January 24, 2025 • 51 mins
In this episode of Logistically Speaking, hosts Scott Case and Cameron Roberts sit down a day after President Trump's second inauguration to discuss the flurry of Executive Orders and trade rhetoric with Carlos Sesma, Senior Partner at Mexican law firm Sesma, Sesma & McNeese. The conversation explores the complex interplay between politics, trade, and regional economic integration.
Key Topics Discussed
Recent Policy Changes
- President Trump's announcement of potential 25% tariffs on Mexico and Canada
- Changes to Mexico's IMMEX program affecting chapters 61, 62, and 63, introducing a 35% duty rate
- Impact on e-commerce companies using Mexico as a distribution hub
- Relationship between trade policies and immigration concerns
Mexico-US Trade Relations
- Mexico's critical dependence on US trade (86% of exports)
- Analysis of Mexico's strategic position between US and China
- Discussion of USMCA renegotiation possibilities
- Impact of potential tariffs on regional manufacturing and supply chains
Infrastructure Development
- Major Mexican infrastructure projects:
- The Mayan Train project connecting the Yucatan Peninsula
- Trans-isthmic railway development as Panama Canal alternative
- New Tulum Airport with cargo capabilities
- Focus on developing Mexico's southern regions
Regional Integration
- Evolution of North American trade relationships
- Role of rail infrastructure in regional connectivity
- CPKC (Canadian Pacific Kansas City) railway expansion plans
- Impact of new administrations in all three countries
Looking Forward
- Preparation for potential USMCA negotiations
- Changes in Mexican governance and judicial system
- Importance of maintaining business relationships despite political rhetoric
- Regional economic development strategies
Source Material:
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
My name is Scott Case, I'm Cameron Roberts, and this is logistically speaking
(00:04):
Cold enough for you
You know, I felt it when I got off the plane
And I was talking to him about
Logistics from the airport to where we're doing this podcast and thank you for arranging a lovely podcast
(00:28):
And the guy's like, yeah, you don't want to go outside. It was negative 20 when I showed up this morning
So yeah in a word, yes for the work for the record, it's a dry cold
From the land of fire and heat in Southern, California, I can tell you that
(00:51):
The dry heat thing is nonsense hot means hot and when it's over a hundred, you know it and just like when it's under
Once it gets below freezing. I think I
Was talking with our guests on the way over and it's like once you get to a certain point
It's just it's just damn cold is what it is. You know what I do. I tell my kids. I tell my kid
It's like to me
It's cold when you when you breathe in through your nose and your nostril hairs freezing. That is that sort of my definition of cold
(01:20):
And I and I can understand why the inauguration was inside and
Although at the same time, I know I pivoted hard there, but I have whiplash from that
Yeah, I got it. I think I'm talking to two lawyers. I never thought that
that
Presidential executive order signing would be a stadium event
Never I mean I saw a lot of things coming, but I didn't think that that would be part of the stadium event
(01:47):
Potter I'm just wondering whether or not they had like full menu because I've been to like concerts where they'll have like chicken fingers and
Fries I just I just want to know the Verizon Center, right? It's the Verizon Center
Did they have like the full concessions venue could you've gotten yourself a suite for the EEO signing?
If it had been done in LA
Absolutely because
(02:07):
There would have been like a cocktail server it would have happened it would have happened there would have been a VIP section
It had better bathrooms. They would have had a better booze
They would have shorter lines moving closer to the stage all of that would have been possible
You know, I went to the inauguration really first one. Really? Yeah. Well my congressman Ted Liu
(02:30):
family friend
His kids are the same age as my kids both by he has two sons I have two daughters
They're the same age. They went to the same elementary the same middle in the same high school. That's cool and
Not surprisingly when Trump won the election and Hillary did not
No one from the constituency
(02:52):
for which Ted predominantly serves because it is quite a blue district wanted to go and
I'll just out myself and say well, I did not vote for the Trump on the on the first round
I am curious. I'm a curious person. And so I said, you know, I'd like to go
my parents were political people my
(03:12):
father stepfather was the mayor of our town and so I thought it would be interesting as a
Political science major though 30 years ago to go see the transition of history
And I know a few people in DC that could like hook me up to go to different
I got an invite to watch the parade from a mutual friend of ours from from their office too
(03:36):
And I had to politely decline that that is you should take that ticket by the way
He has an amazing view of Constitution Boulevard
I the only downside is that the the the mall below it they rent to whomever and
So I had to hurt here like rage against the machine for like I don't know how many hours straight
(03:56):
So it was a little hard that way, but I will say going to an inauguration is like nothing
I have ever seen it is a
circus ambiance and
if you
Choose to wear a button. You should be prepared to talk about why you're wearing that button
especially if you wear a button that
(04:18):
That has the president's name on it and you go to Dupont Circle
Because Dupont Circle has a particular political vibe. I'll let our audience figure that out for itself and it's it's not
Republican I can just share that not so much and we went to a very nice restaurant up there and I and we had
(04:39):
Multiple conversations, so I just can say that you have a lot of interesting chats about
What what's going on in politic what the impact of the incoming administration is going to be and
Frankly, I think that dovetails very nicely into what we're doing here today in that
We're here to talk to a good friend of mine about what?
(05:02):
the perspective is on the incoming administration what we thought was going to happen in the first 24 hours that
apparently has been
pushed off a week and
Examine the possibility
Absolutely, and as as we record here in in cold Chicago on Tuesday night, January 21st
(05:22):
We're a little over a day and a half into the second Trump term and Americans in the world
Nobody stood for the first time around and spent his four years out of office talking about it and agitating to bring to the fore
In the waning days of the Biden administration
There was a flurry of trade related activity much of its centering around China and de minimis
There were also additional export restrictions put in place for technology and last week saw CBP issue not one but two
(05:48):
notices of proposed rulemaking
covering changes to low-value entry shipments in what products are and aren't eligible for those types of entries and
Prior to those two NPR M's and as our guest this week is intimately aware
Mexican President Claudia Scheinbaum instituted a significant change to Mexico's MX type renounce it right MX
MX program which undergirded the nearshoring programs of many brands who had taken advantage
(06:12):
Legally of the loophole in the de minimis program which exempts payment of those duties for type 86 and manifest entries
that MX change for chapters 61
62 and 63 brought about not just a 35% duty rate into Mexico
But also eliminated the ability to recover paid import duties at the time of exportation
(06:33):
effectively stamping out the program with zero warning
And on Monday while the president didn't issue any executive orders
As you said Cameron announcing increases in tariffs from the Oval Office later that evening in response to a reporter's question
He said this we're thinking in terms of 25% on Mexico and Canada because they're allowing
(06:53):
Vast numbers of people Canada's very bad abuser also vast numbers of people to come in and fentanyl to come in
I think February 1st
I think I think we'll do it February 1st
Sir on each and this announcement came in concert with an executive order named
(07:14):
America first trade policy the president laid out his plans to review existing trade deals and had some specific inclusions about China
de minimis Canada and Mexico
Coupled with this apparently novel idea of playing risk in 2025 with Canada Greenland Panama and who knows elsewhere along the way
I'd say that we're gonna be in for quite the ride over the next four years and we normally bring in our guest after Cameron
(07:38):
I've had a chance to sort of lay out the episode topic
But something tells me that a three-headed discussion will be better than one in this particular instance
And we couldn't be happier to have Cameron's longtime friend Carlos Cessna jr
Senior partner in the Mexican law firm of Cessna Cessna and McNeese joining us for logistically speaking. Thank you so much for being here Carlos
Thank you very much for having me. I'm very excited to be able to talk to you tonight and
(08:03):
I think we could have chose a different venue in January, but but I'm happy to be here
Breezing, but very happy. Oh, you're right. We were both here for a good cause
totally
No, I appreciate it Cameron. Why don't you open up?
What's I mean?
We were having a little informal chat as we were as we were prepping for this
And there's just a myriad of things that are floating around there
(08:27):
I mean if we want to do it chronologically
We can start with the pre-christmas announcement from from President Scheinbaum about the 35% duty for stuff in MX
Is that something you could just sort of detail for our listeners in in a minute or two from top down?
