Alliance 33

United States - Mexico Chamber of Commerce Binational Business Magazine

The New Normal:

Improving Flexibility In Global Supply Chains So They Are Less Likely To Break

Year / Año 22 // No 33 // USA $4.00 // MEX $ 45.00

Economic Integration In North America Cross-Border Supply Chain Resiliency Is Imperative for U.S.Mexico Economies A Blueprint For Comprehensive Economic Integration

Resilient Supply Chains: The Logistics Value Of Transportation Infrastructure

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Executive Editorial Committee United StatesMexico Chamber of Commerce Albert C. Zapanta President & CEO, Bi-national Headquarters

Editorial Dear Members and Friends,

Francisco Lopez Espinoza CEO, Grupo Grafico Multicolor Joseph R. Chapa Vice President, International Trade Development Centers

Publishing Coordinators Executive Director PROMEXE Rafael Lopez Rivera rafa.lopez@multicolorig.com Director of Communications Gabriela Kenny gabriela.kenny@usmcoc.org Publishing Manager Cecilia Lopez ceci.lopez@usmcoc.org

Editorial & Design Editorial Director Cecilia López ceci.lopez@usmcoc.org Editor Jill Martinez jmartinez@irvingonline.com Concept & Graphic Design AMIC Parlante cj@amicparlante.com

Printed by Ultra Group Mexicana For advertising inquiries, contact: Rafael Lopez rafa.lopez@multicolorig.com Executive Director PROMEXE Gabriela Kenny gabriela.kenny@usmcoc.org Director of Communications Cecilia Lopez ceci.lopez@usmcoc.org Publishing Manager

Cover Photo: Courtesy of Gastón Cedillo-Campos.

ALLIANCE, revista cuatrimestral.- Publicacion de la Camara de Comercio Mexico Estados Unidos y Promotora Mexicana de Ediciones, S.A. DE C.V. (PROMEXE). Editor Responsable: Francisco Javier Lopez Espinoza. Número de Certificado de Reserva otorgado por el Instituto Nacional del Derecho de Autor: 042013-071518324800-102. Numero de Certificado de Licitud de Titulo y Contenido: 16157. Domicilio de la Publicacion: Jose Maria Chavez #3408-A. Cd. Industrial. C.P. 20290. Aguascalientes., Ags. Imprenta: Multicolor Gran Formato S.A. de C.V. Jose Maria Chavez #3408. Cd. Industrial. C.P. 20290. Aguascalientes., Ags. Distribuidor, PROMEXE Jose Maria Chavez # 3408-A. Cd. Industrial. C.P. 20290. Aguascalientes., Ags. Camara de Comercio Mexico Estados Unidos, 5510 Cherokee Ave. Ste. 120, Alexandria, VA 22313-2320. Mailing address: P.O. Box 14414, Washington, D.C. 20044.

Printed by Ultra Group Mexicana, S.A. de C.V. Av. Jose Maria Chavez No. 3408, Ciudad Industrial; Aguascalientes, Ags., Mex. Specifications: Total production, 3,000 units; covers: couche paper 135 grs; Varnish UV. Interiors: couche paper 135 grs.

Impression: offset full color.

The views expressed in this magazine are the responsibility of the authors and do not necessarily reflect official positions of the U.S.-Mexico Chamber of Commerce, its members or supporters. Our goal is to present a broad range of perspectives on shared bilateral issues.

These days there is much concern over Mexico’s energy policies, and as you know, the U.S. and Canada requested dispute settlement consultations with Mexico under the United States-MexicoCanada Agreement (USMCA). We understand the importance of what is at stake, and while there is a concern, at the same time, we remain confident that the USMCA dispute settlement mechanism will prove to be the right way to resolve this controversy and provide the clarity and certainty necessary for a favorable business climate.

On a more positive note, the U.S. and Mexico broke trade record numbers!

The latest figures released by the U.S. Census Bureau show that U.S. exports to Mexico in May 2022 were $28.9 billion, the highest on record, while at the same time, the total trade grew 26.3 percent compared to May 2021, reaching 68 billion.

This is something to celebrate; with many challenges still prevailing due to the COVID-19 pandemic, the Ukraine-Russia conflict, economic uncertainties, and natural phenomena, the North American partnership continues to offer a venue for expansion of economic activities and growth.

These opportunities and challenges are the focus of this edition of Alliance Magazine.

In a trend that reverses the globalization stream, we are now looking at nearshoring as a solution not only for the short term but as a permanent option. Bringing products and distribution centers closer to their end markets reduces the risk of experiencing the shortages in products and components that we have endured in the past couple of years, forcing many companies to modify their production and logistics operations quickly.

