Mexico's plastics industry is booming under the North American Free Trade Agreement, but the country is a long way from tapping its export potential.
Only large corporations and companies making auto parts have been able to exploit U.S. and offshore markets, according to Ricardo A. Ricardez, owner of consulting firm Internacional de Asesoria y Suministros Industriales SA de CV of Mexico City.
Ricardez estimates that of Mexico's 2,500 plastics firms, only about 100 export. Most companies have limited resources to learn how to export, and many still labor under pre-NAFTA habits of focusing on local customers.
The peso crisis a few years ago hurt a lot of firms and delayed plans to enter foreign markets, Ricardez explained. Now that Mexico's economy is recovering, more midsize companies are willing to look beyond the nation's boundaries.
``Local market rules no longer apply,'' Ricardez said in a recent telephone interview.
The country's plastic products exports to the United States have more than doubled since 1993, the year before NAFTA was implemented. Mexico also is a more important market for U.S. processors, which ship as much there as they do to Canada, the United States' major trade partner overall.
Mexico runs a deficit in plastic products trade with the United States, and Ricardez expects that to continue for at least five years. The industry there is still young — its sales are only about $7 billion a year, about a third of Canada's.
One consultant said he is astonished at how quickly U.S. exports to Mexico have grown.
``It's been a smash, a success,'' noted Michael Paslawskyj, vice president of CIT Group. U.S. plastics exports to Mexico were up 15 percent for the first 10 months of 1998, just behind the 14 percent increase to Canada. Paslawskyj predicts Mexico could be the No. 1 destination for U.S. plastic exports this year or next.
Canada hasn't benefited much from NAFTA. Its major trade stimulus was the Free Trade Agreement it signed with the United States at the end of 1988, said Faris Shammas, chief economist for the Canadian Plastics Industry Association, based in Mississauga, Ontario.
``FTA opened the U.S. market to Canadian processors,'' Shammas said by telephone from his Toronto office. Canadian firms not only gained from elimination of tariffs, they have enjoyed a weak Canadian dollar which makes them more competitive against U.S. rivals.
Canada's trade with Mexico is small. It only exported $4 million of plastic products to the southern country in 1997. Mexico shipped $26 million of plastic goods to Canada that year.
NAFTA did not cause a job drain as some opponents feared, according to Lori M. Anderson, director of government affairs for the Society of the Plastics Industry Inc. in Washington.
``It never touched on plastics jobs,'' she said.
In the new trade environment, many U.S. processors have set up plants in Mexico. Mulay Plastics Inc. opened a new, 105,000-square-foot facility early this year in Ciudad Ju rez, its second in Mexico to injection mold cabinets for consumer electronics firms.
Mulay molds in Mexico to be close to major customers, not to access cheap labor, said Executive Vice President Jack Shedd. ``There are misunderstandings that it is cheap [in Mexico],'' Shedd said. ``Only direct labor costs are lower.''
Another reason to mold in Mexico is crowding at border points that could wreak havoc with just-in-time shipping. As Mexico's trade grows with the United States, border crossings are getting strained.
Mexico is a good location to access Central American markets, said Ric rdez.
U.S. producers that locate there can get advantages of free trade agreements with Costa Rica, Colombia, Brazil and other countries.
SPI's Anderson said publicity about NAFTA while it was being debated in the media helped a lot of companies start to think of global markets.
``Companies that wouldn't go out of state 10 years ago are now thinking global,'' Anderson said. Most firms don't think of NAFTA per se, but they plan to compete on the world stage.
The level of interest in exporting is evident within SPI's trade advisory committee.
In 1993, the committee had five members, mainly machinery makers. It has grown since to about 100 members, about 40 percent of whom are processors, Anderson estimated.