1. According to the most shipping monitoring, on August 6, the US dollar fell to 17.08 against the Mexican currency, up 16.4% against the US dollar last year. When most of the world's currencies depreciate against the dollar, the Mexican peso is not only appreciating but also substantially appreciating it as a "super peso", which is causing strong concern in the global economic, trade, shipping and logistics community.

2. Behind the phenomenon of "super peso", the Mexican economy relies on the policy of "friendly and inshore outsourcing" in the United States, the implementation of the USMCA US-Mexico-Canada agreement, which has been in force for three years, and the return of manufacturing industry in the United States, which has promoted the rapid development of Mexican manufacturing industry in recent years. Today, Mexico is becoming the biggest beneficiary under the principle of inshore procurement in the United States.

3. At present, Mexico has become the centre of the integrated manufacturing supply chain in the North American market, especially in assembly. With the innovation of the NAFTA North American Free Trade Agreement into the USMCA US-Mexico-Canada Agreement in 2020, the process that began with the creation of NAFTA in 1994 has benefited even more.  Assembled goods accounted for 72.1 per cent of Mexico's exports, while the rest were mainly food, beverage and energy products. Exports of computers (mainly servers) accounted for a further 8.4 per cent, while exports of other consumer electrical and electronic products accounted for a further 9.5 per cent.

4. The challenge for the Mexican government and industry is to ensure that the country maintains its position when a new round of inward investment begins. In the automotive sector, the most notable push is Tesla's plan to invest $5 billion in a new battery and car plant in Nuevo Leon. Tesla mobilized Chinese suppliers to go to Mexico to replicate the "Shanghai factory" supply chain cluster! BMW will also invest $863 million in electric car production in Mexico from 2027, while General Motors is expanding production, while HP will increase production of commercial laptops in Mexico. It should be noted that the move is aimed at meeting incremental demand rather than completely replacing Chinese mainland production; traditional manufacturing has also had new investments, including Schneider Electric's $73 million plan to expand its existing high-voltage equipment manufacturing.

5. Investment in the manufacture of electric cars and laptops can solve the problem of slowing exports in Mexico. In the 12 months to 31 May 2023, electric vehicles accounted for only 6.6 per cent of all Mexican car exports, according to third-party data. Shipments rose just 6 per cent from a year earlier, in part because Ford Motor Co., Ltd. restructured its equipment, while other companies started production slowly. During the same period, laptops accounted for only 0.7 per cent of Mexico's total computer exports.

6. Mexican laptop exports, led by Flex Flavor and Lenovo, accounted for 40 per cent and 26 per cent of total exports in the past 12 months, respectively. Flex exports rose 21 per cent from a year earlier, while Lenovo's exports fell 40 per cent from a year earlier, while other electronics assemblers, including Hon Hai Precision Industries (Foxconn), Hueshuo, Guangda computer and Renbao Electronics, have invested in Mexico's PC manufacturing supply chain over the past three years. This is likely to support future growth.

7. This accelerated shift has geopolitical factors, and from a financial point of view, the choice of manufacturing brands in the global market is beyond reproach. For companies, they always seek to maximize shareholder value, which needs to be achieved by maximizing profits and minimizing risk. The choice of procurement location should first take into account its cost profile, including optimizing input costs, including labour costs, energy and available materials. Then the regional economy can be maximized by an integrated supply chain that brings together material processors, parts manufacturers and assemblers. Historically, this model has been very popular in consumer electronics, including smartphones, and more and more appear in the automotive supply chain cluster environment. Finally, the choice factors include the strategy oriented to the target market, which can reduce the transportation cost of the final consumer. This may be one of the main attractions of the Mexican market, and it is becoming increasingly important to India. Like most other countries, the Mexican Government is seeking investment in electrification, renewable energy and semiconductors at the ministerial level through domestic and trade incentives.

