Most discussions regarding the Mexican automotive industry this year have been related to NAFTA. However, as election day approaches on July 1, the four main presidential candidates – Andrés Manuel López Obrador (AMLO), José Antonio Meade, Margarita Zavala and Ricardo Anaya – must also focus on other topics that will be key for Mexico’s growth. Mexico Automotive Review has outlined the proposals and views from each candidate that could potentially impact the industry’s development.
MEXICO AND THE US
NAFTA is one of the few topics where all candidates agree, albeit to a certain point. They all see the agreement as an opportunity for Mexico’s development and say it should be updated, not canceled. However, each presidential hopeful has their own priorities. López Obrador, leader of the MORENA, PES and PT party coalition, says the government should let the new administration handle the negotiation and that he is ready if a consensus is not reached by December.
Anaya, candidate for PAN, PRD and Movimiento Ciudadano, and Meade, running on a joint-PRI-PVEM-PANAL ticket, think NAFTA is crucial for the economy and hope for a final agreement to come before July. This coincides with what most analysts and industry leaders think, such as Ricardo Haneine, Partner at A.T. Kearney. “The industry and the government in the US should resolve the negotiations with the current administration. Otherwise, uncertainty will only damage the market further and companies will see their innovation projects affected,” he said in an interview with Mexico Automotive Review (MAR) 2018.
Meade and independent candidate Zavala also see NAFTA and Mexico’s relationship with the US as an issue deeply interconnected with migration and social issues. Both have vowed to support Mexican migrants and so have Anaya and López Obrador. The latter two, however, have been much more vocal regarding President Donald Trump’s views on Mexico and the migratory issues between both countries. As he launched his campaign on April 1, Obrador said that “neither Mexico nor its people will be the piñata of any government.”
Amid NAFTA negotiations, Meade also sees an opportunity to improve Mexico’s infrastructure to become more competitive. This includes investment in roads, ports, airports and modern border crossings. Infrastructure has been a sore topic during the presidential campaign, though, mainly surrounding the New Mexico City International Airport (NAIM). Meade supports the project unconditionally, while Anaya and Zavala say they back it as long as the concessions for its construction are handled with transparency. Both have also named infrastructure investment as one of their priorities. Anaya says the federal government should destine the equivalent of 5 percent of GDP to this sector, while Zavala says she wants to develop a whole network of state-of-the-art airports, not only in Mexico City.
López Obrador is the only one that has spoken against the NAIM project. At first, he wanted to scrap it completely in favor of an expansion of the military airport in Santa Lucia, State of Mexico, that he said would alleviate the tension on the saturated Mexico City International Airport. However, he has now changed his position and says he is open to analyze the viability and transparency of the project. Regardless, he still considers Santa Lucia a possibility. The cancellation of NAIM is still a threat should he win, nevertheless, and for many logistics operators it would mean more problems in terms of space availability and response times for clients. “The government should incentivize the construction of more airports throughout the country, mostly because the issue directly relates to Mexico’s competitiveness,” said Erik Meade, Country Managing Director Mexico of Panalpina, in an interview with MAR 2017.
INVESTMENT ATTRACTION AND ITS MAIN OBSTACLES
As a strategic logistics and manufacturing hub, Mexico has been open to receive billions of dollars in foreign direct investment. Most candidates are betting on certainty for investors and building the right conditions for further industrial development. However, López Obrador has made it clear that he thinks most concessions for large projects are managed through corruption. Although he has mostly referred to the Energy Reform on this topic, his statements are far from inviting for foreign investors: “Uncertainty … Yes, that is what they say but, then what? For there to be no uncertainty, must I become an accomplice to corruption? No, I prefer uncertainty.”
In 2017, 30.7 percent of MAR’s interviewees saw uncertainty as the main factor hindering Mexico’s competitiveness. Zavala asked the business sector to not give in to fear during a speech at the 101st General Assembly for Partners of the American Chamber of Commerce of Mexico. However, this and other topics are among the main concerns of Mexico’s automotive executives. Almost 25 percent of MAR’s interviewees in 2017 saw transparency as the main way for the government to boost Mexico’s competitiveness, while over 29 percent considered security concerns as one of the main obstacles to national industry.
Although Meade and López Obrador have not presented their solution, Anaya has made it clear that he intends to use the army as a defense line. He and Zavala both want to strengthen the federal police but Zavala has also vowed to invest in better technology for the police force.
WAGE GAP WITH NORTH AMERICA
One of the reasons Mexico has maintained its competitiveness despite its problems is because of its low salaries. This was not overlooked by Trump who has asked for this topic to be included in the NAFTA negotiations. López Obrador agrees with Trump’s views on wages and has promised to rise the minimum wage in Mexico to MX$176.72 (US$9.8). This, however, appears to be out of discussion since the US government has withdrawn its demands regarding salary homologation in favor of a stricter regional content rule.
Anaya made a similar commitment to double the minimum wage by 2022 to MX$100 (US$5.5) on the first day of his presidency. However, Zavala believes these proposals are unsustainable. “I agree that wages must be increased but saying that they will go up to MX$100 and then to MX$200 is truly irresponsible,” she said in an interview at the International Women’s Forum. Instead, she is looking to eliminate the tax income (ISR) for anyone that earns less than MX$15,000 (US$830) per month, while the government looks for a sustainable way to raise salaries.
QUALITY EDUCATION FOR ALL
Meade has been the only candidate to not present a proposal regarding salaries, other than increasing wages for teachers. Better education is also in the automotive executives’ wish list with 49 percent of MAR’s interviewees saying that the current academic programs do not cover the industry’s needs. Among his proposals, Meade has vowed to boost quality education, guarantee access to higher education and support the dual-education model. López Obrador has also tackled the deficiencies in the education model, making technology and languages priorities for his government.