Opportunities for economic development in Mexico under the "New Normality"

By Guillermo Fernández de Jauregui

In times of crisis we encounter valuable opportunities as rules change; it is not the strongest or the smartest who survives, but the ones who adapt faster to the new reality.

Our reality surprisingly and drastically changed due to the appearance of the pandemic generated by COVID-19, completely disrupting all the expectations we had for the short and long term.

ONILOG's reason of existence is being a strategic ally for those who wish to take profit of Mexico's competitive advantages as an industrial platform in the global supply chain; therefore, we are aware that we must reinvent ourselves to create an added value with the aim of generating the factor of change to face this "new normality".

Before a crisis, there are only two types of people: those who cry, and those who sell handkerchiefs; based on our corporate values of Excellence, Integrity, Constancy, Teamwork, Passion, and particularly, Courage, at ONILOG we choose to act.

As we all know, Mexico is going through difficult times as we are experiencing a serious economic decline due to having 5 quarters with an economic slowdown, before the effects generated by COVID-19, which will only exacerbate the situation. The outlooks for 2020 indicate that the economy will decline between 8% and 10%, being these the worst indicators in the last 30 years, with a recovery expectation in the form of an "L" to the levels of 2019 which will take us between 4 and 6 years; our opportunity of improving these prospects is again focused, as in times of previous crises, in our proximity to the world’s largest market and our competitive export industrial sector.

United States has hardly being affected by the pandemic, however, it has taken immediate monetary and fiscal actions to minimize it, which will enable it to make a "U" recovery, possibly recovering its economy by the end of 2021 or early 2022. In addition to the fact that its economy will rebound in the short term, there is also a significant effect generated by the pandemic, as a precaution against a possible contagion the mobility of the population through public transports within the United States is decreasing, giving a boost to private transportation mobility, so the automotive industry is expected to experience a significant rebound as from the 2020’s third quarter, impacting Mexico favorably. This combined with the following situations:

  • To be successful, American and Canadian companies will be motivated to move out of their comfort zone, promoting projects that allow more efficient cost structures to compete in a more demanding environment.
  • Chinese companies will look for options to avoid tariffs created by the trade war between the two major economies, by creating supply chains within North America.
  • The entering into force of the USMCA on July 1, which ends the uncertainty created by the renegotiation of NAFTA for the last three years.
  • Devaluation of the peso facilitates a more efficient costs structure in Mexico, in relation to its main trading partners.
  • A wide availability of qualified human resources in Mexico, given the slowdown in all other economic sectors.

Before this reality, once again, the manufacturing and maquiladora export industry will consolidate itself as the development engine in Mexico, and endless opportunities will open for those of us who decide, with a long-term vision, to invest and take the opportunities created by this "New Normality".

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