We are very grateful to our contributors for sharing their reflections and experiences about supply chain challenges and nearshoring opportunities for North America. Special thanks to my dear friends, ambassador of the U.S. to Mexico and Honorary President of the Chamber Ken Salazar; Congressman Henry Cuellar (TX-28);

and the Governor of the State of Oaxaca, Alejandro Murat, with whom I recently became acquainted. I am truly impressed by his passion and commitment to promote and bring development to his beautiful state.

I want to also thank our bi-national board members Emilio Gonzalez from Verizon, a long-time friend and supporter of the Chamber; Alan Belinski from R.S. Hughes, whose contribution will resonate with many of you as he talks about lessons learned in recent times and the adaptation to “The New Normal”; Kenneth Smith, former chief negotiator for the USMCA and now a partner at Agon, who provided his insight on the potential for North America integration; Gastón Cedillo, founder of the National Laboratory for Transportations Systems; and George Baker, publisher of Mexico Energy Intelligence.

I am also pleased to announce and welcome new binational members: DGCI International, Stress Engineering, Broxel, Uline, American Axle & Manufacturing, and NBC Comcast. We are very excited to have you on board and become allies in the efforts to foster a robust trade and economic relationship between the U.S. and Mexico.

I want to announce that in May 2023, our Chamber will celebrate its 50th Anniversary! We will have a unique celebration in Washington, D.C. Our history goes back to the founding of the Mexico Chamber of Commerce in New York City in 1921, which means we have been active for over 100 years! During all these years, the Chamber has played an essential role in the evolution of U.S. and Mexico relations, the North American Free Trade Agreement, and the USMCA. See you in Washington, D.C.!

Abrazos,

Honorable Al Zapanta President and CEO

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Contents 06

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26

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35

36

38

40

41

From Our Members/ DisruptionMitigation and Reaching Resiliency: “The New Normal”

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Analysis/ The New Normal: Improving Flexibility in Global Supply Chains So They Are Less Likely to Break

Insight/ Cross-Border Supply Chain Resiliency is Imperative for U.S.Mexico Economies

Insight/ More Oaxaca in the World, and More of The World in Oaxaca

Business/ KCSM: 25 Years Contributing To Mexico’s Economic Development

From Our Members/ Verizon Small Business Digital Ready Provides Tools for Small Businesses to Succeed

Analysis/ Resilient Supply Chains: The Logistics Value of Transportation Infrastructure

Insight/ A Blueprint for Comprehensive Economic Integration

Business/ Why Querétaro? through a Logistics Vision

Business/ The Cost-Benefit of Diversifying Logistics Strategies with a Strategic Partner

Analysis/ Economic Integration in North America

Analysis/ Unfinished Business In U.S.-Mexico Energy Relations

Insight/ The Dallas County Inland Port: A 21st Century Model for Economic Growth

Business/ CILQRO Querétaro Cluster for Logistics Innovation

USMCOC Activities/ Annual Bi-national Conference & Good Neighbor Awards Gala

Trusted Advisors For companies expanding their international operations, trade compliance is a critical business function. With a steady rise in trade enforcement actions by the U.S. and foreign government agencies and an increasingly competitive international market, companies must adopt trade programs that minimize legal risks while at the same time remaining cost-effective.

Our International Trade Team of multilingual attorneys and trade advisors focus on compliance and proven legal strategies to advance the growth of our clients’ businesses worldwide.

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Chapter Offices /

www.usmcoc.org

Albert Zapanta

Joseph R. Chapa

Alejandro Ramos

Gabriela Kenny

P.O. Box 14414, Washington, D.C. 20004 zapantaz@usmcoc.org (469) 567-0921

jrchapa@usmcoc.org (469) 567-0922

alejandro@usmcocne.org (212) 471-4703 F: (212) 471-4701

207 Mandalay Canal Irving, TX 75039 gabriela.kenny@usmcoc.org (469) 567-0923

President & CEO Binational Office

Vice President, Finance

California Regional Chapter Los Angeles, CA

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THE AMBASSADOR OF GOOD BUSINESS

LAURA NAVA President MARLEN MARROQUIN Executive Director

marlen.marroquin@usmcoc.org 333 South Hope Street #43, Los Angeles, CA 90071 (310) 922-0206

Inter-American Chapter Miami, FL JORGE CARSTENSEN President ESTELA CACHOUA Executive Director

Estela.cachoua@usmcoc.org 1395 Brickell Ave Ste 800 Miami, FL 33131 (786) 561-6533

Inter-Mountain Chapter, Salt Lake City, Utah KEITH ATKINSON President DENNIS TENNEY Executive Director dtenney@usmcoc.org

