From NAFTA to USMCA: conditions and challenges of automotive financing in Mexico.

Type de publication:

Conference Paper

Source:

Gerpisa colloquium, Paris (2019)

Mots-clés:

Automotive financing, Financial institution, NAFTA, North America, USMCA

Résumé:

In the face of the eventual transition from the North American Free Trade Agreement (NAFTA) to the new United States-Mexico-Canada Treaty (USMCA), this paper analyzes the conditions of automotive financing in Mexico, and the impact of the additions and new provisions contained in the USMCA on financial services could have for the automotive industry in Mexico (AIM). The work contains a characterization, by origin and activity, of the automotive companies with presence in the debt and capital markets in Mexico. Subsequently, the analysis focuses on the financial institutions that carry out auto financing activities in Mexico and that issue and quote their securities in the Mexican Stock Exchange (MSE) to characterize the presence of these institutions in the debt and equity markets and the conditions of local automotive financing within the framework of the regulations and provisions contained in the NAFTA. Finally, the modifications and new regulations contained in the USMCA and its possible implications for automotive financial institutions in Mexico are reviewed. This review allows us to anticipate that, given the current characteristics of automotive financing in the Mexican market, and considering the new provisions contained particularly in chapter 17 of the new treaty, the transition from NAFTA to USMCA could mean, for foreign branded financial institutions, greater opportunities for access to capital, debt and auto financing markets. On the other side of the coin and considering the same conditions, a scenario with fewer opportunities for access and permanence for Mexican automotive financial institutions is proposed, despite the prevalence of national treatment and most favored nation principles that guarantee that financial services companies receive equal treatment in the region of the trading partners of that agreement. Introduction The intensification of policies, and modifications and new regulations for the liberalization of capital (particularly in the form of direct foreign investment) prior to and within the framework of the entry into force of the North American Free Trade Agreement (NAFTA) was and it continues to be inevitably related to the impulse of the "prototype" of industry that, driven under an export regime, would lead to economic growth and development in Mexico: the automotive industry. The deployment of tangible and intangible assets, which took place during the period in which the trade agreement between the nations of North America has been in force, resulted in the intensification of a restructuring process in the automotive production structure in Mexico, which continues to be subject to deep analysis not only in terms of production, marketing, labor relations, value chains and a wider range of issues and problems that are placed in the productive field of the industry. In recent years, a process of analysis has also begun in a field that has been little or no explored within the automotive industry in Mexico: the financial sphere. As a framework of general analysis, it is convenient to refer to the inclusion of Chapter XI in the NAFTA, which guarantees the national and most favored nation treatment that must be granted to investors and investments of the signatory countries, the elimination of performance requirements, and the establishment of the free transfer of resources related to foreign investment (NAFTA, Articles 1102, 1103, 1106 and 1109). In this context, the IAM boosted its production in the terminal industry, from 85.5 thousand in 1994 to 3.9 million units in 2018, while in the local market the commercialization of finished units went from 400.2 thousand to 1.4 million units in the same period (INEGI, Annual Series). The inclusion of chapter 14 on Financial Services in the NAFTA provides the framework of references to analyze and understand the automotive trading dynamics and financial integration processes that developed within the framework of that agreement, but that have generally been left out of the analysis field. about the intensified restructuring process also occurred during the effectiveness of this treaty. The current conditions of automotive financing under the NAFTA and the forecasts that are coming before the amendments and additions on the regulation of the Financial Services contained in chapter 17 in the new USMCA (still to be ratified) will allow to approximate a vision on the direction that the process of financial integration will take for automotive financing in Mexico.

Copyright© Gerpisa
Concéption Tommaso Pardi
Administration Géry Deffontaines

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