Executive Briefings

Mexico's Improving Logistics Environment

A new reform-minded government, a stable economy and sound infrastructure are among the factors combining to make Mexico a good market for logistics operations, says Eric Markeset, who is based in Mexico City as principal of consulting firm Tsol.

A new government that appears committed to making needed reforms in the areas of finance and energy is one reason that Markeset is bullish on the business outlook for Mexico. The country has a sound economy that no longer is battered by issues of inflation and devaluation, Markeset says. "And after 12 years of one party, we now have a new party -really, a return of the previous PRI party but with a new perspective - that is beginning to execute changes that everyone knows are needed."

Another external factor benefiting Mexico is the rise in China's labor costs. "China is becoming a little less competitive whereas Mexico is becoming more competitive," he says. "Companies are looking at the Mexico-vs.-China question, running the numbers regarding logistics and labor, and debating offshoring vs. near-shoring - and Mexico is faring well."

Markeset says the transportation infrastructure in Mexico is prepared to support strong economic growth. He notes that five years ago, the World Bank's logistics performance index rated Mexico 56 out of 155, but it now is ranked 46. The government is expected to unveil a national infrastructure and transportation plan, he says.

Markeset provides the following infrastructure highlights, by sector:

Rail - Mexico has a significant rail network that was built 90 years ago and has been refurbished since the railroads were privatized 10 years ago. Three major rail companies (two under the same ownership) operate approximately 10,000 miles of track between major ports and cities and have strong American investment and influence. Intermodal is growing rapidly. There currently are 35 major intermodal rail yards in the country handling some 700,000 containers a year.

Ports - Mexico has many ocean ports, including five or six major ones, with the most important gateways being on the West Coast. These ports are well equipped to handle container and other traffic.

Air Lift - Because Mexico is a major tourist destination, a lot of wide-bodied jets with a lot of belly space for freight fly in and out of the country's major airports, with many flights to Europe and Asia.

Highways - All major destinations are serviced by two-lane highways, though many roads require a toll and some can be expensive. One current major highway project will cut across the country, linking Matamoros to Mazatlan.

Security issues remain a concern, particularly for highway transportation, he says. At present, this is a fact of business that companies have to deal with by adding security measures. He is hopeful that the new government will develop a new strategy to improve the situation.

Border crossings are fairly easy with rail, but remain complicated with trucks due to a mixture of regulation and tradition, Markeset says. "I could argue that trucking companies on both sides don't want such a fluid border. Now, there are three companies involved: a U.S. trucking company, a Mexican trucking company and a third company to move goods across the border."

Markeset suggests that U.S. and Canadian shippers should consider dealing directly with Mexican trucking companies rather than going through a third party. "The top 10 trucking companies in Mexico are first rate and up to par with their U.S counterparts in terms of technology and equipment," he says. One area that is different is the importance Mexicans place on personal relationships, he says. "If you want to deal directly with a Mexican trucking company, get to know the owner and his family and build a personal relationship with the company."

To view the video in its entirety, click here


Keywords: Supply chain, supply chain management, international trade, supply chain management scm, 3pl, global logistics, transportation management, third party logistics, logistics management, logistics & supply chain, logistics services, supply chain solutions, supply chain planning, transportation management systems, supply chain services, supply chain risk management

A new government that appears committed to making needed reforms in the areas of finance and energy is one reason that Markeset is bullish on the business outlook for Mexico. The country has a sound economy that no longer is battered by issues of inflation and devaluation, Markeset says. "And after 12 years of one party, we now have a new party -really, a return of the previous PRI party but with a new perspective - that is beginning to execute changes that everyone knows are needed."

Another external factor benefiting Mexico is the rise in China's labor costs. "China is becoming a little less competitive whereas Mexico is becoming more competitive," he says. "Companies are looking at the Mexico-vs.-China question, running the numbers regarding logistics and labor, and debating offshoring vs. near-shoring - and Mexico is faring well."

Markeset says the transportation infrastructure in Mexico is prepared to support strong economic growth. He notes that five years ago, the World Bank's logistics performance index rated Mexico 56 out of 155, but it now is ranked 46. The government is expected to unveil a national infrastructure and transportation plan, he says.

Markeset provides the following infrastructure highlights, by sector:

Rail - Mexico has a significant rail network that was built 90 years ago and has been refurbished since the railroads were privatized 10 years ago. Three major rail companies (two under the same ownership) operate approximately 10,000 miles of track between major ports and cities and have strong American investment and influence. Intermodal is growing rapidly. There currently are 35 major intermodal rail yards in the country handling some 700,000 containers a year.

Ports - Mexico has many ocean ports, including five or six major ones, with the most important gateways being on the West Coast. These ports are well equipped to handle container and other traffic.

Air Lift - Because Mexico is a major tourist destination, a lot of wide-bodied jets with a lot of belly space for freight fly in and out of the country's major airports, with many flights to Europe and Asia.

Highways - All major destinations are serviced by two-lane highways, though many roads require a toll and some can be expensive. One current major highway project will cut across the country, linking Matamoros to Mazatlan.

Security issues remain a concern, particularly for highway transportation, he says. At present, this is a fact of business that companies have to deal with by adding security measures. He is hopeful that the new government will develop a new strategy to improve the situation.

Border crossings are fairly easy with rail, but remain complicated with trucks due to a mixture of regulation and tradition, Markeset says. "I could argue that trucking companies on both sides don't want such a fluid border. Now, there are three companies involved: a U.S. trucking company, a Mexican trucking company and a third company to move goods across the border."

Markeset suggests that U.S. and Canadian shippers should consider dealing directly with Mexican trucking companies rather than going through a third party. "The top 10 trucking companies in Mexico are first rate and up to par with their U.S counterparts in terms of technology and equipment," he says. One area that is different is the importance Mexicans place on personal relationships, he says. "If you want to deal directly with a Mexican trucking company, get to know the owner and his family and build a personal relationship with the company."

To view the video in its entirety, click here


Keywords: Supply chain, supply chain management, international trade, supply chain management scm, 3pl, global logistics, transportation management, third party logistics, logistics management, logistics & supply chain, logistics services, supply chain solutions, supply chain planning, transportation management systems, supply chain services, supply chain risk management