Yeah, sure. I think that it's important. First of all to establish what you mix is
It makes is a is a trade program a foreign trade program in Mexico
(08:51):
Which was created a long time ago and the acronym for it that everybody kind of knows is the Maki Ladora
Okay, so the the MX which are initials
to this program
allows for companies to temporary import raw materials and parts to manufacture in Mexico and
(09:12):
therefore generate investment generate employment and
Then afterwards the final product is exported outside of Mexico and all the time the the import and the export
That do not generate
Import tax. So the idea is that we're doing this free of taxes for
companies to come and establish in Mexico invest in Mexico and generate employment and
(09:36):
The intent of all of this is that any type of manufacturing company can apply to
Different sectors of this program so you can be in the automotive sector
you can be in the apparel sector clothing and these type of things and
The recent change was that
The president enacted an increment in tax specifically for the clothing and apparel sector
(10:00):
An increment in tax that goes all the way to 35% was that for footwear as well or just apparel that
It's basically apparel and clothing. There's that's that's where it's geared and
the
There's a lot of talk around this because it was enacted precisely in the moment where people were distracted and holidays and everything
but the idea here is
(10:22):
This is geared specifically in the and it's what we're looking at
It's geared specifically to companies that were taking advantage of the EMEX program
That were not supposed to be taking advantage of that type of program specifically companies such as Temu or Sheen
or Aliexpress that were that were taking advantage of this and
(10:45):
Sending a lot of the manufacturing over to Mexico and taking advantage of the zero tax
Well, let me ask you were they actually doing any manufacturing and they were just simply storing the goods there
To satisfy an e-comm need they were doing both
and the storage was
more than anything so
So it could be a Chinese manufactured good. Correct. No input from
(11:10):
Labor other than the warehousing or certain certain type of value-added services not necessarily
manufacturing per se but certain types of
tags or label labeling and these superficial embossments things
And there was no warning given for this. It was just like effective now
(11:32):
no warning whatsoever this this decree comes with a little bit of a
a
Subterfuge there as there's a there's an
alternative which is to
Declaring a simplified process in this simplified process declared taxes in a simplified process which basically allows for these companies to pay
(11:56):
19%
Which is just a global a global tax
that is
That that can be opted by this by these companies in which we suspect that a lot of these companies
We believe that this is a little bit of the
Claudia shame, but I'm trying to
show the United States that there's going to be a
(12:17):
an
understanding that there's going to be a
Certain
friendly relationship around the the management of the tariffs and the management of the of the of the of the Chinese
participation in Mexico
it's um, I
I'm wondering whether or not it's a um, it's a chess move and I thought about this when the announcement was made
(12:42):
Which is the fact that you have jobs that are there in sort of like the e-commerce the warehouse the very very simple
lower skilled pick and pack space
But in Mexico has a very vibrant
automotive manufacturing
base that is generating a lot of foreign direct investment that
Plants are moving there things are happening and it seemed like sort of sacrificing a piece on a chessboard
(13:04):
To give away sort of the lower value lower skill stuff along the border
To be able to preserve because he has said in in camera, correct me if I'm wrong and throughout 2024
100 or 200 percent in some situations on Mexican auto. So I mean if we're all sort of sitting here
It's it is a maximalist negotiating position to sort of ask for the moon and then to sort of settle around a number that that
(13:29):
Everybody seems to be able to live with well, if you're having a rally in Dearborn
I think you're probably talking over a hundred percent. Sure, but there's that and there's the reality of it and
I think the interesting part of it is that
So many parts that are brought from Mexico to the United States assembly facilities
(13:54):
our inputs into US
manufactured
Automobiles. So if you start talking like that, you're going to have an inflationary effect
it will be counterproductive and
Won't really get you more u.s. Jobs. I do see that they will try to keep the jobs that
(14:16):
are there and the Dearborn jobs, I mean and then you have to balance that against what is going on in Monterey and
Demanding more u.s. Regional value content into the finished product to qualify for the US MCA
And keeping in mind that US MCA was
Renegotiated and put in place on his first watch as well
(14:38):
So he's got a second bite at the Apple for a program that was passed with overwhelming
Bipartisan support during his first term and isn't a or another year
but what we're seeing at least I think we're seeing is a
intention to bring those negotiations forward
So that he can get leverage into it now
(15:00):
So in other words while on the books you have to negotiate it 2026 let's negotiate it today
Let's get it on the table today. And that's I think what Trump is clearly telegraphic and it's interesting to see
Mexican president try to
anticipate that move
(15:22):
Potentially. I do think it does seem like she's anticipating it
I would agree the the Mexican president is a very intelligent woman. She's very well prepared and
I think that she knows well that our country really is is
depending
On the relationship with the United States more than anything
(15:44):
So there's there's options of foreign trade around the world
But for Mexico the United States implies 86 percent of its exports
So when you think of that number
That's a big customer's it's a big customer and it also has a big customer
The customer has buying power, of course, so so negotiated power comes around with it for sure
(16:07):
Now one of the things we talked about before the show was we got on the line here was
What is do you perceive Mexico's relationship with China because I think one
you know, it's it's
Not just a bilateral situation
it's a trilateral or a multilateral situation and are there other countries that
(16:30):
aside from Mexico China and that relationship that we should really be thinking about because so often
One of the things I like to about talking to guests like yourself is like you're looking at it from a different perspective
You're not hearing
the
The
It's not just these it's not framed as simply I think in the US news market
(16:56):
We often get framed and sold frankly framed and sold shit. That is not real
It's a byproduct of having an attention span of a gnat for the populace. It's just it's it's it's X
It's X and Y and there's no let's not confuse it
It's more complicated, isn't it?
(17:16):
I would tell you first of all to your to your first question regarding the relationship between Mexico and China. I think that
Markets the size of China and of course the size of the United States and so on
You cannot not have a relationship with in
Even if you try so they're having a relationship with China
(17:36):
It's you you you have it because it exists and you need to manage it and that's the situation
The preferred relationship for Mexico has always been the United States
However, there needs to be options, of course and
One of the things that also happened over December was that Mexico?
(17:57):
signed a restated
Trade agreement with Europe how important well now we're pivoting to Europe. So here we go
What
Do you see as the importance of Europe and China in the relationship to Mexico
Separate apart from the relationship with the United States. They continue to be less than 86 percent, right? So
(18:24):
So the situation I can do the math. That's 14 or less
So the situation here is it's easy
Europe is an additional partner. That is something that we can do without
Picking a fight with everybody else. So but if we choose China and we choose the brick
(18:47):
countries then choosing that means picking a fight, so
The the situation here is very very touching
The going towards Europe is still friendly territory. You can still do commerce with Europe and still be
Business partners and friends with the United States. So you just raised a really good point there
(19:11):
bricks
Do you see Mexico being in alignment with the United States as part of?
The counter to bricks because now we're looking at bricks
Which obviously involves Brazil Russia China, and now we have the United States Mexico Canada Europe
(19:32):
Is that where how you see this playing itself, I know we're getting to the end of the podcast as opposed to the front
but
You know that it just jumps out at me like that. And so I just have to ask what do you think about that?
That's kind of you know, it's not nutty. It's I'm thinking it's the you're playing chess
(19:53):
Well, but it's a difficult game of chess because the situation is they might be in something
Look the 86% I'm gonna continue to say that number because it's practically what creates the relevance and
The 86% really you don't come to that number in in a year or in five years
You know, this has been this has been a relationship entries, you know
(20:14):
so this this region as a as a commercial block has has been you know ages in creation and
For for a country such as Mexico to decide to change gears and to look for a different
Trade group trade partners, which they could look into brick
(20:35):
That would mean start from zero and it would be a very abrupt and drastic
Situation that no country can survive. So I think that for Mexico to actually take that change of gears
There would need to be really a
very strong trade war with the United States
Terrorists would need to be imposed by the US and then counter imposed by Mexico off and on to to basically probably USMCA
(21:02):
You know catastrophically fail
Then Mexico would need to buy it by need to look to a different solution
you know if you've read the Republic and
Plato and
The
Philosopher King is coming out of the cave and looking at the forms on the cave wall
The alley, you know, the analogy is like, okay. Well, that's not reality
(21:26):
the philosopher King has to go beyond the cave beyond the manipulation of the shadows and
Come into the daylight see the world as it is
What is the world as it is? This is the same. We're doing the same dance. It's only 2,000 years later and
It's that
(21:48):
Question I think that posed here is
We're three guys that are trying to figure this out and go. What is the next move?
What is because that's what your clients are asking you isn't it? Correct?
