Monthly cross-border updates curated with insights from our experts.

October 2024, Vol. XVI

At Nuvocargo, we simplify U.S./MX cross-border trade, shining a light into the black box at the border for greater control and visibility. In this edition, we recap September's highlights, including Mexico’s new judicial reform and its implications on trade, BBVA’s opening of a “nearshoring” office, and storm damages to the World Trade Bridge. Looking ahead, October brings the start of president Sheinbaum’s tenure, as OPEC+ delays oil output hikes, and a new dockworkers strike looms in the U.S. Plus, we explore the nearshoring-driven growth in the automotive industry and share the latest updates on Nuvocargo’s product.

Read on for some of the top trends and insights on cross-border trade, curated and analyzed by Nuvocargo’s team of experts.

Enjoy!

A look back: What happened in September?

Mexico’s Senate Approves Judicial Reform

Mexico’s?Senate has approved a controversial judicial?reform aimed at restructuring the nation’s courts. The reform, backed by President Andrés Manuel López Obrador, seeks to enhance the judiciary’s efficiency and reduce corruption. However, critics argue that it could undermine judicial independence by centralizing power. With the reform now passed, attention turns to its implementation and potential impacts on Mexico’s legal system and democratic institutions.

What does this mean for US-MX trade?

The reform has raised concerns about potential impacts on U.S.-Mexico trade, particularly within the framework of the USMCA. While some investors remain optimistic, viewing the reforms as a move towards streamlining legal processes, others worry about increased uncertainty in Mexico's business climate. These concerns have led to a slowdown in foreign direct investment (FDI), with Asian companies pausing major projects and European and American investments proceeding more cautiously. The reforms could also challenge the stability of the USMCA, as U.S. officials and businesses may perceive them as undermining judicial independence, a key tenet of the trade agreement. With U.S. elections approaching, investor caution is further amplified, highlighting the delicate balance between political reform and economic stability in the region.

Mexico’s largest bank opens office in Houston dedicated to nearshoring

BBVA Mexico?has launched a nearshoring unit in Houston, Texas, aiming to support companies relocating operations closer to the U.S. Their strategy is to bring in 65 foreign companies within the first year of operations, providing financial services to businesses capitalizing on nearshoring. This move reflects the growing trend of strengthening supply chains and reducing reliance on markets like Asia.

Storm damage causes delays at major Texas trade bridge

On September 14th,?a?severe storm?temporarily closed the World Trade Bridge in Laredo, Texas, the busiest U.S.-Mexico commercial crossing. The storm caused the roof of the Mexican commercial customs facility in Nuevo Laredo to collapse, disrupting truck traffic and leading to significant delays for cargo transporters. Disruptions lasted for a couple days, before the bridge reopened on Monday morning (Sept. 16) and cross-border trade resumed.

Looking forward: What to expect in October?

U.S. Dockworkers Strike Looms

An impending U.S.?dockworkers strike, expected in early October, could disrupt supply chains and U.S.-Mexico trade at major U.S. ports. If it proceeds, it could delay up to 40% of U.S. imports and cause severe congestion. Given that nearly $600 billion in goods move annually between the U.S. and Mexico, businesses are bracing for delays and increased shipping costs, potentially affecting supply chain stability and nearshoring efforts in the region.

OPEC+ Delays Oil Output Hike

OPEC+ has decided to delay?its planned oil output hike of 180,000 barrels per day, originally scheduled for October 2024, by two months in response to falling oil prices and weak demand from key markets like China and the U.S. This decision aims to stabilize prices, which had dropped to their lowest levels in nine months. Although this delay could prevent an immediate price crash, analysts warn that it may only postpone challenges, with potential oversupply issues likely to emerge in 2025.

Sheinbaum’s Presidency Kicks-Off

Claudia Sheinbaum’s presidency will start on October 1st, 2024. As a key ally of the current administration, she is expected to continue many of President López Obrador’s policies, including the push for domestic energy sovereignty and reforms in sectors like the judiciary. These moves may lead to both opportunities and challenges for trade, as nearshoring continues to attract foreign investment.

Food for Thought: Inside the US-Mexico Trade Lane

By the Numbers: Nearshoring and the Automotive industry

Nearshoring to Mexico has become a vital strategy for the automotive industry as manufacturers seek to reduce costs and shorten supply chains. With labor shortages and rising production costs in the U.S. and China, many companies are adopting a “China Plus One” strategy, maintaining some production in China while expanding into Mexico to serve key markets like the U.S. Mexico’s automotive industry, already the world’s seventh-largest, produced around 3.3 million vehicles in 2022, with projections to reach 4.5 million by 2028. Crucially, 90% of these vehicles are exported, with 76% heading to the U.S., highlighting the importance of Mexico as a hub for automotive exports.

Additionally, the cost of shipping from Mexico to the U.S. is significantly lower than from China, with cross-border transportation taking just 24-48 hours compared to up to three weeks from China. Overhead and transportation costs are much more favorable in Mexico, with savings of up to 40-50% on transportation alone. These factors make nearshoring to Mexico a cost-effective and logistically efficient solution for automotive manufacturers looking to remain competitive in an evolving global market.

By leveraging Mexico’s growing prominence, companies can enhance flexibility and build resilient infrastructures for future growth.

From the Product Team: Nuvocargo + Orderful EDI Integration

Nuvocargo has partnered with Orderful to streamline and automate Electronic Data Interchange (EDI) processes for large enterprise customers. This partnership enhances operational efficiency by reducing onboarding times, minimizing errors, and improving data accuracy in shipment tracking, invoicing, and compliance checks. With this integration, Nuvocargo can offer faster, more reliable cross-border logistics solutions. Read more about how this collaboration benefits both Nuvocargo and its customers?here.

To learn more on our offering please?click here.?

We are also happy to meet with you in Laredo and explain how we are bringing a new standard of service at the border.