US-China decoupling offers Mexico chance for second industrial renaissance – ANIQ

SAO PAULO (ICIS)–Mexico is well-positioned to benefit from the global trade reorganization started by the US as it takes a stronger stance against China and replicate the resounding success of the 1990s, when the first North America free trade agreement (FTA) NAFTA was signed, the president of the country’s chemicals trade group ANIQ said.

José Carlos Pons, who is also the CFO at Mexican chemicals producer Alpek, said Mexico, the wider North America and the world at large still face some persistent Chinese overcapacity of industrial goods which are flooding markets, but said North America together would face that threat in a better position.

Pons has just started his tenure as ANIQ president at a time when the trade group is navigating shifts in trade policies as well as domestic issues such as the potential for – or lack of – nearshoring as well as policy issues in which companies fully disagree with the left-leaning government of Claudia Sheinbaum.

Pons did not want to enter into much detail about the latter, however, because as he explained in the first part of this interview, ANIQ’s lobbying strategy is to now go “hand in hand” with the government.

According to him, Sheinbaum is honestly trying to fix the beleaguered, state-owned energy major Pemex, which would at the same time greatly help chemicals raw material supply reliability.

NAFTA, USMCA, SOMETHING ELSE?
Soon after taking office in January, US President Donald Trump imposed hefty import tariffs on Mexico and Canada because, he said, the two countries should do more on migration and fentanyl trade – a powerful drug which has caused havoc across the US.

However, when the tariffs were about to kick off, the US announced it was pausing them for one month. It was a timely decision for Mexico: the country is almost completely dependent on the fate of the US economy, as it exports around 80% of its output north of the border.

That dependance is what makes Corporate Mexico wary of even contemplating a break-up of the now called USMCA FTA, the successor to NAFTA which Trump negotiated during his first term.

Pons is optimistic in all fronts – home front and external front – as a relatively young executive who arrives to the helm of ANIQ in some of the most challenging times for Mexico in the past three decades.

“I do feel on the side of the optimists. All this issue of tariffs and economic reorganization of imports and exports in the world – if the US plays a strong role against Asia, as I believe it will end up playing, then what can happen is that Mexico is super well-positioned for greater investments,” said Pons.

“Mexico has natural advantages in serving the US market. Today in many of the industries we are a very relevant supplier to the US. We are connected by pipeline, so to speak, to the US. When there is a competitive supply that Mexico has, Mexico remains the most convenient place to source for the US – it is next door.”

It has been widely reported that USMCA renegotiations, for which the deadline is 2026, are in full swing and both officials from Mexico and Canada have recently said they are hopeful USMCA will be renegotiated and revived, ultimately making North America stronger versus other big economies.

“I think that commercial logic and economic logic will prevail. Trump, if he understands anything very well, it is economic logic and from that point of view I believe that the logic of Canada-US-Mexico integration will stand out. The last renewal of the free trade agreement was positive in general, with no major changes,” said Pons.

“In fact, I think we put some order on some of the issues, some of them affecting chemicals, so from that point of view it has been favorable for us. We are understandably focused on the short-term news, but if we take a slightly longer-term view, I think it [current renegotiations] can end up benefitting the region.”

Following on with the soft lobbying ANIQ is deploying, he praised the cabinet for keeping a cold head before adversity and having gone through momentous crisis points relatively unscathed. Moreover, Sheinbaum’s popularity ratings are almost unheard of in democracies: around 80% of Mexicans have a positive view of her.

“I perceive a Mexican government that is calm, serene, looking more at the long term than the short term, not reacting hastily to attacks, as if taking certain pauses. If you remember, after some tariffs were imposed on Mexico in February, Sheinbaum said the Mexican government would ‘answer in a week’ – they purposefully wanted to give space for conversations to happen,” said Pons.

“I think it has been handled well, it has been handled with composure and I think that is just what is needed.”

When pressed about domestic policy issues including a judicial reform which has sparked fears among most experts in Mexico and abroad, because it could weaken the rule of law rather than strengthen it, Pons was cautious but conceded companies are concerned: without legal certainty, investments come harder.

“One of the important work areas is legal certainty and we are worried as an industry about the change that could occur to legal certainty with this change,” he said.

“I think we have to understand exactly the implications of this judicial reform, of the new judges we are going to have.”

CHINA FORMIDABLE RISE
On Chinese competition, which has hit chemicals hard as there is oversupply for the main petrochemicals and polymers, Pons did say the scale of overcapacity affecting global markets is huge, unheard of, and conceded there are still many question marks surrounding how this will end – and when.

“We have seen that in practically all sectors there is excess capacity. China has been very aggressive. For instance, take polyester textile fibers as an example – if today the whole world closed its production capacity and China maintained its capacity, there would still be 30% excess capacity,” said Pons.

He mentioned polyethylene terephthalate (PET), which happens to be one of the main products which Alpek manufactures and he oversees as CFO.

“It is no surprise that most countries already have trade protections against China. For example, in one of the businesses I participate in at the company, PET has a 105% antidumping duty [ADD] in the US against China. Mexico just decreed an antidumping duty against PET as well. So, it is very clear that all governments understood that there is an intention that is not commercial, not fair trade, which is what we seek as an industry.”

Pons did not think the West at large – or, more specifically, market, democratic economies – had been caught off-guard by the rapid ascent of China in the industrial goods global league.

“In fact, what much of the industry I represent has been doing is improving its competitiveness. There are many investments going on. Mexico’s companies are investing $1.5 billion in maintenance and competitiveness.

“All those projects and millions of dollars are focused on improving and putting us on par in competitiveness against the Chinese,” said Pons.

The first part of this interview was published on 6 June on ICIS news, under the headline “Mexico’s Pemex turnaround key to unlock $50 billion chemicals investments – ANIQ”. Click here to read it. 

Front page picture: Facilities operated by Mexico’s polyethylene (PE) producer Braskem Idesa 
Source: ICIS

Interview article by Jonathan Lopez