I mean you're you're gonna talk to clients here in Chicago. You're gonna talk to clients in Mexico
(22:09):
Clients wherever you are about what what what what are your clients asking you today? I
Think the main concern right now is
What to do if the 25% tariff is actually a vote
That that I think it's the greatest of the situation if they change the name of the Gulf of Mexico, we really don't care
(22:32):
Yeah
Well, you can we can fight Britannica for it
Well, I mean, it's funny because I said this
I'm sorry. I need to know the answer though. What what do you what is it? Well for me, it's it's something that's the move
Keep working the there's there's there's for the past several years. I think we've seen a creation of a populist
(22:57):
Politics in basically every country that is civilized in the world
and
This approach has generated a big separation between the the government and the politicians and the business
Business continues to develop business continues to grow and business continues to work every day
(23:19):
The
Businesses that are making money in the United States and that depend on Canada depend on Mexico to do that money
They'll continue to do money the same way. They'll continue to work the same way
Same in Mexico same in Canada
so I think that going a lot to to what you were saying right now is
We need to try to look past the politic layer and look at the actual
(23:46):
business and legal layer
Below it because that's more stable
That's that's more real and that's where we need to try to focus in and you're getting lost in the forms by analogy
if you do the other and
so you have to look at what's the daylight and
the thing I'm curious about is
(24:07):
As I've talked to my clients as well on this and my advice is similar
because first it's probably going to be temporary and
Second
The advantage to a cross-the-board
Everybody pays the same rate regardless with no exceptions. No exclusions
(24:31):
Is a level playing field everybody suffers so, you know
You can't have people do what people have done for years, which is
Shave this shave that the only way you get around it is
Arguably
Valuation distortion the thing that the thing that just popped into my head as we were sitting here having this discussion
(24:54):
One of the things that he's pushing for is reduction in inflation. I mean very notably it was it was another one of the EEOs
We're gonna drive inflation down
You start talking about some of the duty percentages at like a 25%
Figure or whatever else all of a sudden. Yeah, it goes from the dollar store to the dollar 25
Goes from five below to
(25:14):
It goes from five below to six below. But the point is people aren't gonna stop buying
Watermelon for talking about the weather. Sorry
It's colder than that for the record
People aren't gonna stop buying watermelon for a summer picnic
People aren't gonna stop buying avocados before the Super Bowl to make their guac
What's gonna happen? I think is that that
the the number that gets baked in the first people that are gonna feel it are gonna be the
(25:37):
Importers who already had to come up with a pile of money the first time around and we saw the bond stacking we saw everything else
That went with that
They're gonna have to come up with a pile of money to write that check first of all
Then the price is gonna get
Carried on to the consumer
But where I see this sort of coming at the consumer is that if they think that they're going to try and do
inflation reduction targeting on the back end
(26:00):
Whatever like major benefits they might have been able to demonstrate
Hey, look, we were able to reduce the cost of X by Y percentage
They're handicapping themselves by putting this extra 25% on it making their job to demonstrate the inflation
Reduction that that he wrote into town on more difficult
(26:21):
And why would they want to shoot themselves in the foot right out of the box like that?
That's a good thought
It's it's it's I totally agree
The situation is that the this type of protectionist measures really are not sustainable in the long term
the
The tariff solution. I think it's and I hope it is a negotiating tool
(26:44):
And that is what what is happening at this point if it is
Welcome, let's let's let's use it. There's a lot of things that need to be
Modified there's a lot of things that can be
Better right now between the other three countries in the region and so on
If that is the way to get the attention if that is the way to sit the people to the table, that's fine
(27:05):
But if the actual implementation of the tariff is established it is going to harm commerce
It's going to harm the citizen that it has to pay more money for each things
There's gonna create inflation and and at the end it is not going to be sustainable
There's gonna have to be a step back and that is going to be also something that's gonna hurt the whole
Scenario so the whole negotiation position the whole empowering position if there needs to be a step back on the 25%
(27:32):
I'm not gonna look good
Anything less than 10% is manageable
You can divide by three and the producer can share a third
The middle person can share a third and the ultimate consumer can share a third and therefore it is less inflationary by definition
And there's something
Egalitarian and somewhat inherently fair in that sort of arbitrary
(27:55):
math
But once you get above that percentage, it starts to get very difficult to manage and we've seen people say that
if it were 25% or higher
Or anything higher frankly than 10
It would be very problematic because who then bears the burden is everybody is still tear a third
(28:17):
And are you willing to take that third and can you take that third?
I mean, it's all well and good to say that one person can reduce the cost
but if you're already your your margins are
less than that third then by definition, it's
Something not a business. No, look at the end. I think that there's there's an end realization at certain levels that the
(28:42):
the actual intent of these we have to see a little bit longer term and
What are we facing here we see a lot of messages for example this past Monday
Where you have all of the tech companies at the at the presidential
event and
With better seats than the cabinet exactly and and or part of the cabinet. Yeah, so
(29:07):
To that regard. I think there's a there's there's a very
Important strategy at this point as to who's gonna be the next
technological power in the world and who's gonna have control of
the chips who's gonna have control of artificial intelligence who's gonna be the more advanced and
(29:27):
There that situation which is clear to my eyes is going to generate competition
immediately with China
And the United States has to create the space that is secure that is better for the national security that
that they can have a
Easy sourcing for all of these manufacturing and energy producing that they need to come to come by for that type of
(29:54):
Development and that can only be accomplished through these region that has been created over this
centuries, you know and at the end
These Canada and Mexico right now are the trading partners Mexico number one Canada number two of the United States
so if you stamp that if you stamp it the
Terrace at this point, it's not a good be good for everybody
(30:16):
The this stay in Mexico
what it does is that it sends all of the illegal immigrants down to Mexico to wait there for actual process to come into the
United States and it's creating a
humanitarian problem because our country is
Does not have the resources to receive this number of immigrants into our country
What the president has has come out and said this time around is that she is going to make sure that the Mexicans can be
(30:43):
Refrigerated and the Mexicans will get jobs and they will and they will be received back in Mexico
But there's no assurances for people that are foreign
We have had to set up and this is something also that has been stealth and not very
Known but we have had to set up camps in the in the border on the Mexican side to have all of this
(31:07):
immigrants in the waiting process and keep them there and that in turn has forced the Mexican government to actually
Implement strategies in our southern border, which is a very very difficult border
even though it's not as large as our border that we share with the u.s. Our southern border is is a jungle and
(31:28):
That it is very difficult to actually keep track of the whole crossing area, so there's a lot of
investment in a lot of
Actions that are trying to
To close the Mexican border as well, and it's very difficult. You see that this I
(31:50):
See it as a kind of a poker game
You know you have on one hand immigration. I'll play that card and then I'll play
Sentinel and then this or that
Somehow
distort
The relationship and therefore generate a basis to assess a terror
(32:14):
Yeah, well, it's politics. We come back to the layer of politics politics because
To each of these situations. There's there's a reason so
Sadly because it's a very sad effect and the fact that it even exists is sad fentanyl
come to the United States because there's consumption and
(32:35):
If
No market, it wouldn't come it wouldn't come now, which is a whole different discussion. None of which got mentioned
Yeah, and never does because it's inconvenient exactly and when you have a region that is so entangled as ours
Immigration is also a natural effect
Where there's benefits for the receiving country of
(32:57):
illegal immigration that are
Bill benefits in lower wages benefits in certain functions that in certain work and certain labor that is not generally
Performed by the nationals and so the illegal immigrants take take part of that
And in a lot of industries in the US benefit from this type of work
And in this case this this is a common situation amongst
(33:21):
Countries that are so entangled
that I think that the use of these two concepts versus tariffs is is
It's again political rhetoric because in Mexico, we're not in favor of selling fentanyl to the United States, you know
We're not in favor of sending illegal immigrants to the United States. We have the same problems in Mexico
(33:42):
We also have consumptions of fentanyl in Mexico and that is also very sad
So there's those are regional problems that we tackle with regional solutions
in in the fact that that that's happening, I read I read a
paragraph what I was looking for information for this and
It struck me as interesting where this this person was commenting a tweet and the comment was
(34:10):
Mexico is not
Allowing for immigrants to go to the United States
The actual people that allow the immigrants to come in are the border officers, you know
The country receiving is the one that is allowing the entry
So I would tell you at the end, I think
We are all for
(34:30):
Fixing the immigration problem
We don't we don't like illegal immigrants either
We are all for fixing the fentanyl problem, we're all for fixing the
Violence problem. We're all for fixing the the the cartel problem
So I think that what we should be finding is solutions to all of these
(34:51):
Problems jointly to create a safe area for everybody and an area that we can all do commerce in it's bad for business
exactly
Something that we seem to fail to
Understand
This this
Border relationship is obviously critical
(35:11):
84% critical
And then the next question is how to mitigate the
Restraints of
Unnecessary
trade restrictions that
Prohibit the flow of free and fair trade
These I think the countries that we're talking about both with the United States
(35:35):
Mexico Canada all have a mutual self and self interest, but they also have joint interest
Perpetuating this this union that we've created
So, how can we best do that? And this is what again?
This is we're trying to figure out how does the current administration's the incoming administration?
