General Economic Background - Mexico has the second largest economy in Latin America and according to a study conducted by Goldman & Sachs, may become the 5th largest economy in the world by 2040. The current macroeconomic condition in the country is sluggish, as the GDP grew by a mere 1.2% in 2013. President Peña’s administration promised the investment of $314 billion into the country’s infrastructure (bridges, highways, airports, and ports), but as of now has not done so. Many think that once the promised funding for infrastructure is injected into the country, GDP will grow substantially in 2014. During 2013, the construction sector has experienced a substantial decrease due to Peña’s slow start, a bubble in low-income housing, as well as financial instability of the three major home builders. The Mexican Construction Chamber (CMIC) predicts housing starts will decrease from 500,000 in 2013 to 250,000 in 2014. With respect to manufacturing, rising wages in China are impacting Mexico’s manufacturing sector – companies that once found lower wages in China are returning to Mexico.
Trade Data –The North American Free Trade Agreement (NAFTA) and current political and economic stability in Mexico have resulted in little to no market access problems. This does not provide the US with much of an advantage over its competitors, however, as both Chile and Canada have free trade agreements with Mexico as well.
In 2013, the United States was the largest exporter of softwood lumber to Mexico (value and volume). The U.S.’s market share only decreased slightly: it went from 51.4% in 2012 to 50.2% in 2013. After the U.S., Chile holds the largest market share with 29.6% of the market in 2013. U.S. builder’s carpentry exports to Mexico decreased 15% from 2012 to 2013 with a value of $6.6 million.
Strengths: NAFTA; US softwood lumber’s quality, durability, availability (location), consistency, and sustainability (forest management).
Weaknesses: Price volatility; US mills/wholesalers’ tendency to ignore export markets when US market is strong.
Opportunities: Educate Mexican consumers further regarding softwood lumber grades, species, and uses; NAFTA (very valuable for easy/cheap trade but is often overlooked); close proximity to US sawmills for less expensive freight costs.
Threats: Cheap Chilean lumber with aggressive mills focused on export markets.
SEC maintains an office through American Softwoods in Mexico (http://americansoftwoodsmexico.com/) to assist members with language and in-country market connections.