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Four Billion Reasons to Visit Mexico

8/11/2015 10:00:43 AM

This week, Gov. Mark Dayton is leading a 36-delegate trade mission to Mexico. The delegation – which includes representatives from business, agriculture and education – will travel with the governor to Mexico City and Guadalajara.

exports-to-mexicoIt has been 15 years since a Minnesota governor paid a visit to Mexico. During Gov. Jesse Ventura’s visit back in 2000, Mexico was Minnesota’s 11th-largest export market.

Today, Mexico is Minnesota’s second-largest export market after Canada – and Minnesota companies exported $2.2 billion in manufactured goods to Mexico in 2014.

This is no one-way street. Imports to Minnesota from Mexico amount to $2.1 billion a year – making it is our third-largest source of imports after Canada and China.

Bottom line, Minnesota’s trade with Mexico is now worth $4 billion a year – and it’s been growing fast …

  • Minnesota’s exports to Mexico were up a whopping 255 percent between 2004 and 2014 – a growth rate that far exceeds both the state’s overall export growth rate and the national export growth rate to Mexico.
  • Sales to Mexico accounted for 10 percent of Minnesota’s total exports in 2014, much higher than in prior years. In fact, exports to Mexico grew by 42 percent between 2013 and 2014.

What explains this growth?

One factor is a renaissance in Mexican manufacturing, driven in large part by a “reshoring” of manufacturing operations from China. Minnesota is becoming an important supplier to a resurgent Mexican manufacturing sector as the competitive advantages of operations in China and other countries diminish.

As this happens, more jobs have become available in Mexico, where the current unemployment rate is 4.45 percent – and the standard of living is rising.

When economies are growing more prosperous, consumers tend to spend more of that disposable income on more – and better quality – food. And the appetite for imported foods grows.

That’s certainly happening in Mexico, where Minnesota companies sold just shy of $592 million worth of food and agricultural commodities in 2014, up more than 77 percent from the prior year. And the increase in sales doesn’t stop at the dinner table.

Thousands of Minnesota companies are selling manufactured goods in Mexico – as either finished products or components. Machinery, electric machinery (such as wires, cables and telecomm equipment), and vehicles and vehicle parts top the list.

There are many promising opportunities in a resurgent Mexico, but Minnesota companies new to the market must be well prepared before they invest cash and other resources in export operations.

So, during the trade mission, delegates from Minnesota are meeting with high-ranking Mexican business leaders and U.S. government officials who are in-market experts on Mexico. The market and industry insights company executives gain on the ground will better position them for a successful market entry.

And when Minnesota companies succeed in foreign markets, the whole state gets a share of the profits.

“These export sales help businesses increase revenues, profitability and stability, which helps them sustain and expand the number of people they employ directly in Minnesota,” says Kathleen Motzenbecker, executive director of the Minnesota Trade Office.

But the employment and economic impact of exports to Minnesota extends well outside the company walls.

The vast majority of Minnesota exports are manufactured goods. On average, manufacturing jobs in Minnesota pay 21 percent higher than all other industries statewide. And each manufacturing job generates another 1.7 jobs in other segments of the state’s economy, like sales, marketing, shipping, professional services and more. More manufactured exports means more jobs and better-paying jobs.

Some Minnesota companies also have operations in Mexico. Last year, 31 Minnesota companies were operating in Mexico at more than 250 business locations. Best Buy, for example, opened in Mexico in 2008 and today has 23 stores there – and was named Mexico’s Retailer of the Year in 2014 by Informa BTL, a respected marketing and advertising magazine in Mexico.

Paving the way for Minnesota companies to trade with Mexico is one purpose of the mission trip. Another is to showcase for Mexican entrepreneurs how Mexican companies can succeed here in Minnesota.

In 2014, there were eight Mexican-owned companies operating at 34 locations in Minnesota. A number of them are Minnesota-based companies that were acquired by Mexican companies with similar operations.

For instance, Mexico-based Grupo Bimbo – which produces Bimbo bread, a popular brand in Mexico and Central America – owns Earthgrains Bakery Group, Inc., which has brands well-known to Minnesotans statewide, including Tastee Bread, Master Bread, Metz Baking, Sara Lee and Old Home Bakery.

The governor’s trade mission also is working to nurture the relationship between Minnesota and Mexico in areas of education and culture.

To find out more, watch for other trade mission stories being published this week on our blog, and read the Why Mexico overview.

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