(35:57):
Policies this America I was reading through this as we're talking and you know
it's a lot of investigations a lot of quasi accusations a lot of
There's a lot of for in looking at that first batch of eos
There's a lot of sort of first-person need grievance stuff in there that I just I it's that seems okay
(36:18):
Once once we get the little bitch session out of the way
Here's what I plan on doing with it, which I which I found to be interesting
I mean that was across all of them from the EVs to the immigration to the
To the to the sort of wind policy and we were talking obviously we were talking about oil and gas
But with the with the cessation of those leases those windmills are really nice project cargo, too
I mean the same way you look at sort of like drilling pipes being the length that they are
(36:40):
Some of those windmill turbines and the blades are equally as very nice project cargo
Which could move by truck which could move by rail. We've obviously got a rail Mexico also looking at a rail
I mean in Mexico to something we were talking about earlier
While you're looking sort of at our magic 86% number that we've got cross-border
You're also looking as a country at your own economic security
(37:03):
We're looking at the Panama Canal which may be setting up for another dry season
We're looking at the ability to sort of move goods across
the Mexican portion of land and tell me about some of the things that
Mexico is doing from an infrastructure point of view
I mean it somewhere along the line the word infrastructure became pork here in America
(37:23):
Like it used to be it used to be you're bringing something back to your district. This is a reward for a congressperson
Look, I brought jobs back to my district and then somebody decided to make it an anathema or a dirty word
It's like oh now it's just pork and all this wasteful sort of spending
You know when the bridge that you're riding across on a river falls away beneath you all of a sudden
Infrastructure seems like a really good idea
(37:44):
So within Mexico aside from the growth that has happened with a lot of the industrial towns
What are some of the major infrastructure projects that that Mexico is working on for its own economic security?
Well, I think that
There's a very interesting infrastructure projects going on right now in Mexico
So again, this is going beneath the bullets the politics layer and going through the business and the actual things that are we're not here
(38:10):
for the politics we're here for the business exactly so
So the
What I can tell you is this administration as the previous one in Mexico
Claudia shame bomb took office in October. So so this is very recent, but there's a very strong
There's a very strong
investment going on in rail precisely
(38:32):
So there's there's two mega projects right now that are happening and they're already in in operation
They're still underway, but there's pieces of them that are already operating. So one is the Mayan train
The Mayan train is a is a train that goes around the whole
Yucatan Peninsula and it's a it's a it's a train for
(38:55):
passengers and a train for cargo and it also has
connectivity with certain airports
Specifically then the the most popular one that probably a lot of you have heard is the tool is the Tulum Airport
Yes, so Tulum is more known as a tourist and party destination but
(39:18):
But the but there's also a very important the the new airport also has a very important component for cargo
And there's other airports that are going to be
Connecting that that train as well
That along with a very important project that was
Spearheaded by the previous administration, which is what we call the the trans ismic
(39:42):
Train, which is if you take the narrowest part of our country
if you think of our country, it goes a little bit like an upside triangle and
Like a funnel exactly it like a funnel
So if you go to the lower part of it where the state of Oaxaca is and the state of Veracruz on the other side
there's a very narrow area of Mexico where there's already a
(40:04):
train functioning and it's there's a lot of investment going on right now to
bring it up then to better the the capacity of that of that rail and
The port that connect that train to both both sides
the intent is to actually create an alternative to the Panama Canal precisely and
(40:25):
That is something that should be happening under this administration our government in Mexico is
It has a period of six years with no re-election
So currently we still have six years of Claudia in front of us and the intent is that this train is going to be fully
operational during this administration
In a way that it's going to present an alternative for the Panama Canal. Does it already run from coast to coast?
(40:51):
it is it is
The one that is running from coast to coast is not sufficient is that it's an older version of what we want to accomplish
But there is some
that we say
Infrastructure in place that needs
Upgrading exactly. So the the land is cleared. There's track laid
(41:12):
It's just a matter of getting better track better equipment better
end to end
Exactly
connectivity and there's roads being built and there's clusters that are going to be established along the way for
Certain industries a lot of the focus of the previous administration and this one is to develop the southern area of Mexico
(41:33):
Our country has has developed unevenly
where the northern area
Given its proximity to the United States is very modern and there's a lot of industry a lot of work a lot of money
And also the center because of Mexico City, but when you go south
Which is this area that I was telling you about that has the jungle and it's difficult to access and so on
(41:59):
Our southern area of Mexico is very poor
So the focus here is to try to bring development into the southern area of Mexico and all of these projects that I'm telling you
About are precisely in that area and the intent is to bring
Development and work and investment. It's actually a parallel I see
(42:19):
because if you think about
how China
exploited its
seaboard
during the 80s
And then pushed west and it in it pushed
West eventually, but it it it was started in these economic zones in various cities
(42:40):
Following the Singapore model and then developed and developed and developed and then once they felt confident that they could
Because the you know, my first experience anyway back in the late 80s was all of the goods that were ferried
Manufactured in China, whether it be Shanghai and what-have-you all of that went by
(43:02):
Peter vessel down to Hong Kong and then did transpat from Hong Kong across
And that was the trans-pacific route now, obviously we've got Ningbo. We've got Shanghai. We've got
dozens of deep water ports
but my emphasis here is that I could see where Mexico could exploit that train track as
(43:26):
a seacoast in a way and then develop it and then it would have the equal ability to
Export
goods and commerce to
All of Latin America all of Europe all of the Pacific Rim
Makes a lot of sense
the intent is precisely to try to develop in that sense and in the focus and rail is is is very
(43:55):
natural because
Using roads in the jungle is very difficult
And it's unsafe and it's just a very complex and very expensive endeavor. So
So rail has been the solution and so you'll see that there's a lot of investment around that there's there's there's a
There's a gonna be further investment
(44:15):
in in rail as other
Companies that have concessions in Mexico will continue to invest so CPK
Sorry
CPKC Canadian Pacific
Kansas City Southern exactly. So the first rail that actually crosses Mexico the US and Canada under the same company
(44:37):
is actually
Looking to to grow its infrastructure in Mexico. So they're in negotiations and discussions with the federal government
so
It's it's rail is going to be probably the biggest infrastructure project. There's there's also
investment geared to ports
In both sides and there's also investment going to be focused to
(45:03):
create a broader
Crossing for Laredo, which that's also underway
And that I will tell you probably is that the
Things that are underway right now that that are going to be
Quite beneficial for for commerce between the three countries
The the teams for negotiating the USMCA already in place and they're ready to go
(45:29):
At least the Mexican and the Canadian teams are ready
But it's interesting because the three countries have new administrations
at the same time
Canada is not there yet, but it's very close
so
So we're gonna well the Canadian negotiating team turn over if the if the composition and the leadership turns over or is it the
(45:52):
Same team you think?
I don't know if it's gonna be a full a full turnover, but
because these groups of experts that have done it before but
It's gonna be interesting at least the focus and in the way that they do it is the Claudia team
The same players as the last time say I have to be honest a complete ignorance on
(46:17):
Who is at the tip of the spear for Mexico? It's it's the same thing
It's the same team with the new players that are going to be
Forming part of it, but it's the same people that that worked with the USMCA
the last administration in Mexico
Was I think?
