BINATIONAL SHARED PRODUCTION. WHAT IS THAT?
By Jorge Canavati
I was impressed by Dr. Leonardo Curzio’s presentation during the recent Asociación de Empresarios Mexicanos (AEM) annual gala. In additional to his presentation, he very eloquently introduced the honoree for that evening, Nadbank CEO, Geronimo Gutierrez. Leonardo is a well-respected columnist and author considered one of the 300 most influential leaders of Mexico.
During his presentation, he showed a slide from a Wall Street Journal article of March 30, 2015 by John Stoll announcing a USD 500 Million Volvo plant to be built in the United States. It ultimately went to Tennessee. Later I found the complete article online. As expected, it had negative connotations regarding the automotive industry’s successful expansion in Mexico, which is what Leonardo talked about in his presentation. The article was peppered with many terms that make it sound like an “us” versus “them” situation. I continued to research this and found many, many more articles on this topic. It dawned on me that though we are the North America trade bloc under NAFTA (and a powerful bloc at that), there is an combative economic development mood between individual states in the U.S. towards Mexico. What there should be is a celebratory reaction as automotive plants open throughout our trade bloc as a whole. Bravo for Tennessee. Bravo for Guanajuato. Bravo for San Antonio. Bravo for Aguascalientes. Keep it coming.
Enter “Binational Shared Production”. I love this term. It speaks for itself. As automotive plants develop throughout Mexico and the southern U.S., a strong economic energy takes root. As an example, let’s use the Toyota manufacturing plant (TMMTX) here in San Antonio, Texas. Since the inception of this plant, automotive parts manufacturers at various tier levels sprung up in both the U.S. and Mexico. Supply chain corridors developed aggressively. Many times parts, partially assembled components, and key elements for the plant here and its tier one suppliers cross the border multiple times during the process. The chassis supplier for TMMTX is in Monterrey. Because of this, a rail service with the Union Pacific Railroad came into play between Monterrey and San Antonio. The San Antonio Intermodal Terminal (SAIT), another UPRR project developed serving Toyota’s needs through U.S. West Coast ports. This intermodal facility also support Mexico business. And as you drive around San Antonio you can see large volumes of intermodal containers double stacked on trains going to Mexico. These containers mostly carry auto parts from U.S. manufacturers. Charter air cargo services for automotive parts developed at San Antonio International Airport (SAT) and on occasion at Kelly Field (SKF) at Port San Antonio. These charter air cargo projects support auto parts emergency and spur of the moment needs between suppliers in Mexico and the Toyota plant in San Antonio and vice versa. Without these services, many plants would have to shut down temporarily at an incredibly high cost. Many logistics firms, freight forwarders and customhouse brokers are very active because of the binational shared production process. And the success stories go on and on. All around positive economic impact. I gave the Toyota example for the sake of this article. However, binational shared production is a positive throughout North America and it applies to various other industries, such as energy.
More and more environmental regulations in the United Sates are bringing on the development of state of the art, complex devices in newer model automobiles. The cost of these devices is prohibitive. Certain cost savings in Mexico make it more feasible to assemble and install these devices there so the automobile can comply with U.S. environmental requirements. Think about that.
John Stoll continues: “Mr. Samuelsson (the Volvo CEO) said Volvo considered Mexico, but the benefits of building cars in the world’s most-profitable market tipped the decision in America’s direction.” Seems we are still having trouble digesting what the North American trade bloc is all about and how it works. “Us” versus “them.”
The Texas Mexico Automotive Super Cluster www.txmxautomotive.com is an economic development concept developed by my friend David Marquez who is the director of economic develop for the county of Bexar. David developed this some years ago and not surprisingly hit the nail on the head. Recently, I was involved in the inception of the South Texas Alliance for Regional Trade (S.T.A.R.T) which is an economic development alliance between the Port of Corpus Christi, Port San Antonio and the Port of Laredo. This alliance supports and promotes South Texas regional economic development through trade and logistics. Smart cats. Today, we are developing the process of bringing Mexico into the scene. David Hendricks, an opinion columnist for the San Antonio Express News wrote a very good column for the May 16th edition which speaks to what I am writing about: “Auto investments in Mexico bring opportunities for S.A.”
I admire Tony Garza, former U.S. Ambassador to Mexico and Idelfonso Guajardo, Secretary of Economy of Mexico. These gentlemen understand the power of binational shared production. In addition, the North American trade bloc and more specifically Texas and Mexico as a team are in a geographically privileged position to compete globally. At the end of the day, it’s all about logistics. So what should come about from all this? A four letter word come to mind: Jobs.
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Jorge Canavati is the president of J. Canavati & Co. LLC., a logistics and international trade agency and consulting firm located in San Antonio, Texas. Mr. Canavati is the U.S. representative of the National Importers and Exporters Association of Mexico (ANIERM). He also presides the logistics subcommittee of the Binational Energy Committee of AEM. He is a member of the Camino Real District Export Council (DEC) and serves on various boards of international trade organizations.
Contact: email jc@jcanavati.com
twitter: @jcanavatico
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