According to the Agility Emerging Markets Logistics Index 2017, compiled by Ti on behalf of Agility, Mexico was one of the top 10 Index performers and the second top performer from Latin America. However, the to-be-determined Trump initiatives certainly create uncertainties for the country. With more than a quarter of Mexico’s economy accounted for by exports to the US the country could be facing new challenges should manufacturers have to confront new barriers to the US market. Having introduced a series of immigration-related decrees Trump is set to take a first step toward enacting his plan to “build a wall” across the border between the United States and Mexico. With such plans underway it is not only manufacturers companies that find themselves under threat though. Logistics providers, too, should be looking closely at these developments due to the immediate impact on their businesses should these regulations become reality.
To anticipate the potential impact that the realisation of these plans could have on logistics companies operating in the cross-border trade segment it is worthwhile to look at the trade figures between these two countries. The value of goods transported by truck and rail both ways across the U.S.-Mexico border totalled $340.8bn last year through November, according to the Bureau of Transportation Statistics. Logistics companies that are most exposed to U.S.- Mexico trade are likely to find themselves at greater risk. Even more so considering that many of these providers have recently spent billions of dollars upgrading rail facilities, building warehouses and expanding truck terminals.
Such is the case with Landstar, a Florida-based trucking company, which invested heavily in cross-border infrastructure and is now faced with a lot of uncertainty. Just days before Trump made his comments about NAFTA, Landstar opened a terminal in Laredo, Texas, with capacity for 30 trucks to transfer their cargo to big rigs waiting to carry goods further north. The company reportedly spent about $25m on the project. Similarly, Railroads Union Pacific and Kansas City Southern are amongst the other logistics companies that have spent millions of dollars upgrading cross-border connections and adjacent facilities. Shares of the latter have dropped about 5% since the election, an indication that this uncertainty can harm logistics companies.
Interestingly, not all logistics companies have been deterred by the pessimistic outlook on U.S.-Mexico cross-border trade. For instance, TransForce, a Canadian trucking company, acquired XPO Logistics’s truckload division in late October, which at the time generated 30% of its business moving cargo across the U.S.-Mexico border. The company’s Chief Executive Alain Bédard commented that acquiring Mexican trucking capacity was “important because the trade between U.S. and Mexico will keep on growing”.
It remains to be seen whether logistics providers are capable of successfully managing the impending upheaval. One way in which they could embrace these game-changing rules and limit their negative impact could be by providing additional value-added services that address the increased complexity in trade compliance processes.
Source: Transport Intelligence, February 1, 2017
Author: Violeta Keckarovska