(46:38):
Criticized or it's
The way it was looking toward the judiciary and trying to renegotiate the Constitution
so that the judiciary played a less important role or a less independent role in the
As a I would say a check on the presidential power of the Mexican
(47:01):
President is that fair? I think you're very kind in the way that you're presenting this
I
The situation that actually happened is that there were sufficient
constitutional reforms in Mexico in the past year to create a
(47:24):
Situation where going forward
The current president is sitting in probably the most powerful chair for the past 70 years in our country
I see of course controls the executive power
Through the elections. She got majority in both of our chambers. So she's is controlling the legislature and
(47:49):
Through the constitutional reform there's gonna be changes coming
where there's the whole body of the federal judges and the state judges are now going to be elected in Mexico and
The process is very messy
However, the most important part of the whole reform is that through that process
(48:10):
The whole Supreme Court is going to be elected again
So this is going to be a precedent that is going to have
indirectly and informally a say in
Who's going to be a Supreme Court judge and for every
Supreme Court judge is the Supreme Court going to be a nationally elected job
(48:36):
Yes, I
Can see why that would be messy. Yeah
Candidates and who's gonna support the candidates and who's gonna get behind them and give them money to run in
Traditional elections are always just so messy. I mean we've got him obviously here in America
(48:56):
we've got him at the state level county level, but it's like
Mm-hmm some things it just I mean there's there's a there's a number of things about this wonderful little
Democratic constitutional experiment of ours that make me twitchy
like I
Think we're almost about out of time here Cameron and Carlos. Thank you so much for the time for the travel for the extra jacket
(49:19):
I realize I keep making fun of the weather but but it when it's as cold you have to any any parting it's
Something not a business administration
Yeah, sure, I think that what I would tell the audience is let's keep our eye on the ball let's try to see
past all of the rhetoric and all of the politics and all of the
(49:41):
Craziness that is going on in our two countries and basically in our three countries because there's craziness in the three countries right now
So let's try to look past that and try to see what's actually going on. Try to see that there's
Long-term relationships here. There's there's a long-term ventures. There's a there's a companies that have been doing business forever
(50:04):
In our three countries, so let's continue to do work every day
let's continue to grow every day together and let's try to
navigate the
Political aspect of it and try to just make sure that we're not driven by that rhetoric
Because there's a lot of things serious things to do that continue to be there and that we can continue to
(50:28):
To grow as a region and grow our businesses together
Wonderful. Carlos. Thank you Cameron always a pleasure to see you in person. That's fun. We get to do this
I love it when we're here face to face as do I well, I think that is it for this episode
So for Carlos and for Cameron, I am Scott case you have been listening to logistically speaking have a wonderful
(50:52):
day
My name is Scott Case, I'm Cameron Roberts, and this is logistically speaking
(00:04):
Cold enough for you
You know, I felt it when I got off the plane
And I was talking to him about
Logistics from the airport to where we're doing this podcast and thank you for arranging a lovely podcast
(00:28):
And the guy's like, yeah, you don't want to go outside. It was negative 20 when I showed up this morning
So yeah in a word, yes for the work for the record, it's a dry cold
From the land of fire and heat in Southern, California, I can tell you that
(00:51):
The dry heat thing is nonsense hot means hot and when it's over a hundred, you know it and just like when it's under
Once it gets below freezing. I think I
Was talking with our guests on the way over and it's like once you get to a certain point
It's just it's just damn cold is what it is. You know what I do. I tell my kids. I tell my kid
It's like to me
It's cold when you when you breathe in through your nose and your nostril hairs freezing. That is that sort of my definition of cold
(01:20):
And I and I can understand why the inauguration was inside and
Although at the same time, I know I pivoted hard there, but I have whiplash from that
Yeah, I got it. I think I'm talking to two lawyers. I never thought that
that
Presidential executive order signing would be a stadium event
Never I mean I saw a lot of things coming, but I didn't think that that would be part of the stadium event
(01:47):
Potter I'm just wondering whether or not they had like full menu because I've been to like concerts where they'll have like chicken fingers and
Fries I just I just want to know the Verizon Center, right? It's the Verizon Center
Did they have like the full concessions venue could you've gotten yourself a suite for the EEO signing?
If it had been done in LA
Absolutely because
(02:07):
There would have been like a cocktail server it would have happened it would have happened there would have been a VIP section
It had better bathrooms. They would have had a better booze
They would have shorter lines moving closer to the stage all of that would have been possible
You know, I went to the inauguration really first one. Really? Yeah. Well my congressman Ted Liu
(02:30):
family friend
His kids are the same age as my kids both by he has two sons I have two daughters
They're the same age. They went to the same elementary the same middle in the same high school. That's cool and
Not surprisingly when Trump won the election and Hillary did not
No one from the constituency
(02:52):
for which Ted predominantly serves because it is quite a blue district wanted to go and
I'll just out myself and say well, I did not vote for the Trump on the on the first round
I am curious. I'm a curious person. And so I said, you know, I'd like to go
my parents were political people my
(03:12):
father stepfather was the mayor of our town and so I thought it would be interesting as a
Political science major though 30 years ago to go see the transition of history
And I know a few people in DC that could like hook me up to go to different
I got an invite to watch the parade from a mutual friend of ours from from their office too
(03:36):
And I had to politely decline that that is you should take that ticket by the way
He has an amazing view of Constitution Boulevard
I the only downside is that the the the mall below it they rent to whomever and
So I had to hurt here like rage against the machine for like I don't know how many hours straight
(03:56):
So it was a little hard that way, but I will say going to an inauguration is like nothing
I have ever seen it is a
circus ambiance and
if you
Choose to wear a button. You should be prepared to talk about why you're wearing that button
especially if you wear a button that
(04:18):
That has the president's name on it and you go to Dupont Circle
Because Dupont Circle has a particular political vibe. I'll let our audience figure that out for itself and it's it's not
Republican I can just share that not so much and we went to a very nice restaurant up there and I and we had
(04:39):
Multiple conversations, so I just can say that you have a lot of interesting chats about
What what's going on in politic what the impact of the incoming administration is going to be and
Frankly, I think that dovetails very nicely into what we're doing here today in that
We're here to talk to a good friend of mine about what?
(05:02):
the perspective is on the incoming administration what we thought was going to happen in the first 24 hours that
apparently has been
pushed off a week and
Examine the possibility
Absolutely, and as as we record here in in cold Chicago on Tuesday night, January 21st
(05:22):
We're a little over a day and a half into the second Trump term and Americans in the world
Nobody stood for the first time around and spent his four years out of office talking about it and agitating to bring to the fore
In the waning days of the Biden administration
There was a flurry of trade related activity much of its centering around China and de minimis
There were also additional export restrictions put in place for technology and last week saw CBP issue not one but two
(05:48):
notices of proposed rulemaking
covering changes to low-value entry shipments in what products are and aren't eligible for those types of entries and
Prior to those two NPR M's and as our guest this week is intimately aware
Mexican President Claudia Scheinbaum instituted a significant change to Mexico's MX type renounce it right MX
MX program which undergirded the nearshoring programs of many brands who had taken advantage
(06:12):
Legally of the loophole in the de minimis program which exempts payment of those duties for type 86 and manifest entries
that MX change for chapters 61
62 and 63 brought about not just a 35% duty rate into Mexico
But also eliminated the ability to recover paid import duties at the time of exportation
(06:33):
effectively stamping out the program with zero warning
And on Monday while the president didn't issue any executive orders
As you said Cameron announcing increases in tariffs from the Oval Office later that evening in response to a reporter's question
He said this we're thinking in terms of 25% on Mexico and Canada because they're allowing
(06:53):
Vast numbers of people Canada's very bad abuser also vast numbers of people to come in and fentanyl to come in
I think February 1st
I think I think we'll do it February 1st
Sir on each and this announcement came in concert with an executive order named
(07:14):
America first trade policy the president laid out his plans to review existing trade deals and had some specific inclusions about China
de minimis Canada and Mexico
Coupled with this apparently novel idea of playing risk in 2025 with Canada Greenland Panama and who knows elsewhere along the way
I'd say that we're gonna be in for quite the ride over the next four years and we normally bring in our guest after Cameron
(07:38):
I've had a chance to sort of lay out the episode topic
But something tells me that a three-headed discussion will be better than one in this particular instance
And we couldn't be happier to have Cameron's longtime friend Carlos Cessna jr
Senior partner in the Mexican law firm of Cessna Cessna and McNeese joining us for logistically speaking. Thank you so much for being here Carlos
Thank you very much for having me. I'm very excited to be able to talk to you tonight and
(08:03):
I think we could have chose a different venue in January, but but I'm happy to be here
Breezing, but very happy. Oh, you're right. We were both here for a good cause
totally
No, I appreciate it Cameron. Why don't you open up?
What's I mean?
We were having a little informal chat as we were as we were prepping for this
And there's just a myriad of things that are floating around there
(08:27):
I mean if we want to do it chronologically
We can start with the pre-christmas announcement from from President Scheinbaum about the 35% duty for stuff in MX
Is that something you could just sort of detail for our listeners in in a minute or two from top down?