111 South Main Street, Suite 2200, Salt Lake City, UTAH 84111 (801) 916-3575

International Trade Development and Assistance Center JOSEPH R. CHAPA Vice President, International Affairs Irving-Las Colinas Chamber of Commerce jrchapa@usmcoc.org 207 Mandalay Canal Irving, TX 75039 (703) 642-1088

Washington, D.C. Office Mid-Atlantic Chapter CLARK H. CROOK CASTAN President

chcrookcas@hotmail.com P.O. Box 14414, Washington, D.C. 20004 (301) 233-4485 (703) 752-4751

Great Lakes Chapter Detroit, MI Contact via email: greatlakes@usmcoc.org

Vice President, Chapter Operations

Director of Communications North American Headquarters

Mid-America Chapter Chicago, IL

Aguascalientes Chapter Aguascalientes, Ags.

Pacifico Chapter Guadalajara, Jal.

ralph.b@usmcoc.org c/o Baker McKenzie-Suite 5000 300 E. Randolph Drive Chicago, Il 60601 (224) 271-2125

aguascalientes@usmcoc.org.mx (449) 286 6682

pacifico@usmcoc.org.mx Av. Circunvalación Agustín Yañez 2895 Piso A, Guadalajara, Jalisco (33) 3576 2844

Northeast Chapter New York, NY

JORGE VEGA Trade Representative

RALPH BIEDERMANN Executive Director

ROSA ERTZE President ALEJANDRO RAMOS Vice President Chapter Operations Executive Director of Northeast Chapter alejandro@usmcocne.org 1540 Broadway, Suite 1400 New York, NY 10036-4086 (212) 471-4703 (212) 471-4701

Pacific Northwest Chapter Seattle, WA LUIS MORRIS President

lmorris@usmcoc.org 800 5th Ave #101-260, Seattle, WA 98104-3102.

(253) 678-7696 (206) 259-5003

Southwest Chapter Dallas, TX VINCENT CHAPA President JOSIE OROSCO Executive Director

josie.orosco@usmcoc.org Venture X Dallas Braniff Center 7701 Lemon Avenue Suite 260 Dallas Texas 75209 (817) 881-0264 / (972) 430-4084

Houston-The Woodlands-Gulf Coast Chapter, Houston, TX PETE GARCIA President ANA MARIA SIMMONS Executive Director

Ana.simmons@ usmcocgc.org 4582 Kingwood Dr Suite E-334 Kingwood, TX 77345 (281) 733-1110

RAFAEL LOPEZ President and Executive Director

Golfo Chapter Veracruz, Ver.

veracruz@usmcoc.org.mx (229) 937-0598

Guanajuato Chapter Leon, Gto. RICARDO ARELLANO President SERGIO PONCE LOPEZ Executive Director

sergio.ponce@usmcoc.org.mx Privada Magnolias No. 113 Col. Bosques del Campestre Leon, Guanajuato, 37125 (477) 779-5670

Michoacan Chapter Morelia, Mich.

NICK ORTIZ President / Executive Director

nick.ortiz@usmcoc.org.mx Melo 166-B Morelia, Mich.

C.P. 58000 (443) 353-7743

Noreste Chapter Monterrey, N.L.

JOSEPH CHAPA Vice President, Finance jrchapa@usmcoc.org (469) 893-1796

JOSE MARIA SALGUERO President and Executive Director

Puebla Chapter Puebla, Pue.

VIDAUR MORA President and Executive Director puebla@usmcocpue.org 31 Poniente No. 4128 Piso 2B Col. Reforma Sur Puebla, Pue. 72160 (222) 249-8828 (222) 249-2361

Queretaro Chapter Queretaro, Qro. SERGIO NAVA President MONICA LOPEZ Executive Director

queretaro@usmcoc.org.mx monica.lopez@usmcoc.org Av. Zaragoza Pte. 330-301 Col. Ninos Heroes Queretaro, Qro. 76010 (442) 226-4771

Valle de Mexico Chapter Mexico City JOSE GARCIA TORRES President CLAUDIA VIDAL Executive Director

c_vidal@usmcoc.org.mx Av. Insurgentes Sur 1605 Torre Mural, Piso 25, Mod. 3 Col. San Jose Insurgentes Benito Juarez, 03900. Mexico, D.F. (55) 5662-6103 (55) 5683-2700

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From Our Members ______

DisruptionMitigation And Reaching Resiliency: “The New Normal” By

Alan Belinky

6

The global and local supply chain disruptions have been at the forefront of many conversations since the COVID-19 outbreak in 2020. Such fragility has made it difficult for companies to operate as they once did, causing many to look inward for new ways to solve the issues.

From the post-pandemic increase in demand to environmental and political factors like the war in Ukraine to shortages of qualified truck drivers, many companies have had to work around new or often ignored obstacles.

