and will encourage domestic consumption and exports, particularly with the United States.

The largest segments of the chemical industry include petrochemicals, rubber and plastics, pharmaceuticals, soaps, detergents and cosmetics. The Chemical industry accounted for a production value of 20.4 billion US Dollars.

Decreasing production combined with an increasing consumption resulted in a severe increase in imports (12%) and exports (18%) between 2012 and 2016. This increasing consumption is linked to other growing industries such as the agricultural, automotive and aerospace sector. These sectors all demand for chemicals such as lubricants, coatings, paint, fluids and metalwork

Energy

The Mexican energy market faced a revolutionary change due to the 2013 Energy Reform, which broke up the monopoly of the state-owned institutions Petróleos Mexicanos (PEMEX) and the Federal Electricity Commission (CFE). The energy reform invites foreign expertise, investments and innovation. This also means that fruitful opportunities lay ahead for the Mexican oil industry.  

On the other hand, Mexico is trying to improve their environmental performance by setting goals to generate 35% of energy consumption through clean sources by 2024. In order to accomplish these goals, specific knowledge is needed that currently is not available in Mexico. 

Because of the innovative Dutch business climate in combination with its expertise in the renewable energy market, promising business opportunities lay ahead. Sectors with explicit potential are: generated distribution, solar power Innovations, the service industry for wind generation, energy storage through water management and electric public transport and smart charging solutions. 

Food & Beverages

The Mexican Food and Beverage market has a bright future with an expected growth rate of at least 6% annually between 2020 and 2023. A notable aspect of this market is the large number of low-income households that spend more than a quarter of their total spending on food and non-alcoholic drinks, on average. 

Mexico has developed their agriculture-food market a lot over the past years. Since 2015 Mexico has exported more than they have imported, with the main destination of their produce being the United States. The US accounts for 65% of the Mexican food and beverage exports, with corn, soybeans and dairy being the three largest contributors. 

There are notable opportunities for imports. Firstly, the Mexican Ministry of Economy has shown signs of interest in diversifying away from its heavy reliance on the US, resulting in a more favourable attitude towards European parties. Secondly, the modernised trade agreement between Mexico and the EU has enhanced protection of geographical indications, ensuring duty-free import of most EU products and alleviating Sanitary and Phytosanitary barriers for fruit, vegetables, and animal product imports. Thirdly, Mexican consumers have focused more on healthy alternatives of their traditional diet in recent years. This trend is a reaction to the severe obesity problem in Mexico due to all the processed foods that were introduced in the last decade.These favourable factors, among others, make it the perfect time to explore opportunities within Food and Beverages in Mexico. 

Healthcare & Life Sciences

The Maya people already had sophisticated healthcare for their time. They made prosthetics for arms and legs and were able to stitch wounds and use anesthetics for the patients. In modern times, while being well developed, Mexico is in high need for further innovations. The challenges for this sector lie within identifying spaces for effective collaboration between the public and private sector. Furthermore, supply chains need to become more efficient. Lastly, the sector is seeking for greater synchrony between manufacturers, distributors and payers of products. Additionally, the country has a chronic shortage in health infrastructure and hospital beds while at the same time dealing with an aging population. 

 

The main opportunities for Dutch companies are to be found in Architecture, Construction, Hospital Equipment, providers of healthcare products and experience in dealing with an aging population. Furthermore, Mexico has one of the most attractive pharmaceutical industries to invest in, due to the improvement of the regulatory framework and increase in quality certifications. Furthermore, the current presidency announced that it would make increased budgets available for the public healthcare infrastructure and procurement. By entering the market now, Dutch companies will find themselves in an unsaturated market where their product or service can be introduced to healthcare providers before the influx of players emerge.

Transport & Logistics

Over the past decades, large investments have been made in Mexico’s infrastructure, as it is now one of the leaders in manufacturing and exports. The continuously improving vast network of highways, maritime ports, airports and railroads provide the perfect platform for exports. This transport network is performing a vital role in trade with its main trade partner, the United States, accounting for 80% of exports. This combined with Mexico’s multiple Free Trade Agreements, which encompass over 40 countries including the Netherlands, are key to its successful international trade

Mexico’s transport and logistics sector is still undergoing major expansion. By the end of 2019, President Andrés Manuel López Obrador announced an infrastructure plan worth $44 billion, of which most funding is meant to come from the private sector by the means of Public Private Partnerships (PPPs). In 2018, an agreement on principle was reached on the updated version of the Free Trade Agreement with the EU, removing duties on practically all goods and simplifying custom procedures. The new agreement, once ratified, will increase trade between Mexico and the Netherlands. Consequently, there is a need for improved logistics technology, distribution centers and warehouse management equipment. Additionally, the attraction of outside capital from the private sector through PPPs and the increasing international trade, offer interesting opportunities for the prominent Dutch transport and logistics sector.

Water

During the past decade, the Mexican water and sanitation sector made major strides in service coverage with water supply and sanitation. Currently, 94% of the population has access to drinking water services, while 89% has sanitation coverage. An expanding economy has led to an increasing number of people formerly living in rural areas relocating to urban areas. This has led to a burgeoning gap between urban and rural demographics. Consequently, investments in water supplies to rural areas have traditionally suffered and demands for greater distribution of water are ongoing. Therefore, the Dutch water industry holds attractive opportunities to provide knowledge and technology in water management to contribute to the country’s fast rising development.

The subsectors of significant interest in Mexico are: delta, agrifood, sanitation, wastewater treatment, drinking water, and technology development. Moreover, Mexico is an interesting location for Dutch maritime companies due to its strategic geographical position and trade opportunities. Mexico is a major trading hub, with its ports facilitating shipping routes to the US and Europe. 

Other fruitful areas for Dutch businesses in Mexico are leaks, storm- and wastewater management, water-treatment and recycling technology. Northern states are looking to Dutch solutions that can be effectively implemented. They have stated to need isolated water treatment systems either for industrial waste or to attend distant communities.