Yeah, sure. I think that it's important. First of all to establish what you mix is
It makes is a is a trade program a foreign trade program in Mexico
(08:51):
Which was created a long time ago and the acronym for it that everybody kind of knows is the Maki Ladora
Okay, so the the MX which are initials
to this program
allows for companies to temporary import raw materials and parts to manufacture in Mexico and
(09:12):
therefore generate investment generate employment and
Then afterwards the final product is exported outside of Mexico and all the time the the import and the export
That do not generate
Import tax. So the idea is that we're doing this free of taxes for
companies to come and establish in Mexico invest in Mexico and generate employment and
(09:36):
The intent of all of this is that any type of manufacturing company can apply to
Different sectors of this program so you can be in the automotive sector
you can be in the apparel sector clothing and these type of things and
The recent change was that
The president enacted an increment in tax specifically for the clothing and apparel sector
(10:00):
An increment in tax that goes all the way to 35% was that for footwear as well or just apparel that
It's basically apparel and clothing. There's that's that's where it's geared and
the
There's a lot of talk around this because it was enacted precisely in the moment where people were distracted and holidays and everything
but the idea here is
(10:22):
This is geared specifically in the and it's what we're looking at
It's geared specifically to companies that were taking advantage of the EMEX program
That were not supposed to be taking advantage of that type of program specifically companies such as Temu or Sheen
or Aliexpress that were that were taking advantage of this and
(10:45):
Sending a lot of the manufacturing over to Mexico and taking advantage of the zero tax
Well, let me ask you were they actually doing any manufacturing and they were just simply storing the goods there
To satisfy an e-comm need they were doing both
and the storage was
more than anything so
So it could be a Chinese manufactured good. Correct. No input from
(11:10):
Labor other than the warehousing or certain certain type of value-added services not necessarily
manufacturing per se but certain types of
tags or label labeling and these superficial embossments things
And there was no warning given for this. It was just like effective now
(11:32):
no warning whatsoever this this decree comes with a little bit of a
a
Subterfuge there as there's a there's an
alternative which is to
Declaring a simplified process in this simplified process declared taxes in a simplified process which basically allows for these companies to pay
(11:56):
19%
Which is just a global a global tax
that is
That that can be opted by this by these companies in which we suspect that a lot of these companies
We believe that this is a little bit of the
Claudia shame, but I'm trying to
show the United States that there's going to be a
(12:17):
an
understanding that there's going to be a
Certain
friendly relationship around the the management of the tariffs and the management of the of the of the of the Chinese
participation in Mexico
it's um, I
I'm wondering whether or not it's a um, it's a chess move and I thought about this when the announcement was made
(12:42):
Which is the fact that you have jobs that are there in sort of like the e-commerce the warehouse the very very simple
lower skilled pick and pack space
But in Mexico has a very vibrant
automotive manufacturing
base that is generating a lot of foreign direct investment that
Plants are moving there things are happening and it seemed like sort of sacrificing a piece on a chessboard
(13:04):
To give away sort of the lower value lower skill stuff along the border
To be able to preserve because he has said in in camera, correct me if I'm wrong and throughout 2024
100 or 200 percent in some situations on Mexican auto. So I mean if we're all sort of sitting here
It's it is a maximalist negotiating position to sort of ask for the moon and then to sort of settle around a number that that
(13:29):
Everybody seems to be able to live with well, if you're having a rally in Dearborn
I think you're probably talking over a hundred percent. Sure, but there's that and there's the reality of it and
I think the interesting part of it is that
So many parts that are brought from Mexico to the United States assembly facilities
(13:54):
our inputs into US
manufactured
Automobiles. So if you start talking like that, you're going to have an inflationary effect
it will be counterproductive and
Won't really get you more u.s. Jobs. I do see that they will try to keep the jobs that
(14:16):
are there and the Dearborn jobs, I mean and then you have to balance that against what is going on in Monterey and
Demanding more u.s. Regional value content into the finished product to qualify for the US MCA
And keeping in mind that US MCA was
Renegotiated and put in place on his first watch as well
(14:38):
So he's got a second bite at the Apple for a program that was passed with overwhelming
Bipartisan support during his first term and isn't a or another year
but what we're seeing at least I think we're seeing is a
intention to bring those negotiations forward
So that he can get leverage into it now
(15:00):
So in other words while on the books you have to negotiate it 2026 let's negotiate it today
Let's get it on the table today. And that's I think what Trump is clearly telegraphic and it's interesting to see
Mexican president try to
anticipate that move
(15:22):
Potentially. I do think it does seem like she's anticipating it
I would agree the the Mexican president is a very intelligent woman. She's very well prepared and
I think that she knows well that our country really is is
depending
On the relationship with the United States more than anything
(15:44):
So there's there's options of foreign trade around the world
But for Mexico the United States implies 86 percent of its exports
So when you think of that number
That's a big customer's it's a big customer and it also has a big customer
The customer has buying power, of course, so so negotiated power comes around with it for sure
(16:07):
Now one of the things we talked about before the show was we got on the line here was
What is do you perceive Mexico's relationship with China because I think one
you know, it's it's
Not just a bilateral situation
it's a trilateral or a multilateral situation and are there other countries that
(16:30):
aside from Mexico China and that relationship that we should really be thinking about because so often
One of the things I like to about talking to guests like yourself is like you're looking at it from a different perspective
You're not hearing
the
The
It's not just these it's not framed as simply I think in the US news market
(16:56):
We often get framed and sold frankly framed and sold shit. That is not real
It's a byproduct of having an attention span of a gnat for the populace. It's just it's it's it's X
It's X and Y and there's no let's not confuse it
It's more complicated, isn't it?
(17:16):
I would tell you first of all to your to your first question regarding the relationship between Mexico and China. I think that
Markets the size of China and of course the size of the United States and so on
You cannot not have a relationship with in
Even if you try so they're having a relationship with China
(17:36):
It's you you you have it because it exists and you need to manage it and that's the situation
The preferred relationship for Mexico has always been the United States
However, there needs to be options, of course and
One of the things that also happened over December was that Mexico?
(17:57):
signed a restated
Trade agreement with Europe how important well now we're pivoting to Europe. So here we go
What
Do you see as the importance of Europe and China in the relationship to Mexico
Separate apart from the relationship with the United States. They continue to be less than 86 percent, right? So
(18:24):
So the situation I can do the math. That's 14 or less
So the situation here is it's easy
Europe is an additional partner. That is something that we can do without
Picking a fight with everybody else. So but if we choose China and we choose the brick
(18:47):
countries then choosing that means picking a fight, so
The the situation here is very very touching
The going towards Europe is still friendly territory. You can still do commerce with Europe and still be
Business partners and friends with the United States. So you just raised a really good point there
(19:11):
bricks
Do you see Mexico being in alignment with the United States as part of?
The counter to bricks because now we're looking at bricks
Which obviously involves Brazil Russia China, and now we have the United States Mexico Canada Europe
(19:32):
Is that where how you see this playing itself, I know we're getting to the end of the podcast as opposed to the front
but
You know that it just jumps out at me like that. And so I just have to ask what do you think about that?
That's kind of you know, it's not nutty. It's I'm thinking it's the you're playing chess
(19:53):
Well, but it's a difficult game of chess because the situation is they might be in something
Look the 86% I'm gonna continue to say that number because it's practically what creates the relevance and
The 86% really you don't come to that number in in a year or in five years
You know, this has been this has been a relationship entries, you know
(20:14):
so this this region as a as a commercial block has has been you know ages in creation and
For for a country such as Mexico to decide to change gears and to look for a different
Trade group trade partners, which they could look into brick
(20:35):
That would mean start from zero and it would be a very abrupt and drastic
Situation that no country can survive. So I think that for Mexico to actually take that change of gears
There would need to be really a
very strong trade war with the United States
Terrorists would need to be imposed by the US and then counter imposed by Mexico off and on to to basically probably USMCA
(21:02):
You know catastrophically fail
Then Mexico would need to buy it by need to look to a different solution
you know if you've read the Republic and
Plato and
The
Philosopher King is coming out of the cave and looking at the forms on the cave wall
The alley, you know, the analogy is like, okay. Well, that's not reality
(21:26):
the philosopher King has to go beyond the cave beyond the manipulation of the shadows and
Come into the daylight see the world as it is
What is the world as it is? This is the same. We're doing the same dance. It's only 2,000 years later and
It's that
(21:48):
Question I think that posed here is
We're three guys that are trying to figure this out and go. What is the next move?
What is because that's what your clients are asking you isn't it? Correct?
I mean you're you're gonna talk to clients here in Chicago. You're gonna talk to clients in Mexico
(22:09):
Clients wherever you are about what what what what are your clients asking you today? I
Think the main concern right now is
What to do if the 25% tariff is actually a vote
That that I think it's the greatest of the situation if they change the name of the Gulf of Mexico, we really don't care
(22:32):
Yeah
Well, you can we can fight Britannica for it
Well, I mean, it's funny because I said this
I'm sorry. I need to know the answer though. What what do you what is it? Well for me, it's it's something that's the move
Keep working the there's there's there's for the past several years. I think we've seen a creation of a populist
(22:57):
Politics in basically every country that is civilized in the world
and
This approach has generated a big separation between the the government and the politicians and the business
Business continues to develop business continues to grow and business continues to work every day
(23:19):
The
Businesses that are making money in the United States and that depend on Canada depend on Mexico to do that money
They'll continue to do money the same way. They'll continue to work the same way
Same in Mexico same in Canada
so I think that going a lot to to what you were saying right now is
We need to try to look past the politic layer and look at the actual
(23:46):
business and legal layer
Below it because that's more stable
That's that's more real and that's where we need to try to focus in and you're getting lost in the forms by analogy
if you do the other and
so you have to look at what's the daylight and
the thing I'm curious about is
(24:07):
As I've talked to my clients as well on this and my advice is similar
because first it's probably going to be temporary and
Second
The advantage to a cross-the-board
Everybody pays the same rate regardless with no exceptions. No exclusions
(24:31):
Is a level playing field everybody suffers so, you know
You can't have people do what people have done for years, which is
Shave this shave that the only way you get around it is
Arguably
Valuation distortion the thing that the thing that just popped into my head as we were sitting here having this discussion
(24:54):
One of the things that he's pushing for is reduction in inflation. I mean very notably it was it was another one of the EEOs
We're gonna drive inflation down
You start talking about some of the duty percentages at like a 25%
Figure or whatever else all of a sudden. Yeah, it goes from the dollar store to the dollar 25
Goes from five below to
(25:14):
It goes from five below to six below. But the point is people aren't gonna stop buying
Watermelon for talking about the weather. Sorry
It's colder than that for the record
People aren't gonna stop buying watermelon for a summer picnic
People aren't gonna stop buying avocados before the Super Bowl to make their guac
What's gonna happen? I think is that that
the the number that gets baked in the first people that are gonna feel it are gonna be the
(25:37):
Importers who already had to come up with a pile of money the first time around and we saw the bond stacking we saw everything else
That went with that
They're gonna have to come up with a pile of money to write that check first of all
Then the price is gonna get
Carried on to the consumer
But where I see this sort of coming at the consumer is that if they think that they're going to try and do
inflation reduction targeting on the back end
(26:00):
Whatever like major benefits they might have been able to demonstrate
Hey, look, we were able to reduce the cost of X by Y percentage
They're handicapping themselves by putting this extra 25% on it making their job to demonstrate the inflation
Reduction that that he wrote into town on more difficult
(26:21):
And why would they want to shoot themselves in the foot right out of the box like that?
