Following the news that Ford had cancelled its planned $1.6 billion auto assembly plant in Mexico, Mexican officials are concerned about the impact this will have on their economy.
Ford Motor Co.’s decision to cancel a planned $1.6 billion assembly plant in the Mexican industrial city of San Luis Potosí caught the nation’s elected officials off guard and represents a major blow to one of the main engines of Mexico’s economy.
. . . . The developments come at a crucial time for Mexico’s economy, which has seen a slowdown in foreign direct investment in the manufacturing sector. If other manufacturers follow Ford’s lead, it could put the brakes on foreign direct investment, which partly finances Mexico’s current account deficits.
The auto industry accounts for a third of Mexico’s manufactured exports. Production of cars and light trucks edged up to 3.2 million units in the first 11 months of last year, while exports were flat at 2.6 million units, of which nearly 2 million went to the U.S.
Ford’s production in Mexico from January to November was 363,400 units, down almost 10% from the year-earlier period, and its exports from Mexico were off 8%, near 352,000 units, according to the Mexican Auto Industry Association.
“This is not what we needed to start the year,” said Alonso Cervera, chief Latin America economist at Credit Suisse. “What is particularly damaging is that this is the auto industry, which has been one of the main drivers of growth.”
Watch the report:
Reuters apparently thinks that President-elect Trump’s agenda should include building Mexico’s economy.
In an article entitled, “Ford plant turns ‘cemetery’ as Trump wrenches Mexican autos,” the writer observes that “Ford Motor Co’s (F.N) abrupt move to scrap a planned $1.6 billion car plant in central Mexico has spooked a network of suppliers who bet on a growing customer base and dramatized the risk that Donald Trump’s agenda poses to the country’s broader economy. “
Many auto parts makers had started to expand in anticipation of Ford’s plant in the state of San Luis Potosi, where industry is “easily 70 percent” dependent on the auto sector, said Julian Eaves, managing director of Preferred Compounding de Mexico, a U.S.-owned maker of rubber compounds operating here.
“It’s going to have a huge impact on the local community,” said Eaves.
The loss to the economy, Eaves calculates, could run into the hundreds of millions of dollars, and maybe even into the billions, over the next five years, as manufacturing, contracting and indirect jobs all fall short of plans. Officials say they are still analyzing the economic impact of the Ford decision.
The hemorrhaging may be just the beginning of Mexico’s pain from Trump’s vows to shake up trade and bring manufacturing jobs back north when he takes office on Jan. 20.
Bringing much needed jobs “back north” to America is apparently a bad thing.
In a matter of days, Ford’s retreat has turned the factory site into a barren plain bereft of its economic promise.
“It now looks like a cemetery,” said Fernando Rosales, 28, a hydraulic hoses contractor preparing to abandon the site. “(There is) only death here, we are all leaving.”
. . . . Some Mexican states have come to depend on autos almost entirely for growth. In San Luis Potosi, 15,000-17,000 new direct jobs are expected to be created in 2017, all in the auto sector, according to federal labor delegate Edgar Duron. The total does not include the Ford plant, which had been expected to create thousands of additional jobs in coming years.
The San Luis Potosi state government had already paid part of the 1 billion pesos ($47 million) it owed under a contract to support the Ford plant, Puente said, without specifying how much. The federal government said Ford would reimburse the sum.
Projects, both private and public, are underway to spend hundreds of millions of pesos to expand the city’s airport and build a new bus line in expectation of a busier future.
But the real fear in Mexico is that, as Trump himself tweeted after the Ford decision, “This is just the beginning.”
The article nicely illustrates exactly why we want these jobs in America, so that’s something.DONATE
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