Tariffs cuts spark worry for Mexico plastics, petchems

10 February 2009 22:44  [Source: ICIS news]

MEXICO CITY (ICIS news)--Mexico’s chemical and plastics industries are concerned that tariff cuts that took effect at the start of January could boost competing imports, sources said on Tuesday.

The government had initially wanted to cut all tariffs to zero, but the private sector reaction was so strong that the government implemented lesser cuts, said Alfredo Lopez Machorro, director of international affairs at the National Plastic Industry Association (Anipac).

Most so-called third party nation tariffs on imports from nations where Mexico has no trade treaties were cut to 15% at the start of the year, from 25% last year. Tariffs on most plastics fell to 7% from 10%.

Lopez said that industry groups had accepted the cuts only when the government had promised to help boost competition by lowering energy costs, supporting financing and boosting security and transport services. The government will review the actions at the end of next year.

Local industries will begin to see the impact of the government incentives and tariff cuts in three to four months, Lopez said.

Import data will be available in mid-February at the earliest, he said.

The tariff cuts occur when Mexico’s export industries are already being hit hard, said Enrique Dussel Peters, a trade expert at the National Autonomous University of Mexico (UNAM), pointing to Labour Ministry data showing a 9.4% fall in manufacturing employment in January from a year earlier; around 350,000 jobs.

The situation is the worst manufacturing crisis since the Labour Ministry began recording job statistics in the 1980s, Dussel Peters said.

Mexican manufacturing employment has fallen by around 1m jobs, or 23%, since its peak in October 2000. The impact has been even sharper for textile production, which has seen employment halve to 350,000 jobs. Lower textile production hit the petrochemicals industry by slashing demand for synthetic fibres.

Dussel Peters said that exports from China have had the greatest impact on Mexican manufacturing in the last decade, but Central America and, in the last two years, Vietnam are also competing to export to Mexico and to Mexico’s traditional export markets.

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By: Alex Manda
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