That's a good thought
It's it's it's I totally agree
The situation is that the this type of protectionist measures really are not sustainable in the long term
the
The tariff solution. I think it's and I hope it is a negotiating tool
(26:44):
And that is what what is happening at this point if it is
Welcome, let's let's let's use it. There's a lot of things that need to be
Modified there's a lot of things that can be
Better right now between the other three countries in the region and so on
If that is the way to get the attention if that is the way to sit the people to the table, that's fine
(27:05):
But if the actual implementation of the tariff is established it is going to harm commerce
It's going to harm the citizen that it has to pay more money for each things
There's gonna create inflation and and at the end it is not going to be sustainable
There's gonna have to be a step back and that is going to be also something that's gonna hurt the whole
Scenario so the whole negotiation position the whole empowering position if there needs to be a step back on the 25%
(27:32):
I'm not gonna look good
Anything less than 10% is manageable
You can divide by three and the producer can share a third
The middle person can share a third and the ultimate consumer can share a third and therefore it is less inflationary by definition
And there's something
Egalitarian and somewhat inherently fair in that sort of arbitrary
(27:55):
math
But once you get above that percentage, it starts to get very difficult to manage and we've seen people say that
if it were 25% or higher
Or anything higher frankly than 10
It would be very problematic because who then bears the burden is everybody is still tear a third
(28:17):
And are you willing to take that third and can you take that third?
I mean, it's all well and good to say that one person can reduce the cost
but if you're already your your margins are
less than that third then by definition, it's
Something not a business. No, look at the end. I think that there's there's an end realization at certain levels that the
(28:42):
the actual intent of these we have to see a little bit longer term and
What are we facing here we see a lot of messages for example this past Monday
Where you have all of the tech companies at the at the presidential
event and
With better seats than the cabinet exactly and and or part of the cabinet. Yeah, so
(29:07):
To that regard. I think there's a there's there's a very
Important strategy at this point as to who's gonna be the next
technological power in the world and who's gonna have control of
the chips who's gonna have control of artificial intelligence who's gonna be the more advanced and
(29:27):
There that situation which is clear to my eyes is going to generate competition
immediately with China
And the United States has to create the space that is secure that is better for the national security that
that they can have a
Easy sourcing for all of these manufacturing and energy producing that they need to come to come by for that type of
(29:54):
Development and that can only be accomplished through these region that has been created over this
centuries, you know and at the end
These Canada and Mexico right now are the trading partners Mexico number one Canada number two of the United States
so if you stamp that if you stamp it the
Terrace at this point, it's not a good be good for everybody
(30:16):
The this stay in Mexico
what it does is that it sends all of the illegal immigrants down to Mexico to wait there for actual process to come into the
United States and it's creating a
humanitarian problem because our country is
Does not have the resources to receive this number of immigrants into our country
What the president has has come out and said this time around is that she is going to make sure that the Mexicans can be
(30:43):
Refrigerated and the Mexicans will get jobs and they will and they will be received back in Mexico
But there's no assurances for people that are foreign
We have had to set up and this is something also that has been stealth and not very
Known but we have had to set up camps in the in the border on the Mexican side to have all of this
(31:07):
immigrants in the waiting process and keep them there and that in turn has forced the Mexican government to actually
Implement strategies in our southern border, which is a very very difficult border
even though it's not as large as our border that we share with the u.s. Our southern border is is a jungle and
(31:28):
That it is very difficult to actually keep track of the whole crossing area, so there's a lot of
investment in a lot of
Actions that are trying to
To close the Mexican border as well, and it's very difficult. You see that this I
(31:50):
See it as a kind of a poker game
You know you have on one hand immigration. I'll play that card and then I'll play
Sentinel and then this or that
Somehow
distort
The relationship and therefore generate a basis to assess a terror
(32:14):
Yeah, well, it's politics. We come back to the layer of politics politics because
To each of these situations. There's there's a reason so
Sadly because it's a very sad effect and the fact that it even exists is sad fentanyl
come to the United States because there's consumption and
(32:35):
If
No market, it wouldn't come it wouldn't come now, which is a whole different discussion. None of which got mentioned
Yeah, and never does because it's inconvenient exactly and when you have a region that is so entangled as ours
Immigration is also a natural effect
Where there's benefits for the receiving country of
(32:57):
illegal immigration that are
Bill benefits in lower wages benefits in certain functions that in certain work and certain labor that is not generally
Performed by the nationals and so the illegal immigrants take take part of that
And in a lot of industries in the US benefit from this type of work
And in this case this this is a common situation amongst
(33:21):
Countries that are so entangled
that I think that the use of these two concepts versus tariffs is is
It's again political rhetoric because in Mexico, we're not in favor of selling fentanyl to the United States, you know
We're not in favor of sending illegal immigrants to the United States. We have the same problems in Mexico
(33:42):
We also have consumptions of fentanyl in Mexico and that is also very sad
So there's those are regional problems that we tackle with regional solutions
in in the fact that that that's happening, I read I read a
paragraph what I was looking for information for this and
It struck me as interesting where this this person was commenting a tweet and the comment was
(34:10):
Mexico is not
Allowing for immigrants to go to the United States
The actual people that allow the immigrants to come in are the border officers, you know
The country receiving is the one that is allowing the entry
So I would tell you at the end, I think
We are all for
(34:30):
Fixing the immigration problem
We don't we don't like illegal immigrants either
We are all for fixing the fentanyl problem, we're all for fixing the
Violence problem. We're all for fixing the the the cartel problem
So I think that what we should be finding is solutions to all of these
(34:51):
Problems jointly to create a safe area for everybody and an area that we can all do commerce in it's bad for business
exactly
Something that we seem to fail to
Understand
This this
Border relationship is obviously critical
(35:11):
84% critical
And then the next question is how to mitigate the
Restraints of
Unnecessary
trade restrictions that
Prohibit the flow of free and fair trade
These I think the countries that we're talking about both with the United States
(35:35):
Mexico Canada all have a mutual self and self interest, but they also have joint interest
Perpetuating this this union that we've created
So, how can we best do that? And this is what again?
This is we're trying to figure out how does the current administration's the incoming administration?
(35:57):
Policies this America I was reading through this as we're talking and you know
it's a lot of investigations a lot of quasi accusations a lot of
There's a lot of for in looking at that first batch of eos
There's a lot of sort of first-person need grievance stuff in there that I just I it's that seems okay
(36:18):
Once once we get the little bitch session out of the way
Here's what I plan on doing with it, which I which I found to be interesting
I mean that was across all of them from the EVs to the immigration to the
To the to the sort of wind policy and we were talking obviously we were talking about oil and gas
But with the with the cessation of those leases those windmills are really nice project cargo, too
I mean the same way you look at sort of like drilling pipes being the length that they are
(36:40):
Some of those windmill turbines and the blades are equally as very nice project cargo
Which could move by truck which could move by rail. We've obviously got a rail Mexico also looking at a rail
I mean in Mexico to something we were talking about earlier
While you're looking sort of at our magic 86% number that we've got cross-border
You're also looking as a country at your own economic security
(37:03):
We're looking at the Panama Canal which may be setting up for another dry season
We're looking at the ability to sort of move goods across
the Mexican portion of land and tell me about some of the things that
Mexico is doing from an infrastructure point of view
I mean it somewhere along the line the word infrastructure became pork here in America
(37:23):
Like it used to be it used to be you're bringing something back to your district. This is a reward for a congressperson
Look, I brought jobs back to my district and then somebody decided to make it an anathema or a dirty word
It's like oh now it's just pork and all this wasteful sort of spending
You know when the bridge that you're riding across on a river falls away beneath you all of a sudden
Infrastructure seems like a really good idea
(37:44):
So within Mexico aside from the growth that has happened with a lot of the industrial towns
What are some of the major infrastructure projects that that Mexico is working on for its own economic security?
