It’s Mexico’s big moment, but violence and truck-jackings are scaring away investors

It's impressive how much the business relationship between the United States and Mexico has developed over the past 15 years. However, it is unfortunate to see how Mexico is squandering an opportunity to fundamentally transform its economy in this era of supply chain restructuring and nearshoring.

I'm an executive at an insurance company specializing in cross-border commercial transactions. We saw how Mexico's exports to the United States nearly doubled from $223 billion in 2007 to $439 billion in the first 11 months of 2023. But overall, violent crime continues to prevent Mexico from reaching its full potential.

In September 2008, global financial markets entered crisis mode, causing severe disruption to Mexico's economy. That winter, former Mexican President Felipe Calderon took office and immediately declared war on Mexico's organized crime groups.

Mexico's economy contracted by 6.3% in 2009. At the same time, violence exploded in Mexico as police and soldiers adopted increasingly confrontational tactics against powerful and well-armed organized crime groups. The total number of homicides in Mexico soared from 14,006 in 2008 to 19,803 in 2009 and 25,757 in 2010.

At the time, it seemed that many multinational companies that had already moved manufacturing from Mexico to China might abandon Mexico altogether in favor of more stable and reliable business partners in Asia.

But far from collapsing, Mexico's manufacturing industry has attracted a new wave of investment. Foreign direct investment jumped 55% from his $19.6 billion in 2009 to his $30.5 billion in 2010. Mexico's economy expanded by 5% in 2010.

Mexican cities such as Tijuana, Guadalajara, Mexico City, Monterrey, and Ciudad Juarez are globally recognized as hubs for automotive, aerospace, and electronics manufacturing, cementing their reputation as plug-and-play nodes within global supply chains. I made it into something.

Over the past decade, violence in Mexico has declined and then resurfaced in various regions of the country.But overall, the number of murders is continues to maintain high standards. Like many foreign business owners learning the intricacies of running a business in Mexico, I have seen organized criminal activity impact large swathes of Mexico's economy, from agricultural production to mining to logistics. I'm here.

criminal kidnapped a Pepsi executive 2015 and killed the manager At ArcelorMittal in 2017. In 2022, armed robbers targeted a Volkswagen employee transport van.Starbucks too being targeted Charges of violent assault and robbery in Mexico City.

In 2017, I founded an insurance company focused on helping U.S. companies protect land transportation within Mexico and across the U.S.-Mexico border. In 2018, I watched as Mexico elected a new president, Andres Manuel López Obrador, who promised to reduce violent crime by creating jobs and reducing poverty.

President López Obrador crossed the U.S.-Mexico border on December 10, 2019, just before the onset of another major shock, the 2020 coronavirus pandemic. Signed a revised version of the new USMCA trade agreement governing commerce. Again, Mexico's economy withstood the storm and also used it as a catalyst for growth. Foreign direct investment in Mexico soared from $31.5 billion in 2020 to $38.6 billion in 2022 as manufacturing leaves China. Preliminary data for 2023 shows a new record for investment in Mexico, as multinational companies continue to benefit from global trends reshaping their supply chains. , either give up or supplement operations in China.

Thanks to new investments, Mexico's GDP in 2023 expanded by 3.4%.

Overall, however, Mexico is unlikely to take full advantage of the benefits of nearshoring because Mexican politicians and policymakers have broadly failed to improve the country's security capabilities. The nearshoring boom appears to be developing not because of its potential but despite Mexico's problems.

López Obrador's government has already overseen the most violent five years in Mexico's modern history. Foreign companies do not operate in isolation from the violent criminal organizations that operate on the outskirts of many major cities and on major highways that run through rural areas between central Mexico and the U.S. border.

Mexico's lack of safe routes for moving goods between manufacturing sites and the U.S. border is a deterrent for foreign executives looking for reliable business partners.

Mexico experienced a total of 7,862 violent cargo truck hijackings in 2023, an increase of 3 percent compared to 2022, according to Reliance Partners' Cargo Truck Hijacking Data Portal. The most common locations for cargo hijacking in Mexico are Puebla and Estado de México, two manufacturing sites located adjacent to Mexico City. Together, these two states accounted for 78% of all cargo truck hijackings in Mexico in 2023.

In Puebla, the number of truck hijackings increased by 45 percent in 2023.

Mexico's AMOTAC trucking union has already threatened to carry out a nationwide strike in early 2024, threatening to close critical transport routes unless the Mexican government takes additional steps to reduce the risk of violent cargo truck robberies. This is likely to include the establishment of highway closures.

On January 12, Mexico's Chamber of Industry and Commerce CONCAMIN warned that highway robbery costs Mexican businesses more than $400 million a year. According to CONCAMIN's calculations, over the past five years he has had more than 84,000 cargo trucks hijacked or robbed, with an average of 46 incidents per day. Major companies such as Ford, DJI, Danone, and Coca-Cola have all experienced cargo theft in Mexico.

Until Mexico figures out how to improve highway safety and reduce the risk of violent cargo truck hijackings, it is unlikely to reach its full potential as a 21st century manufacturing powerhouse.

Mark Vickers is the Director of International Logistics at Reliance Partners, a major US-based insurance company.