However, with the evolving workforce, such as corporate buy-in of the hybrid work culture, the normalization of remote meetings, and process automation, some positive

About Alan Belinky

light has been shining during difficult times.

What have we learned throughout these last few years? Disruption will occur, and we, as a company, and a society, need contingency planning to handle the interference.

Examples include how and when to contact customers with good and bad news, how much and which inventory to stockpile, an emphasis on financial health, and a strong focus on upskilling employees.

The manufacturersupplier-customer relationship has become demanding, but there are steps to take to reach a more resilient state. For example, R.S. Hughes Co., Inc., a distributor of specialized adhesives, abrasives, safety, and MRO (maintenance, repair, and

operations) products for the manufacturing sector, has taken a solid approach to become more flexible and able to withstand unforeseen challenges by investing in technology, training, and inventory control. We’ve found the need to deal with adversity while adapting, and accelerating has provided a more straightforward path for action.

The effects of 2020 have helped us all identify our strengths and weaknesses and have even fastforwarded those points by five to ten years. We’ve focused on disciplined decision-making and a high level of customer communication to determine the correct path for us long-term.

From creating a supply chain risk management

team to more investment in cyber security, the decisions being made today are meant to shape the company of tomorrow.

As we question the globalized market and practices such as JIT (justin-time) inventory control, the process of nearshoring has been cited frequently in articles to illustrate local, self-sustainable supply chains within direct reach of production facilities and end-users. The U.S. and Mexico are two markets starting to see investments supporting this idea. With more than 50 locations in North America, R.S. Hughes Co., along with Saunders Corp, a specialty manufacturer of films, adhesives and die-cut solutions, is positioned to participate in the local markets to serve our clients’ immediate needs.

/

Alan Belinky is the general manager of Mexico for R.S. Hughes Co., Inc., an industrial distributor specializing in adhesives, abrasives, safety apparel, and other OEM and MRO consumables.

His tenure within RS Hughes and the industrial market spans over 15 years. During that time, he has been instrumental in growing the company’s footprint within Mexico by focusing on the company’s core values and its reputation among its North American clients and vendors.

Outside of his work at RS Hughes, Alan is a bi-national board member for the U.S.-Mexico Chamber of Commerce. Alan holds a Bachelor of Science in Business Administration from California State University, Long Beach.

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Verizon Small Business Digital Ready Provides Tools for Small Businesses to Succeed

By Emilio Gonzalez

8

/

Verizon Small Business Digital Ready is an online curriculum designed to give small businesses the personalized tools to succeed in today’s digital world. It is part of Citizen Verizon, Verizon’s responsible business plan with the goal of providing one million businesses with the tools and resources needed to help them thrive in the digital economy by 2030.

Developed by small businesses and created in partnership with Local Initiatives Support Corporation (LISC) and NextStreet, the online portal is open to any business for free and fosters a personalized experience for all users by providing educational resources, peer networking and tailored coaching for a variety of enterprises. Small businesses will find a unique, customized experience focused on their needs depending on industry, size and interests.

Participants who register for Verizon Small Business Digital Ready and complete two courses or mentoring events will even be eligible to apply for a $10,000 grant to move their ideas forward.

Digital readiness is about making sure businesses have all the tools and resources they need to thrive in today’s economy. The COVID-19 pandemic has imposed unforeseen challenges on entrepreneurs and further accelerated a shift to digital ways of working. More than 75 percent of small businesses pivoted their operations due to the crisis and more than 50 percent of small and midsize businesses say their online interactions with customers have increased. To stay competitive in the new economic environment, small businesses must be agile and able to adapt to shifting consumer preferences.

About Emilio Gonzalez

More than 100,000 small businesses closed due to the pandemic, with a disproportionate impact on Black and Latinx-owned small businesses.

Latinos are starting businesses at a faster rate than the national average, growing 34 percent over the last 10 years. In 2018, the U.S. Small Business Administration reported that Latino entrepreneurs contributed more than $62.5 billion to the U.S. economy.

Moving forward, a strong economy needs a force of diverse, digitalready small business owners. Small businesses deserve a partner that can help navigate the future, and Verizon Business is providing tailored expertise, solutions, connectivity and security necessary to help them achieve success.

To learn more about the program, visit https://www.verizon.com/about/ responsibility/digital-inclusion/ small-business-training.

/

Emilio Gonzalez is the Executive Director for Public Policy & Strategic Initiatives at Verizon.

Emilio joined Verizon in 2004 as director for Hispanic and Asian American Affairs.

Prior to joining Verizon, Emilio was an appointee in the Clinton Administration focusing on technology and internet policy issues. As Technology Advisor to the U.S. Secretary of Education, Emilio helped design, develop, and implement the E-rate program which is the single largest federal investment in educational technology to date.

