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Mexico surges to 11th place as global exporter

In 2021, Mexico exported goods valued at almost USD 500 billion, making it the eleventh largest global exporter – for procurement and supply managers, it would pay to take note of this surge.

In the two decades from the year 2001, Mexico’s exports grew steadily at a compounded annual growth rate (CAGR) of 6%. As in the case of most countries across the world, Mexico’s exports were severely hit by the pandemic, and they fell by 9.3% to USD 418 billion, as the fallout from Covid-19 hit the global economy.

As economies started reopening by 2021, its exports rebounded, however, a strong growth rate of 18.6% was recorded, pushing exports to over USD 495 billion. This indicates that there is a very strong demand for Mexican goods from the country’s trade partners.

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Mexico CAGR and export share table

Its biggest export market is the US, which on average accounted for 82% of Mexico’s exports between 2001 and 2021. Mexico’s proximity to the US counts in its favour in this regard. In 2021, 35% of Mexico’s global exports were in the machinery and electronics sector, and 24% in the transportation sector.

A quick roundup of key developments in Mexico’s export market

  • For six months after March 2020, exports declined, but, driven by shipments of manufactured goods, started to rebound by September, and by 2021 had increased by 18.6% over the previous year.
  • While Mexico’s share in global exports have slightly declined from 2.6% in 2001 to 2.2% in 2021, a CAGR of 6% in its exports in that period shows strong and sustained growth of its export capacity.
  • Machinery and electronics as well as transportation exports together contributed 59% of Mexico’s USD 495bn in exports for 2021. In the two decades since 2001, agriculture, and metals and minerals both grew by just over 8%.
  • The fuels sector has seen a massive year-on-year growth of 66% in 2021.
  • Between 1993 and 2018 trade agreements between the US and Mexico (and later also Canada) led to a six-fold increase in exports to North America. By 2021, it accounted for 78% of its exports.
  • Mexico’s free trade agreement with the European Union in 2000 gave Mexican goods a higher profile across Europe.
  • Mexico is also part of the Pacific Alliance – made up of Chile, Colombia, and Peru.
  • The S&P Global Mexico Manufacturing PMI went up to 49.6 in July 2021 – the highest for that year. This points to a recovery in the Mexican manufacturing industry. Volatility in energy prices, raw material scarcity, and limited shipping availability due to Russia’s war against Ukraine also increased input costs, and these factors affected production somewhat.
  • All signs point to the fact that Mexico is poised to remain a strong exporter, especially to the Americas.

What does the future hold for Mexican exports?

Mexico has expanded its manufacturing capability and has become a strong player in the world’s high-value supply chains – more so than comparable developing countries. The economy peaked in 2014, and a slight decline followed, because of uncertainty around free trade agreements with US and Canada, the pandemic, and reduced investment and consumption. However, there has been a recovery, and the IMF forecasts that in 2022 it will outstrip the 2015 GDP of USD 1.32 trillion.

Here’s a quick summary of expected developments

  • Manufacturing will remain Mexico’s engine of growth. By stage of processing, capital goods and consumer goods contributed 51% and 31% of the country’s exports in 2019.
  • Trade flow between Mexico and the US (where the economy has picked up pace) is normalizing, which has led to a faster recovery in the Mexican manufacturing sector, which is reaching pre-pandemic production levels.
  • The recovery process will be boosted by a continued rise in external demand for goods, as well as by a recovery in demand for services, particularly tourism.
  • There also needs to be a strong rebound in domestic consumer spending to contribute to a wider and faster recovery of the overall economy.

Partnerships and increased demand in South America to drive growth

Mexico will continue to be a major exporter to the US. Two new growth areas are envisaged which are expected to lead to an increase in Mexico’s exports:

  • Mexico’s membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which was ratified in December 2018 has created an opportunity for it to emerge as an important sourcing destination for key Asia-Pacific markets such as Japan, Australia, Malaysia and Singapore.
  • Economists are expecting household incomes to rise across Latin America, which will drive a demand for high-value manufactured goods. Mexico is in a good position to cater for this.
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Keep Mexico’s growth in exports in mind

  • Assess categories of strength in Mexican manufactures and consider it among priority supply markets
  • Leverage Mexico’s relatively cheaper labour costs compared to developed countries for higher value-added manufacturing goods
  • Take note that Mexico supplies the US, which is a discerning developed market, therefore Mexico has demonstrated its capability to export high value-added products
  • Take advantage of Mexico’s ability to meet global quality standards, proved by signing of many significant trade agreements
  • Mexico was the 15th largest recipient of foreign direct investment (FDI) in 2020, globally. This amounted to USD 31.6 billion in 2021, growing by 8.7% year-on-year, and new investments made up 44% of this. Closely watch the sectors attracting most FDI – a signal of continued capacity expansion in those sectors

Source: UN Comtrade; Axis Group Analysis

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