Interview by the Japan Association of Latin America and the Caribbean
December 2020
Question 1
What is happening with Covid-19 in Mexico and Latin America?
Unfortunately, the population of Latin America has been affected substantially more
by COVID than in other regions. There is a variety of reasons for these unfortunate
results: weak health systems and the lack of education about the use of masks toprotect the “others”, have played and are still playing a substantial negative role.
However, the basic explanation for the disastrous impact of COVID in Latin America
is that its governments have not been able or willing to learn from the mostsuccessful experiences in the world, especially in Asia.
On the economic front, the fiscal responses have varied across Latin America; somegovernments have been capable and willing to use resources to help decrease theimpact on workers of the lock downs that have been imposed in different degrees
throughout the region, while others, such as Mexico, have explicitly oppose to use
their fiscal resources for that objective.

Question 2
What will be foreseen after Covid-19 in Mexico and Latin America, and how
rapid would be the recovery of economy in Mexico compared to the other Latin
America countries?
The economic recovery of Latin America will be strongly correlated to that of theirmain export’s destinations; massive vaccination will help countries which are highly
dependent on tourism, such as the Caribbean countries and Mexico. In general, thefast recovery of China should be beneficial to several countries of Latin America,
which are strong exporters of minerals, such as iron ore and cooper.
Mexico’s recovery has been and will be strongly related to demand growth in the US.
In the first months of the pandemia, the lack of coordination between the regulations
and definitions of the sectors excepted from the lockdowns, damaged some of themain Mexican exports, such as automobiles and auto parts.
Although tourists have started to come back to Mexico, the complete recovery of thesector will only come with massive vaccination in the US and Europe, the main
costumers of the Mexican tourism sector.

Question 3
Has Covid-19 had any implication to (1) USMCA framework, and (2) MexicoJapan EPA, especially in terms of the automobile industry?
Initially during the pandemia, the lockdown in Mexico did hurt the automotive supplychain. Today most of the states which concentrate investments by and suppliers ofToyota, Nissan, Honda and Mazda have adopted COVID prevention programs thathave allowed for at least the partial operation of these plants.
The main implication of COVID for the USMCA is to speed up the harmonization ofnorms and standards across North America and to establish emergencies protocols
that would allow the continuous operation of the main supply chains in North
America, during health or other type of disruptive events.
On the positive side, the emergency caused by COVID has further strengthen thedecision of corporations to shorten their supply chains, favoring countries in close
vicinity to the main markets, such as Mexico.
On the negative side, COVID could be used as an effective excuse to enact policies
to bring back to the United Sated the production of medical equipment and theircomponents; Mexico would be strongly impacted if such policies are enacted, since
this year we will export more than 20,000 million dollars.
Question4 - What business chances are expected in Mexico and Latin America
amid and after Covid-19 and what activities shall be taken?
In the case of Mexico, the sector that is bound to be the most successful coming outof the COVID pandemia is manufacturing. The entry into force of the USMCA,
although it does represent important challenges, brings certainty of access to the USand Canada. As I mentioned before, the potential of future emergencies such as
COVID is a strong incentive to shorten supply chains, partly relocating plants inMexico to decrease the risk of dealing with an emergency with plants in distant Asia.
However, the implementation of the USMCA does present some challenges,
especially its Rapid Response Labor Mechanism (RRM). This mechanism allows theUS and Canada to initiate a dispute settlement procedure that could lead to theimposition of tariffs and in some rare cases to embargos. This uncommonly speedy
dispute settlement procedure could last only six months, in industrial plants in which
there is credible evidence of violations of union rights with respect to free and secretvote to elect leaders and to approve labor contracts. The main challenge for Mexico
is that US and Canadian unions may use the RRM to try to decrease Mexicancompetitiveness by disrupting automotive supply chains.
Our company, IQOM, has the responsibility of representing and promoting theinterests of the Mexican private sector in Washington; as such, we are helpingcorporations located in Mexico to be prepared to successfully respond to potential
aggressive actions by such unions.
Question 5
What is the impact to Mexico arising from the serious conflict between
USA/China?
Mexico is one of the main beneficiaries of the two events that are forcing
corporations to adopt what is sometimes called the “China plus one” risk avoiding
strategy: COVID 19 and the conflict between US and China.
Additionally, since the Mexican federal administration does not represent significant
political risks to the manufacturing sector, investment in this sector will continue tobe one of the brightest spots in the Mexican economy.
Question 6
What changes do you expect in respect to the relations between Mexico andUSA under the new US administration?
We expect the Biden administrations to be much more law abiding and professional
than the outgoing administration. During the first five months since the USMCA
entered into force, both the Trump and the Lopez Obrador administrations havetaken several actions that constitute clear violations of the USMCA. My expectationis that the Biden administration would make the compliance of the USMCA a priority,
not only with respect the labor chapter but with respect to the whole agreement.
The uncertainty of the application or the threat of application of tariffs by the Trumpadministration either because of migration or drug trafficking has been notoriously
problematic. I would expect the Biden administration use more institutional andcooperative approach to these challenges.
Concluding Comments
Although the Lopez Obrador administration has enacted policies that havegenerated substantial uncertainty for investing in Mexico, the future of ourmanufacturing sector is bright. This assertion is based on the proximity of Mexico tothe US, on Mexico’s proven capacity to manufacture highly competitive products, on
the enactment of the USMCA with strong votes of both Democrats and Republicans
and, very importantly, on the disruption to supply chains brought about by the conflictbetween the US and China and by COVID 19.
The Japanese presence in the Mexican manufacturing sector has grown tounbelievable levels; however, I believe that Mexico represents great opportunities tohundreds of middle size Japanese corporations, to increase their competitivenessby locating in Mexico. We would be happy to support their migration to Mexico.