Mexico must generate stability and improve its image

In the face of the geopolitical changes taking place globally, Mexico must work to generate greater stability, governance, transparency, and investment in infrastructure, education, and training; as well as support developing Mexican companies and continue on the path of political and economic reforms, warned David Bach, president of the International Institute for Management Development (IMD).

I believe there is an opportunity to improve Mexico’s image. On the one hand, we see an economy that has benefited greatly from what has happened geopolitically, such as nearshoring, but there is also concern about the security situation in parts of the country. “You see a society that is quite politically divided, and there is an opportunity to improve Mexico’s image and remind everyone that the country is not only a good starting point for accessing the United States but also an attractive and interesting market in its own right,” he said.

In an interview with Excélsior, the executive noted that in the current context of a tariff war, Mexico finds itself in a complex situation because 80% of its exports go to the United States, so it is necessary to begin market diversification. However, he acknowledged that this will take time.

It is extremely dependent on exports, and that cannot be changed overnight. It is true that the United States represents 80% of Mexico’s exports, but the United States only accounts for 13% of global imports. So there are markets in Europe, Latin America, and Asia that Mexico can develop. This takes time, there is no doubt about it, but whatever happens in Washington, we must try to diversify and become a little less dependent on the United States. It is a good idea, and so is developing the domestic market. “Mexico has a large population that needs and wants products and services, so there are opportunities for Mexican companies,” he noted.

Regarding the tariff war, Bach expressed confidence that both President Donald Trump and his advisors realize that tariffs are not good for the United States, its businesses, and its consumers.

They will indeed reach an agreement in which Mexico will have to make some concessions because the president needs them to maintain face, but in the end, tariffs will be lowered. “I don’t think we’ll go back to where we were before, where we were on a path toward greater integration, easier movement of products from one part of the border to another,” he said.

Bach also pointed out that Foreign Direct Investment (FDI) and the relocation of companies to Mexico will remain halted as there is a lot of uncertainty due to the tariffs.

There is a lot of uncertainty now; companies can adapt to tariffs, but they must calculate whether it is worthwhile to bring their factories to Mexico to access the United States. The problem now is the uncertainty and whether they will be tariffs of 7, 15, or 25%, whether they will apply to all industries or just a few. I wouldn’t expect much new investment with so much uncertainty about what might happen, especially if the goal of investing here in Mexico is to access the United States market,” he stated.

He mentioned that when certainty returns, there could be new investments, but they likely won’t be what they were before because the United States government is trying to force companies to go to that country and not to Mexico or Canada.

Source: excelsior