Trump: A Burden for Monterrey's Auto Industry
In Pesquería, an industrial town near the capital of Mexico, there is a big poster with the Korean and Mexican flags that says: "Thank you, Jesus for bringing Kia to Pesquería."
Kia-Hyundai is planning to invest more than 1,000 USD in Pesquería. The investment is less connected to Jesus but to the Free Trade Agreement (Nafta) with the US, that gives access to the biggest national auto market, the American market.
Another reason for Kia to choose Mexico is the tax exemptions for 20 years granted by former governor Rodrigo Medina de la Cruz, already investigated for corruption. Yet another reason is the gift to the Korean company of a former ejido, collective farm, without compensation for its peasant owners. And, the most important, the fact that labor costs are extraordinarily low in the automobile industry: about 400 pesos (around 20 USD) a day. Mexico already offers cheaper labor than China in the manufacturing sector, as reported in Barcelona's leading newspaper, La Vanguardia.
What is going to happen in Pesquería and Monterrey, the "Detroit" of Mexico, if president Trump continues to push for more Protectionist measures against Mexico (he has threatened to put a tax to imported cars from Mexico and other products to pay for the border wall, as well as getting out of the Nafta)?
"One thing is a tweet, another is to be executed: nothing is going to happen for the moment; The production in the sector is the same as before and we feel that the rationality has to finally win," says Manuel Montoya of the automobile cluster in an interview with La Vanguardia.
80% of products made in Monterrey - from beer to plasma screens, from equipment to steel bars - are sold in the US market. Moreover, there are strong cross-border supply chains not only in the automotive sector but also in medical equipment, machinery, optical industry, aeronautics, sectors that would hardly be renationalised. "It is very difficult to know if a component is from Mexico or the USA. Or Canada because they are being developed in the three countries ... How can you put a tax on the Mexican side? "said a supply chain expert at Monterrey Tech.