Mexico hopes to attract a flood of new investment to replace the Asian supply chains

By Zhao Xinhua

Mexico is one of the major textile and gar—ment trading countries in the world. The textile and garment industry is its traditional advanta—geous industry and plays an important role in Mexico’s national economy. Mexico textile and garment industry products are relatively com—plete, including all kinds of yarns, fabrics, home textiles, nonwovens and all kinds of clothing. Narrow blended fabrics, plain fabrics and knitted fabrics are traditional Mexican textile products. The Mexican fashion sector is also promoting the continuous innovation of garment products and vigorously improving the competitiveness of the textile and garment industry. Industry experts predict that Mexico’s textile manufacturing sector will grow by $3.98 billion between 2021 and 2026, with a compound annual growth rate of 4.13 percent.

Geographical advantages promote the growth of textile imports

Following Mexico’s entry into the North American Free Trade Agreement, the manufacturing sector came under intense pressure to increase productivity, forcing domestic industries to compete with more competitive producers around the world. Meanwhile, a more unified North American market provides Mexican producers with the demand, capital and technology necessary to facili—tate market access and enable them to take advantage of economies of scale and sustain productivity growth. Of the nearly $12 billion in U.S. trade, Mexico and Cana—da are the largest export markets for the U.S. textile in—dustry. In addition, Mexico provides garment processing capacity that the United States currently lacks.

The most important market for Mexican exports is the United States, accounting for about 80 percent, while the remaining 20 percent goes to Canada, China, Spain and Brazil. Shipping from China to the U.S. took 20 days in the pre—pandemic period, but now it takes 60 days. Mexico is more competitive with China in transportation costs. Because Mexico is close to the United States, it can save a lot of transportation costs. Moreover, the transportation speed is faster, and it takes less than 36 hours to reach the United States.

While U.S. apparel imports in 2021 continue to be dominated by Asian suppliers, we continue to see very strong growth from Western Hemisphere Free Trade Agreement suppliers, CAFTA [countries] and USMCA part—ner Mexico. Mexican apparel exports to the United States in 2021 increased 21.52 percent to 826 million SME.

For Mexico specifically, industry expert predicted shipments could hit $7 billion this year after rising 6 to 8 percent in 2021. Brisk sales of knitwear, T—shirts, polo shirts, lingerie, underwear and socks are seen fuel—ing those gains. Denim exports are also forecast to rise sharply. However, that a lack of fabric, notably synthetic yarn and thread, is making it hard for suppliers to meet orders. As a result, the industry is moving to negotiate more flexible rules of origin under the United States—Mexico—Canada Agreement, or USMCA, free—trade deal with the U.S. and Canada to import more fabrics from countries such as China, India and Pakistan.

Attract foreign suppliers to invest

Mexico is China’s second largest trading partner in Latin America, while China is Mexico’s second larg—est trading partner in the world. In 2021, bilateral trade reached a new record high, increasing by 41.9 percent year—on—year to $86.6 billion. Accessory is the first category of its import, import amount accounted for 50 percent. The second is clothing, import amount ac—counted for 29 percent. For high—end functional fabrics and accessories, as well as sports apparel and fashion products with complex technology, Mexico does not have production advantages at present and mainly re—lies on imports. Chinese textile products with high qual—ity and low price are becoming more and more popular in the Mexican market. Nearly half of the imports of home textiles and shoes come from China.

Mexico’s textile machinery relies on imports, mainly from the United States, Germany and other developed countries. Due to the current economic situation, the import quantity of textile machinery has decreased sig—nificantly, leading to the increase in the import quantity of textile machinery parts. Exports to Mexico from China, Taiwan China and Japan are growing. As equipment imported from Asia is cheaper than that in European countries, it is a good time for Chinese companies to enter the Mexican market.

Due to the change of pandemic situation and the uncertainty of Sino—US relations, investing in Mexico is one of the preferred strategies for manufacturing enterprises. According to local media reports in Mexico, Araceli W. Ching, the representative of Mexico—China Chamber of Commerce and Industry in Nuevo León, believes that, in view of the world economic situation, the international offshore supply chain has been greatly affected, and the most appropriate solution is to attract multinational companies and their suppliers to consider increasing the coastal productive investment, and make the products show diversified forms of export from oth—er countries. The reasons are as follows: first, compared with China, the logistics time of products exported to America is greatly shortened; second, it is attractive to Chinese capital that has a supply—demand relationship in America; third, trade barriers can be avoided; fourth, the industries are highly complementary; fifth, Mexico has sufficient labor force, high quality and low cost.

With Mexico's manufacturing industry showing a vigorous trend in several key industrial clusters, it is easier than ever for foreign capital to establish a firm local supplier network and find industrial parks with per—fect supporting facilities.