Before joining the Administration, Emilio served as senior analyst at the U.S. Congress Office of Technology Assessment (OTA) where he advised standing committees of Congress on tech issues and co-authored Making Government Work.

Emilio is a member of the executive committee of the Mexican American Legal and Education Fund (MALDEF) board of directors. He is also the secretary of the board of directors for the Congressional Hispanic Leadership Institute (CHLI). Emilio was recently elected to the National Association of Latino Elected and Appointed Officials (NALEO) board of directors and to the board of the Asian American Justice Center (AAJC). Emilio is also on the Bi-national Board of Directors of the USMCOC.

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Analysis

Update

Supply chain

Tax

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Economic Integration in North America By

Kenneth Smith, partner at Agon and Mexico’s chief negotiator for the U.S.-MexicoCanada Agreement (USMCA)

10

Photo by Bernd Dittrich on Unsplash

Many analysts will agree that the U.S.-Mexico-Canada Agreement (USMCA) is just what the North American region needs to face the challenges posed by a postpandemic world where supply chain disruptions, inflation, and slow economic growth are wreaking havoc in many countries.

Its predecessor, the North American Free Trade Agreement (NAFTA) changed the economic landscape in Mexico, turning it into one of the most open economies in the world. Thanks to NAFTA, Mexico became one of the world´s top exporters, and today, the value of Mexican trade with the world is equivalent to 70 percent of the country´s GDP. The USMCA has been in operation for just over two years, and the trade numbers have been very positive, as total trade between Mexico and the U.S. reached $661 billion in 2021 and could go as high as $750 billion in 2022.

The three USMCA partners understand that a top priority for the region is to strengthen supply chains in order to reduce the dependency on other regions for key inputs for manufacturing. One of the key lessons from the COVID pandemic is that companies are looking to shorten their supply chains, bringing them closer to home to reduce the risk of potential lockdowns in production processes in Asia due to health emergencies.

This adjustment, known as “nearshoring,” is also being fueled by the extreme increase in TransPacific shipping fees, where the lack of available containers, coupled with an insufficient supply of key inputs such as semiconductors, are raising the costs of producing in other regions of the world.

This opens up important opportunities to attract investment into the USMCA region, and Mexico is in a very strong position to benefit from the relocation of top manufacturing firms back to North America. The average age of the Mexican population is 29, which means that, thanks to NAFTA, Mexico has been able to develop a young workforce with strong manufacturing skills in sectors such as automotive, aerospace, and electronics, among many others.

In addition, Mexico´s wide network of free trade agreements allows companies to access U.S. and Canadian markets, as well as 48 other countries, turning Mexico into a springboard to the world.

Workforce development so that Mexican workers can develop the skills needed to thrive in a world of advanced manufacturing where information technologies play a vital role.

In order to take advantage of these opportunities, the USMCA partners must work together to further integrate their economies and engage in coordinated efforts to facilitate linkages between manufacturing hubs in Mexico, Canada and the U.S. Positive steps have been taken through the re-launching of the HighLevel Economic Dialogue (HLED) between Mexico and the U.S., and the North American Leaders Summit (NALS), where strengthening supply chains has been placed at the top of the agenda. The recent approval in the U.S. of legislation that will allow the government to invest billions of dollars for the development of semiconductor capabilities and provide incentives for the production of electrical vehicles in North America, is a big step in the right direction.

Prioritize innovation and R&D in order for Mexico to increase the number of patents that are registered every year, and thus lay the groundwork for the country to develop its own technological capabilities in the future.

In the case of Mexico, trade liberalization alone will not be enough to attract the investment that it needs to develop the sectors of the future.

The negotiation of trade agreements must go hand-in-hand with the implementation of transparent and predictable domestic economic policies that create a positive business environment and reduce country risk.

Currently, foreign direct investment (FDI) continues to flow into Mexico because international investors are betting that the USMCA will remain in place for decades to come. That is why FDI in 2021 reached $29 billion, despite the economic downturn caused by the COVID pandemic.

However, these figures could be much higher, and should be above the levels of FDI that were flowing into Mexico at the end of the President Enrique Peña Nieto’s administration in 2018 ($34 billion).

Mexico has the potential to attract $40 billion in FDI every year and develop key sectors such as pharmaceuticals, advanced medical equipment, and the digital economy. To do so will require the establishment of an industrial development program with the following priorities:

Make the transition to clean energies a national priority.

Integrate Mexican SMEs into international supply chains.

Ensure transparency and predictability in regulations that affect economic activity.

