U.S. exports to Mexico in 1994 were up an estimated 22% over 1993's numbers. By comparison, on a global basis, U.S. exports were projected to grow this year by 6%. This boom has benefitted U.S. exporters a great deal.

In the first quarter of 1994, many U.S. industry exports were up considerably from the same period last year. For example, transportation equipment was up 29.8%; electrical and electronic equipment, up 15.6%; industrial machinery and computer equipment, up 14.1%; fabricated metal products, up 31.5%; rubber and plastics, up 33.6%; Stone, clay and glass products, up 34.2%; printing and publishing, up 22.9%; forestry products, up 27.9%.

Agricultural exports to also rose considerably. From January to June 1994, for example, Corn (feed grain) was up 471%; beef and veal, up 54%; pork, up 45%; poultry and poultry products, up 28%; fresh fruits, up 78%; and vegetables, up 25%.

Unfortunately, 1995 will be different.

Peso Crisis Throws a Wrench into Mexican Auto Industry

The value of U.S. car exports to Mexico decreased 6% from 1992 to 1993, but increased a whopping 685% in 1994 to over $437 million, according to the U.S. Department of Commerce.

Mexican domestic car and light-truck sales were up in October 1994 by 32% compared to those of October 1993. Nissan recorded an increase of 183%; followed by Volkswagen, up 100%; Ford, up 8%; General Motors, up almost 2%; and Chrysler slightly down.

From January 1 to October 5, 1994, Ford Motor Company exported 18,000 cars to Mexico. This represented a huge increase from its 1,700 cars and truck exported there in 1993. Prior to the Mexican Peso crisis, Ford expected its exports from the United States and Canada to Mexico to top 50,000 vehicles in 1996.

Chrysler, Ford, General Motors, Nissan, Mercedes-Benz and Volkswagen currently produce in Mexico. Prior to the Peso crisis, Deloitte & Touche, the international consulting firm, estimated the Mexican auto market to grow by 8% during the next several years. Based on positive economic expectations, many auto producers had planned to expand upon or establish manufacturing facilities in Mexico.

Announced last October, Ford had planned to increase production capacity in Mexico to 108,000 cars annually beginning with the 1996 model year. The additional investment in Mexico would total about $60 million mainly for tools and equipment.

BMW reportedly planned a $600 million investment in car assembly, auto parts and distribution operations scheduled to begin in mid-1995. It chose to locate the assembly plant in Lerma, just west of Mexico City. T&N PLC, a British auto parts manufacturer, began building a plant on the grounds of a Chrysler de Mexico facility in the central Mexican city of Saltillo.

Reported in November 1994, Daewoo of South Korea had planned to invest about $350 million in a joint venture with Mexico's Creaciones Automotrices Nacionales (CANSA) to assemble automobiles in the municipality of Escobedo near Monterrey. Honda Motor Co. Ltd. planned to produce automobiles in Mexico within a two years. The company considered producing a smaller car for sale throughout North and South America.

Since the Mexican crisis, Italy's Fiat Auto S.p.A., which was negotiating a joint venture with Consorcio G. Grupo Dina S.A. (Dina), a Mexican truck and bus manufacturer, pulled out. The joint venture had planned to produce 100,000 cars a year in Mexico. And the Big Three U.S. auto makers have trimmed production plans for the Mexican domestic market. Until the dust settles, future plans of these producers are unknown.

The devalued Peso will boost the price of cars imported into Mexico, drop the value of dollar-based investments in Mexico, and lower the price of Mexican goods shipped to the United States and other countries. According to an industry analyst, prospective Mexican car buyers flocked to showrooms in order to buy before prices increased.

Although confidence in the Mexican economy declined as a result of the crisis, Mexico's solid economic base and entrenched free trade policies will no doubt overcome the adversity.

This article appeared in Export Today, March 1995.

John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the ManzellaReport.com, is a world-recognized speaker, author and nationally syndicated columnist on global business, trade policy, labor, and economic trends. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.

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