Markeset Says:
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The
businesses that will be
hurt, if the announcement
becomes reality, are those
that have exploited the
inefficiencies of the
current situation.
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On
February 22, US Secretary of
Transportation Mary Peters and
the Mexican Secretary of Transportation
and Communication Luis Tellez
inaugurated an inspection process
that will apply to 100 Mexican
trucking companies that wish
to become certified to operate
in US territory beyond the current
20 mile “commercial zone.”
Six months from now a proportional
number (based on tractors) of
US trucking companies will begin
a process to permit their operation
in Mexican territory.
This event
fulfills a commitment made 12
years ago under NAFTA to allow
trucking companies to operate
on either side of the border
to support the trade of goods
enabled by NAFTA. The
idea of facilitating transportation
along with trade is sound and
is consistent with agreements
made between high-trade neighbor
countries around the world,
particularly in Europe.
It is in the interest of exporters
and consumers on both sides
of the US-Mexican border to
reduce the extraordinary inefficiency
that characterizes truck movements
that execute close to 5 million
crossings per year at 21 points.
The current process adds on
average 5 hours and $85 to $120
dollars per crossing.
The independent Mexican Institute
for Competitiveness (www.imco.org.mx)
estimates savings of approximately
$250 million a year from the
opening of the border to trucking
services.
But will it
actually happen? This
article explores the Mexican
perspective which harbors a
degree of skepticism, despite
the optimistic statements made
by the governments of both countries.
“I’m not certain
how serious of an effort is
under way,” says Brad
Skinner, CEO of TMM Logistics,
one of Mexico’s leading
third party logistics companies
and operator of one of the country’s
largest dedicated fleets (www.tmm.com.mx).
He adds, “I think we need
to see what happens in the Congress
of the United States, with the
labor unions, and with all of
the other vested interests that
have thus far blocked any further
progress on this matter for
the last 12 years.”
Federico Ruiz, a senior executive
at EASO and its sister company
Tractoenlaces de America (www.easo.com)
is also doubtful: “I think
these are political maneuvers.”
Will this ever go beyond
a pilot program? We’ll
have to wait and see.
The skepticism is founded on
the 12 year history preceding
last month’s announcement,
acknowledged in Secretary Peter’s
statement that “the time
has come for us to move forward
on this longstanding promise
with Mexico.”
A brief history
of relevant events includes:
- Until 1982 Mexican trucking
companies could enter US territory
with some freedom
- 1995: United States prohibits
entry of Mexican trucks.
Mexico returns the favor.
- 2000: NAFTA dispute resolution
panel rules in favor of Mexico
ordering opening of the US
border
- 2001: In January, President
Bush promises to abide by
the panel’s ruling.
In September world events
distract US attention from
Latin America and raise security
concerns not previously considered
- 2002: Rules established
for Mexican truckers to enter
the US, the include: drivers
must speak English, poses
insurance, meet licensing
and medical requirements as
well as security requirements
- 2007: Pilot program launched,
the first actionable step
towards making the vision
operational
While there
are pessimists north and south
of the border, the Mexican trucking
companies surveyed for this
article were not concerned about
an invasion by American trucking
companies. “The
opening should give is more
advantages than disadvantages,”
says Ruiz. His opinion
is shared by Francisco Uribe,
General Manager of Transportes
Astros (www.transportesastros.com.mx)
a medium sized trucking company
with a national focus.
“NAFTA preserves cabotage
rights in each country and prohibits
direct investment in companies
that perform domestic transportation
exclusively.”
Furthermore,
both Uribe and Ruiz think that
the all-American driver accustomed
to the US network would not
feel comfortable driving in
Mexico where roads can be as
excellent as they can be awful,
diesel grades are different,
signage is poor, language and
tradition are very different.
Because of this and because
of their in-country focus, they
do not feel threatened.
Skinner is not so sure.
There are plenty of Mexican-Americans
with the language skills and
the understanding of both countries
that can be hired by US truckers
and feel comfortable driving
in Mexico. But the same
people can also be hired by
Mexican trucking companies that
are serious about entering the
cross-border business.
The businesses
that will be hurt, if the announcement
becomes reality, are those that
have exploited the inefficiencies
of the current situation.
These include companies that
have specialized in the multi-step
border crossing process, also
known as the “transfer.”
Trucking companies whose business
has disproportionately been
border-to-destination moves
will be hurt if they are not
able to leverage their in-country
delivery competency into securing
moves from origin. “Their
value-add will be reduced,”
says Uribe. Some of these
are companies with existing
US partnerships. How the
partnerships play out will probably
be a function of each relationship.
Will the US companies want to
deliver all the way to the Mexican
destination, hand the freight
directly over to the current
partner (minus the “transfer”),
or let the Mexican company pick
up from origin. Whoever
“owns” the customer
will likely drive the answer.
This gives
rise to a related question of
whether or not a Mexican trucking
company can operate in the US
without a significant partner.
Skinner, a logistics veteran
with experience in both countries,
thinks that would be difficult,
pointing to operational and
commercial issues such as insurance,
backhauls, interchange, fuel
cards, maintenance, legal and
emergency support all at competitive
costs. Whether through
a partner or by individual action,
the first Mexican companies
to tackle the obstacles to operating
in the US will either end up
as first-mover winners or as
losers of an expensive gamble
if they fail to capture additional
business.
Why did it
happen now? Did both governments
finally decide to put the interests
of voiceless majority of exporters
and consumers ahead of the vociferous
interests of a few parties that
prospered from the inefficiency?
Is the US showing support for
the new government of Felipe
Calderón, or returning
a favor for the significant
gesture by Mexico of extraditing
its most notorious drug lords
last month? Or, perhaps
the progress has to do
more with economics than politics:
the US driver shortage just
got too painful. This
is the greatest concern of some
Mexican trucking companies that
otherwise are skeptically pleased
by the announcement. The
fear is that Mexico’s
most talented drives will be
recruited by US trucking companies,
with the immediate consequence
lost drivers and the long term
effect of higher wages.
Who wins with
this change? The winners
are exporters, consumers and
efficient trucking companies
on both sides of the border.
In his press release on this
matter U.S. Ambassador Tony
Garza states, “The free
and efficient movement of goods
by trucks across the border
will stimulate increased commerce
and trade between our two countries.
Every time our nations cooperate
to overcome another obstacle
to free trade, we strengthen
our relationship and improve
the lives of our citizens.”
Provided you’re not one
of the losing parties, one can’t
take issue with the statement.
Transportation costs will decline
and service levels will improve
to the benefit of Mexicans,
Americans, and Canadians.
Trucking companies
that have the scale, volume,
and infrastructure to operate
efficiently stand to do well.
The three companies interviewed
for this report affirmed their
interest in participating either
in the pilot program (becoming
one of the 100 test companies)
or in the post-pilot phase.
Skinner points out that TMM
is in the midst of a major re-investment
effort and will very shortly
have an entire fleet with average
age of four years and compliant
with US specifications.
Whether or not leading Mexican
trucking companies such as TMM,
Easo, or Astro become pilot
participants is in the hands
of the DOT, which is accepting
applications right now and will
begin conducting on-site inspections
within the next 60 days.
More information is available
at DOT’s website: www.fmcsa.dot.gov/spanish/english/mmc_english.htm
During the
next six months we expect to
see the Mexican Ministry Transportation
and Communication open the application
process for US companies.
Additional information is available
at the Ministry’s website:
www.economia-snci.gob.mx/sphp_pages/sala_prensa/textobd.php?res=1177
For an update
on progress of the pilot program
and more information on the
US perspective of this matter,
stay tuned for future Transportunities
articles.
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