8. Companies with transnational operations must manage a range of policy-specific import tariffs and export restrictions, as well as complex international trade agreements, which may include complex rules of origin. Mexico is striking because it has signed a free trade agreement, which covers 96 per cent of its exports by 2022! The USMCA tripartite agreement with the United States and Canada dominates, accounting for 79 per cent of exports, while trade with the European Union and the European Free Trade Association accounts for 10 per cent. Mexican exports have grown by 6 per cent a year over the past five years.

9. The United States imposed an additional 301 tariff on Chinese mainland imports, resulting in a reduction in Chinese mainland's import share to 10.4% in the 12 months ended May 31, 2023, from 17.4% on May 31, 2023. The share of Mexican suppliers rose from 15.5 per cent to 17.2 per cent. Mexico does not have these basic and additional tariffs and can indirectly benefit from US subsidies because it is a member of the USMCA, such as the principle of car subsidies under the inflation reduction Act of the United States.

10. From the perspective of global brands, traders and logistics, we must take into account a range of political, economic, legal, tax arrangements, operational considerations and security risks when considering new markets. These factors also change dynamically over time. From a political point of view, moving manufacturing to Mexico-either to replace production elsewhere or to meet growth strategies in and towards the manufacturing market-could mitigate the geopolitical risks of US companies currently procured from Chinese mainland. However, both the United States and Mexico will hold national elections in 2024, adding uncertainty to the prospects for all trade and domestic industrial policies. A real concern for post-election risk is the future of USMCA. Under its so-called "sunset clause", the USMCA will conduct its first review in 2026, which will also add uncertainty to the rules governing the current preferential entry of Mexican exports into the US market.

11. as far as other risk points are concerned, the security situation of companies operating in Mexico has improved slightly over the past five years, but still faces very high risks associated with criminal activities, in particular extortion and theft of goods. In addition, operational risks have exacerbated over the same period as a result of corruption and the risk of strikes. The new labour standards under the USMCA rules make the problem even more complicated. Although logistics risk can be mitigated by getting closer to the customer market.

12. looking at specific categories, the share of US televisions imported from Mexico rose from 54.1 per cent in 2016 to 74.7 per cent in 2022. Shipments of Samsung Electronics, LG Electronics and, most recently, Tatung Datong have increased significantly. In the case of computer servers, the share of US imports from Mexico has risen to 79.3 per cent in the past 12 months from 77.2 per cent in 2016. The main shippers include Hon Hai Precision and the nearest Lenovo Group. In terms of a wide range of network routers and other network-connected devices, Mexico's share of US shipments has risen to 52.4 per cent in the past 12 months, up from 29.9 per cent in 2016. Suppliers are led by contract manufacturers Jabil and Plexus. In terms of custom computer chips, the share of Mexican suppliers in US imports rose from 1.3 per cent in 2016 to 11.6 per cent in the 12 months ended May 31, 2023. The expansion was driven mainly by Skyworks Solutions and recent shipments related to Sanmina and Samsung Electronics.

13. Although the share is already large, the share of Mexican companies in United States car imports continues to increase. In the case of gasoline-powered vehicles, Mexico's share of US imports has risen to 30.3 per cent in the past 12 months, up from 18.6 per cent in 2016. The increase was driven by a rebound in GM and Nissan-related shipments; supply of motors and spare parts also increased, with Mexico accounting for 36.2 per cent of US engine and spare parts imports in the past 12 months, compared with 27.5 per cent in 2016. Ford has been the largest consignor, with shipments related to Cummins high; the same is true of shipments of steering, brakes and other parts, with Mexico's share rising from 31.5 per cent to 39.2 per cent, up from a wide range of suppliers, including Magna, ZF Friedrichshafen and Autoliv. It is worth mentioning that under the revised USMCA trade agreement, stricter rules of origin for automobiles may lead to a restructuring of its supply chain. In addition, the shift to electric vehicles could lead to consolidation among suppliers of internal combustion engine components.