Nuevo León governor takes Nafta battle to Trump

Jaime 'El Bronco' Rodríguez lives up to his nickname when questioned over the inflammatory remarks about Mexico by US president Donald Trump. “We don’t want to be mistreated,” he says in an interview in Monterrey in March. “[The US administration] has to treat us with respect.”

Elected governor of Mexico’s northern industrial powerhouse Nuevo León in 2015, 'El Bronco' owes his nickname to his passion for horses and a fierce, pugnacious attitude: Mexicans use the word 'bronco' to describe those horses that cannot be tamed and ridden. So fittingly, although Nuevo León owes much of its economic status to the North American Free Trade Agreement (Nafta) and US-based investors and trade partners, Mr Rodríguez is not intimidated by Mr Trump’s threat to review the trade agreement, which he decried as “one-sided [to the benefit of Mexico] from the beginning”. If anything, Mr Rodríguez is flexing his muscles, calling for his fellow citizens to give up shopping trips across the US border and asking his cabinet to deepen the relationship with partners in Asia and thus lessen dependence on the US.

“I’ve already asked the citizens not to go and spend their money in the US, and many of them haven’t gone, causing losses for US merchants. All that for the stubbornness and the whim of [Mr Trump],” says Mr Rodríguez.  

Striking a balance

Frontier state Nuevo León is one of Mexico’s manufacturing powerhouses. Thanks to its proximity with the US, Nuevo León has become a location of preference for producers looking to export goods to the US duty-free, under the privileged treatment granted by Nafta to locally produced goods. The state has received by far the most greenfield FDI among Mexican states since 2003, according to figures from greenfield investment monitor fDi Markets. Nuevo León’s economic boom came at the cost of a growing reliance on US investment and trade partners. US companies have moved existing and new manufacturing capacity across the border en masse, making up almost half of the total number of greenfield projects announced in the state between 2003 and 2016, and about one-third of the related investment commitment.

US secretary of commerce Wilbur Ross stands out among those who have reaped the benefits by combining Nafta privileges with Mexico’s low labour costs as he turned around the fate of car component producer IAC by relocating part of its production to Nuevo León and seven other facilities across Mexico. Today, as much as 80% of the state’s exports go the US every year, and Mr Rodríguez highlights the mutual benefits, and mutual dependence, stemming from this state of things.

“I believe Mr Trump doesn’t know much about economic issues. His statements [about Nafta] trace back to declarations he made to gain voters and today he is looking for ways to deliver on those promises,” says Mr Rodríguez. “At the same time, I think he realised he depends much on Mexico. We charge little for our labour, US companies that invested in Mexico have received important incentives. And today there are no borders, they fell off years ago. Both countries need each other.”

China option

Waiting for official talks between the US, Mexico and Canada to kick off once the congress in Washington wraps up a 90-day review of the White House's renegotiation plan in August, Nuevo León is already looking for alternatives. 

“We have looked into the Chinese market, which is much bigger and stronger [than the US market], and we have already obtained results. We will bring over Chinese companies, which come here to produce goods for the Mexican market,” says Mr Rodríguez. “At the same time, they can use Mexican labour to produce what they need back in China or in other parts of the world. For many years the US market has been the strongest in North America […] but we cannot be reliant on one single country.”

Asian investors are already becoming very active in Nuevo León. South Korean car giant Kia has started production at its new $1bn site in Pesquería, and Chinese investors announced the development of a $1.2bn industrial park on the outskirts of Monterrey earlier in 2017.  

“Los gringos [the Americans] are not necessary. Any investor can come to Mexico,” concludes Mr Rodríguez.