Mexico: Getting ready for new business

 

portveracruzRecently, Dawson Strategic had the opportunity to visit Veracruz, Mexico. Located in the Gulf of Mexico, the city was once the gateway for the Spanish Conquistadors and the fall of the Aztec Empire. Nowadays, Veracruz is the most important maritime port in Mexico, and a modern multimodal transportation hub that offers new investment opportunities for both the manufacturing and energy sectors.

The maritime port facilities are undergoing a US $4.5 billion expansion for the development of 165 hectares of land that will be leased under a bonded warehouse regime to companies interested in the in-situ transformation or manufacturing of export-bound merchandise. Additional zones surrounding the port area are already functioning as bonded warehouses where major enterprises are established. Vehicle manufacturer Volkswagen, for example, has a facility close to the port for the transformation of its export vehicles. Steel pipeline manufacturer and exporter Tenaris TAMSA has maintained an industrial park in Veracruz for more than 60 years.

Investors in the new facilities could benefit from financial and fiscal incentives like the IMMEX program, which allows maquiladoras and manufacturers to import duty and tax-free merchandise to be transformed and exported. Furthermore, companies can take advantage of the geographic position and logistic advantages of the Port of Veracruz, which connects Mexico with the Atlantic Basin, Europe, Africa, and the eastern coast of North and South America. (A ship can travel from Veracruz to New York in 5 days. It takes 31 days for a ship to travel from Shanghai to New York and 17 days from Shanghai to California).

These new projects come at a time when Mexico is transforming its economy through reforms to key sectors such as energy and telecommunications. The opening up of Mexico’s hydrocarbons sector will bring further advantages to Veracruz, since 40 percent of Mexico’s oil reserves and 50 percent of the natural gas reserves are located in this state.

This scenario opens up business and investment opportunities for Canadian companies not only in the energy sector, but also to support port expansion by providing shipyard technology, ship maintenance, repairs and service. Other opportunities within the port exist in the automotive sector, adding value to export/import merchandise or establishing distribution centres.

Foreign investors stand to benefit from Mexico’s economic transformation in general, and areas like the Port of Veracruz in particular. Veracruz offers not only fiscal and financial incentives to exporters, but also qualified and inexpensive labour and a transportation hub that efficiently connects surface and marine transport. More importantly, foreign investors could benefit from the network of FTAs that Mexico has with 45 countries, including the NAFTA.

Written by Yamily Camacho

ycamacho@dawsonstrat.com

 

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