Well, I think that
There's a very interesting infrastructure projects going on right now in Mexico
So again, this is going beneath the bullets the politics layer and going through the business and the actual things that are we're not here
(38:10):
for the politics we're here for the business exactly so
So the
What I can tell you is this administration as the previous one in Mexico
Claudia shame bomb took office in October. So so this is very recent, but there's a very strong
There's a very strong
investment going on in rail precisely
(38:32):
So there's there's two mega projects right now that are happening and they're already in in operation
They're still underway, but there's pieces of them that are already operating. So one is the Mayan train
The Mayan train is a is a train that goes around the whole
Yucatan Peninsula and it's a it's a it's a train for
(38:55):
passengers and a train for cargo and it also has
connectivity with certain airports
Specifically then the the most popular one that probably a lot of you have heard is the tool is the Tulum Airport
Yes, so Tulum is more known as a tourist and party destination but
(39:18):
But the but there's also a very important the the new airport also has a very important component for cargo
And there's other airports that are going to be
Connecting that that train as well
That along with a very important project that was
Spearheaded by the previous administration, which is what we call the the trans ismic
(39:42):
Train, which is if you take the narrowest part of our country
if you think of our country, it goes a little bit like an upside triangle and
Like a funnel exactly it like a funnel
So if you go to the lower part of it where the state of Oaxaca is and the state of Veracruz on the other side
there's a very narrow area of Mexico where there's already a
(40:04):
train functioning and it's there's a lot of investment going on right now to
bring it up then to better the the capacity of that of that rail and
The port that connect that train to both both sides
the intent is to actually create an alternative to the Panama Canal precisely and
(40:25):
That is something that should be happening under this administration our government in Mexico is
It has a period of six years with no re-election
So currently we still have six years of Claudia in front of us and the intent is that this train is going to be fully
operational during this administration
In a way that it's going to present an alternative for the Panama Canal. Does it already run from coast to coast?
(40:51):
it is it is
The one that is running from coast to coast is not sufficient is that it's an older version of what we want to accomplish
But there is some
that we say
Infrastructure in place that needs
Upgrading exactly. So the the land is cleared. There's track laid
(41:12):
It's just a matter of getting better track better equipment better
end to end
Exactly
connectivity and there's roads being built and there's clusters that are going to be established along the way for
Certain industries a lot of the focus of the previous administration and this one is to develop the southern area of Mexico
(41:33):
Our country has has developed unevenly
where the northern area
Given its proximity to the United States is very modern and there's a lot of industry a lot of work a lot of money
And also the center because of Mexico City, but when you go south
Which is this area that I was telling you about that has the jungle and it's difficult to access and so on
(41:59):
Our southern area of Mexico is very poor
So the focus here is to try to bring development into the southern area of Mexico and all of these projects that I'm telling you
About are precisely in that area and the intent is to bring
Development and work and investment. It's actually a parallel I see
(42:19):
because if you think about
how China
exploited its
seaboard
during the 80s
And then pushed west and it in it pushed
West eventually, but it it it was started in these economic zones in various cities
(42:40):
Following the Singapore model and then developed and developed and developed and then once they felt confident that they could
Because the you know, my first experience anyway back in the late 80s was all of the goods that were ferried
Manufactured in China, whether it be Shanghai and what-have-you all of that went by
(43:02):
Peter vessel down to Hong Kong and then did transpat from Hong Kong across
And that was the trans-pacific route now, obviously we've got Ningbo. We've got Shanghai. We've got
dozens of deep water ports
but my emphasis here is that I could see where Mexico could exploit that train track as
(43:26):
a seacoast in a way and then develop it and then it would have the equal ability to
Export
goods and commerce to
All of Latin America all of Europe all of the Pacific Rim
Makes a lot of sense
the intent is precisely to try to develop in that sense and in the focus and rail is is is very
(43:55):
natural because
Using roads in the jungle is very difficult
And it's unsafe and it's just a very complex and very expensive endeavor. So
So rail has been the solution and so you'll see that there's a lot of investment around that there's there's there's a
There's a gonna be further investment
(44:15):
in in rail as other
Companies that have concessions in Mexico will continue to invest so CPK
Sorry
CPKC Canadian Pacific
Kansas City Southern exactly. So the first rail that actually crosses Mexico the US and Canada under the same company
(44:37):
is actually
Looking to to grow its infrastructure in Mexico. So they're in negotiations and discussions with the federal government
so
It's it's rail is going to be probably the biggest infrastructure project. There's there's also
investment geared to ports
In both sides and there's also investment going to be focused to
(45:03):
create a broader
Crossing for Laredo, which that's also underway
And that I will tell you probably is that the
Things that are underway right now that that are going to be
Quite beneficial for for commerce between the three countries
The the teams for negotiating the USMCA already in place and they're ready to go
(45:29):
At least the Mexican and the Canadian teams are ready
But it's interesting because the three countries have new administrations
at the same time
Canada is not there yet, but it's very close
so
So we're gonna well the Canadian negotiating team turn over if the if the composition and the leadership turns over or is it the
(45:52):
Same team you think?
I don't know if it's gonna be a full a full turnover, but
because these groups of experts that have done it before but
It's gonna be interesting at least the focus and in the way that they do it is the Claudia team
The same players as the last time say I have to be honest a complete ignorance on
(46:17):
Who is at the tip of the spear for Mexico? It's it's the same thing
It's the same team with the new players that are going to be
Forming part of it, but it's the same people that that worked with the USMCA
the last administration in Mexico
Was I think?
(46:38):
Criticized or it's
The way it was looking toward the judiciary and trying to renegotiate the Constitution
so that the judiciary played a less important role or a less independent role in the
As a I would say a check on the presidential power of the Mexican
(47:01):
President is that fair? I think you're very kind in the way that you're presenting this
I
The situation that actually happened is that there were sufficient
constitutional reforms in Mexico in the past year to create a
(47:24):
Situation where going forward
The current president is sitting in probably the most powerful chair for the past 70 years in our country
I see of course controls the executive power
Through the elections. She got majority in both of our chambers. So she's is controlling the legislature and
(47:49):
Through the constitutional reform there's gonna be changes coming
where there's the whole body of the federal judges and the state judges are now going to be elected in Mexico and
The process is very messy
However, the most important part of the whole reform is that through that process
(48:10):
The whole Supreme Court is going to be elected again
So this is going to be a precedent that is going to have
indirectly and informally a say in
Who's going to be a Supreme Court judge and for every
Supreme Court judge is the Supreme Court going to be a nationally elected job
(48:36):
Yes, I
Can see why that would be messy. Yeah
Candidates and who's gonna support the candidates and who's gonna get behind them and give them money to run in
Traditional elections are always just so messy. I mean we've got him obviously here in America
(48:56):
we've got him at the state level county level, but it's like
Mm-hmm some things it just I mean there's there's a there's a number of things about this wonderful little
Democratic constitutional experiment of ours that make me twitchy
like I
Think we're almost about out of time here Cameron and Carlos. Thank you so much for the time for the travel for the extra jacket
(49:19):
I realize I keep making fun of the weather but but it when it's as cold you have to any any parting it's
Something not a business administration
Yeah, sure, I think that what I would tell the audience is let's keep our eye on the ball let's try to see
past all of the rhetoric and all of the politics and all of the
(49:41):
Craziness that is going on in our two countries and basically in our three countries because there's craziness in the three countries right now
So let's try to look past that and try to see what's actually going on. Try to see that there's
Long-term relationships here. There's there's a long-term ventures. There's a there's a companies that have been doing business forever
(50:04):
In our three countries, so let's continue to do work every day
let's continue to grow every day together and let's try to
navigate the
Political aspect of it and try to just make sure that we're not driven by that rhetoric
Because there's a lot of things serious things to do that continue to be there and that we can continue to
(50:28):
To grow as a region and grow our businesses together
Wonderful. Carlos. Thank you Cameron always a pleasure to see you in person. That's fun. We get to do this
I love it when we're here face to face as do I well, I think that is it for this episode
So for Carlos and for Cameron, I am Scott case you have been listening to logistically speaking have a wonderful
(50:52):
day
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