11 The North American region is very fortunate to have in place a free trade environment which offers Mexico, Canada, and the United States, the opportunity to build the most competitive region in the world. Achieving North America´s full potential, however, will require even greater cooperation and, most importantly, a shared view that economic integration is the answer to the challenges of the future.

Analysis ______

Supply chain

The New Normal: Improving Flexibility in Global Supply Chains So They Are Less Likely to Break By

Vanessa Miller, Nicholas Ellis, Alejandro Gomez.

Partners at Foley 12

To maintain operations during the pandemic, many companies have been operating in crisis management mode, particularly with respect to unpredictable and unprecedented disruptions to their supply chains.

Supply chain bottlenecks have rippled through and impacted all levels of industry, from raw materials up to the consumer.

Due to the increasingly global nature of supply chains, volatile fluctuations in demand, along with environmental and socio-political influences, companies must adapt and take proactive steps to thrive in this “new normal.”

How, then, can your company shift from crisis management mode to an adapt-tosurvive-and-then-flourish operational approach in the new environment?

This article presents six key strategies that companies should consider from the contracting stage through daily operations.

1. Engage in Supply-Chain Mapping.

Understand who, what, when, where, and how, products move across supply chain inputs and outputs. Many companies have a full view of their direct suppliers and customers, but much less understanding beyond such direct links.

More transparency of their supply chain will increase a company’s ability to plan and pivot when there is an interruption or some event that impacts supply— whether due to price increases, delivery issues, or raw material shortages.

Examine past occurrences and lessons learned from those incidents to inform strategies to improve the supply chain going forward.

2. Reexamine Your Contracts.

Your contracts matter. They are the framework that will determine the duties and responsibilities of the parties, and define how any supply chain dispute will be resolved.

One key area where we see changes is a renewed focus on price adjustments and indexing mechanisms for triggering pricing relief. Before the pandemic, many contracts were

Analysis ______

Supply chain

6. Nearshoring and Reshoring.

Many North American businesses are either bringing back, or contemplating bringing back, their manufacturing to North America in the near future; this is a practice commonly referred to as “reshoring” or “nearshoring.”

4. Dual-Source.

The drive toward minimizing costs, including the expenses associated with qualifying a new supplier, signaled a trend toward single sourcing materials and components.

long-term and fixed price contracts with no countervailing protections for volume fluctuations or termination.

Across many industries, suppliers were even required to provide annual price reductions, i.e. year-over-year cost savings. With some hard knocks over the last two years, companies are seeking to build in greater pricing flexibility to account for variable costs whether through some form of predefined indexing, a periodic opportunity to renegotiate and market test, or other novel approaches.

3. Build Warehousing and Inventory Banks.

The proven efficiency of lean, justin-time (JIT) inventory management works as long as all systems run smoothly and on time. The ability to warehouse or otherwise create an inventory bank—whether on- or off-site—creates a buffer against shortages and disruptions. These can benefit both parties to a supply contract: they give the seller some degree of flexibility, and the buyer some level of protection.

In the current, unpredictable world of trying to bring global supply chains closer to home, companies should analyze their supply chains to understand where risks exist and whether a single-source strategy still makes sense; this often requires drilling down into the details of the related business processes to identify the flow and sources of the supply chain. For example, if two unrelated suppliers are obtaining one hundred percent of their raw materials from the same vendor, your company is exposed to risk based on the sole source.

It is vital to have a contingency plan that makes the most business sense like dual-sourcing from different locations, and have at least one prequalified alternate source ready.

5. Shift Risks for Freight Costs.

Traditionally, many buyers have treated shipping costs, including expedited costs in cases of force majeure and commercial impracticability, as the suppliers’ responsibility. This typically resulted in a zero-sum game with buyers demanding their suppliers pay the entire costs for whatever-isnecessary-to-get-my-parts-to-menow, and suppliers often balking and refusing to pay such costs—even if obligated to do so under applicable law or existing contract provisions.

(Do you know what your current contracts say in that regard?)

Companies should look for potential new approaches in which both buyers and sellers each share some of the risks for expedited freight arising from events that are out of their control. Companies should involve operational managers from both sides in preparing the relief plan.

The business areas that companies are considering reshoring range from backroom operations such as information technology, payroll, etc, to customer services and call centers, to design and production of key components or entire product lines.

Similarly, there are many variations in the ways in which reshoring is accomplished. In some cases, a company may return work to existing North American plants and facilities, while in others it can involve the construction of entirely new facilities.

Regardless of the approach, the goal is the same—to mitigate the risks and costs associated with having an extended supply chain with long shipping times for Trans-Atlantic or Trans-Pacific shipping.

