General Economic Background – Mexico has implemented a package of structural reform to break free from three decades of slow growth, low productivity, and income inequality. The package of reforms has already helped to improve confidence and bodes well for the rest of 2015 and beyond. In the past decade, Mexico made little progress in growing toward the upper-income OECD countries. Fortunately, the cycle has started to turn around and a rebound is now underway, which is being fuelled primarily by stronger import demand from the United States, a gradual recovery in domestic demand, and expansionary fiscal policy. The policy interest rate remains at an all-time low of 3%, and the exchange rate was stable during 2014. A marked rebound in GDP growth is projected, with growth predicted to reach nearly 4% in 2015. As external demand strengthens with the US recovery and the fiscal stimulus (0.5% of GDP in 2014), investor confidence should return. The ongoing boost to government spending is welcome, in particular the national infrastructure investment plan scheduled to occur from 2014 to 2018.
In 2013, the federal government proposed a new vision for housing and urban policy, seeking to reduce the needs of adequate housing that still affects many Mexican households, and to address the inefficient development patterns of recent decades. This new approach to housing and urban policy differs from those of the recent past in shifting from quantitative objectives for housing to a more explicit qualitative focus on housing and the urban environment. In 2013, a single ministry tasked with housing and urban policy (the Ministry of Agrarian, Territorial and Urban Development, SEDATU) was created. This will hopefully be an important first step towards a more coordinated response to the country’s urban challenges.
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.
2014 was an all-time record for softwood lumber export to Mexico, reaching $160 million and exceeding all other categories of forest product exports to this market. Softwood lumber exports to Mexico grew 56% since 2010 while treated lumber exports remain strong at nearly $10 million.
Strengths: NAFTA; US softwood lumber’s quality, durability, availability (location), consistency, and sustainability (forest management). U.S. forests are sustainably managed and harvested, which is an increasingly important factor for Mexican consumers.
Weaknesses: Price volatility; US mills/wholesalers’ tendency to ignore export markets when US market is strong; exchange rates
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 and price dumping; illegal logging activity in Mexico
SEC maintains an office through American Softwoods in Mexico (http://americansoftwoodsmexico.com/) to assist members with language and in-country market connections.