It should be noted however that, due to the complexities involved with moving production locations, particularly in cases where contracts may require revalidation and customer approval, reshoring and nearshoring cannot be achieved overnight. It is a promising long-term strategy, but may not offer much in the way of short-term relief.

Conclusion.

If supply chain participants have learned anything from the pandemic and its effects on their business, it is that they should re-evaluate their contracting and operations across their global supply chains. Going forward, companies should build in additional layers of protection through contracting, processes and logistics.

The bend-but-don’t-break approach may add costs, but it will be worth it to enhance flexibility and maintain continuity of supply and operations.

About

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Authors Vanessa L. Miller, vmiller@foley.com; Nicholas J. Ellis, nellis@foley.com; and Alejandro N. Gomez-Strozzi, agomez@foley.com, are partners at the law firm Foley & Lardner LLP

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Analysis ______

Supply chain

14

Resilient Supply Chains: The Logistics Value of Transportation Infrastructure Photo by William Warby on Unsplash

By

Dr. Gastón Cedillo

HOW IMPORTANT IS THE LOGISTICS VALUE PROVIDED BY TRANSPORTATION INFRASTRUCTURE TO SUPPLY CHAINS IN TIMES WHEN RELIANCE AND RESILIENCE ARE CRITICAL? The increasingly frequent disruptions caused by events such as natural disasters, conventional or trade wars, piracy, and pandemics, among others, are now on the minds of decisionmakers at all levels.

For these reasons, guaranteeing the accuracy and reliability of logistics, i.e. expected travel times, reduction of the carbon footprint, and cost savings provided by a welldesigned, constructed, and operated transportation infrastructure, are so critical today. The question becomes: How can the logistics

value of an operating transportation infrastructure be assessed when considering new investments? Our recent research provided interesting insights and turnkey solutions.

Nearshoring and Transportation Infrastructure: A “Control Tower” Approach Is Needed Supply chains’ regionalization, also known as “nearshoring” or “allyshoring,” is viewed as a new stage of globalization. In this context, the G-7, which is comprised of leaders of the world’s largest developed economies (France, Germany, Italy, Japan, United States, United Kingdom, and Canada), has pledged to invest $600 billion into infrastructure for developing countries.

The U.S. will provide $200 billion to counter China’s global infrastructure plan. In this context, during a July 2022 White House meeting between U.S. President Joe Biden and his Mexican counterpart, President Andrés Manuel López Obrador, the leaders discussed ways to expand legal migration, improve security, and strengthen their shared border.

During the meeting, Mexico agreed to invest $1.5 billion in border infrastructure to reinforce fluidity of North American supply chains.

The key role of the transportation infrastructure—to increase logistics value and fluidity of supply chains—is clearly acknowledged.

In fact, inadequate transportation infrastructure is often mentioned as the most important challenge for companies located in emerging countries, preventing them from successfully participating in global supply chains.

Many comparative indicators that measure a country’s competitiveness consider transportation infrastructure a key element; nonetheless, most governments seem to focus more on infrastructure density (miles of roads per miles2 of territory) than to the real benefits transportation infrastructure may bring the supply chain’s operation.

Since modern industrial systems have developed advanced supply systems going from just-in-time (JIT) to justin-sequence deliveries, the increase in product variety and the multiple interfaces needed to deliver products, have exposed them to disruptions.

Analysis ______

Supply chain

Thus, supply chain resilience is a critical element of industrial competitiveness today.

Better supply chains enable low inventory practices that save businesses and customers valued resources. In this sense, our most recent research results proved that when looking for “regionalized” production systems, having information related to the logistics value (reliability of travel times and costs) provided by transportation infrastructure enables companies to improve the performance and resilience of supply chains. However, a “control tower” perspective is needed to achieve freight fluidity along transportation corridors. In this sense, we proposed a new logistics dashboard that enables users to analyze, understand, and remedy overly-congested transportation infrastructures.

Transportation Infrastructure: A Supply Chain Resilience Enabler From a transportation infrastructure approach, we found that neither public nor private sectors consider collaboration over supply chains between the industrial and the territorial systems to

Photo by Gastón Cedillo

be an important factor when building sustainability, economic competitiveness, and resilience, but the two perspectives collide.

From a private sector perspective, the need to be competitive by managing a wide range of products for which time and delivery costs must be reduced, leads companies to focus on understanding and simplifying this complexity by concentrating their efforts on a reduced number of members of their own supply chains.

In my personal opinion, the strength and reliability of the lowest logistics value provided by a specific transportation infrastructure is the one that determines the limits of the logistics value of the whole group of door-to-door transportation infrastructures for a particular supply chain.

From the public sector perspective, the jurisdictional restrictions of state and national borders make engineers and planners from various agencies focus on the average condition of the transportation infrastructure, putting aside the “door-to-door” delivery viewpoint, basic to the supply chain paradigm.

Furthermore, since every supply chain is organized around the needs of the final customer for a specific product, the logistics value, i.e. reliability of travel times, costs, carbon footprint, resilience, etc., required for an individual supply chain in a specific transportation infrastructure, is different. Therefore, a supplychain-by-supply-chain analysis is also needed.

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Analysis ______

Supply chain

Logistics Value of Transportation Infrastructure

16

In the current context of regionalization, the promotion of an integrated vision of the logistics value is important. For example, different public and private entities operate along the USMCA1 freight transportation corridors to improve supply chains’ fluidity; but in practice, there is a lack of coordination. As an illustration, one of the critical success factors for the USMCA region would be to increase cross-border throughput, understood as the reliability of the time, volume, carbon footprint, and costs by which products move through manufacturing processes, transportation, and customs, at the border.

Specifically, from our perspective, at least two actions are needed.

First, both the private sector’s decision-makers and public authorities require a standardized measurement approach to effectively and jointly measure the logistics value provided by transportation infrastructures along a specific freight transportation corridor to coordinate public-private actions. For this, an informatics dashboard is needed.

A data hub that monitors the logistics value provided by different infrastructures becomes strategic when considering investments as well as the operation of transportation and logistics infrastructures.

For those decision-makers in the private sector, it could provide beneficial information about the realistic contribution of infrastructures to the logistics value of their supply chains when they decide to use one transportation infrastructure instead of another.

For decision-makers in the public sector, a data hub could deliver precise information about where the transportation network needs to be improved—where repairs are needed, how and where to increase capacity, and other facets of the infrastructure—to maintain reliability in travel times, costs, carbon footprint and disruption risks, etc., assurances that were made to users and the best use of public resources.

Photo by Caleb Ruiter on Unsplash

1

The 2018 U.S.-Mexico-Canada Trade Agreement.

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Analysis ______

Supply chain

Second, since numerous public and private entities operate along the same transportation corridors, a single contact—a freight transportation corridor manager—would serve as a “control tower” for every key USMCA corridor. This position is crucial as it would serve as the designated point person for solving coordination issues.

Since reliability, flexibility, reduction of the carbon footprint and cost reductions are requirements for modern logistics systems, nearshoring is a great option for the USMCA region when looking to increase supply chain resilience. This could result not only in a world-class transportation and logistics system for the three nations, but could generate a new regional pride based on products “Made in North America.”

Photo by Yassine Khalfalli on Unsplash

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Photo by Jared Murray on Unsplash

About

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Dr. Gastón Cedillo-Campos is a logistics system dynamics specialist. For over 15 years, he has been an academic researcher and consultant for public agencies and multinational companies.

He received a doctorate in transportation and logistics systems from the University of Paris in 2004. He is member of the Texas Center for Border Economic and Enterprise Development of the Texas A&M International University, and founder of the National Laboratory for Transportation Systems and Logistics of the Mexican Institute of Transportation (IMT) as well as the Mexican Logistics and Supply Chain Association.

Cedillo-Campos is the scientific chairman of the International Congress on Logistics and Supply Chain (CiLOG). Among the many awards and recognitions he has received are Mexico’s National Logistics Award, the Technology Innovation Award from the Autonomous University of Nuevo Leon, and the Engineering Leadership Award from the University of Anahuac.

Dr. Cedillo-Campos designed several real-life projects as the LogistiX-Lab, the First Urban Logistics Living Lab in Latin America, a real-life laboratory for measuring logistics practices, transportation emissions, and energy in “Last-Mile” deliveries; eraclituX, an interactive digital map which uses millions of GPS data for measuring the reliability of travel times of freight transportation corridors in Mexico; and IMT-X, an autonomous unmanned aerial vehicle for logistics purposes.

¡Por el compromiso continuo con la comunidad Empresarial Mexico-Estadounidense!

Como miembro binacional de la USMCOC, hemos visto cómo el poder de las buenas relaciones y las grandes conversaciones pueden llevarte hacia un gran futuro. Al igual que la USMCOC, Baker Tilly aprovecha todas las oportunidades que el mañana representa.

Honramos el legado de USMCOC y esperamos enfrentar el futuro juntos.

Here’s to an ongoing commitment to the Mexican-American business community!

As a longstanding binational member of the USMCOC, we have seen how the power of great relationships and great conversations can lead to great futures. Like the USMCOC, Baker Tilly embraces the opportunities that tomorrow presents.

We honor USMCOC’s legacy and look forward to facing the future together.

Advisory. Tax. Assurance. bakertilly.com Baker Tilly US, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2022 Baker Tilly US, LLP.

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Analysis ______

Unfinished Business In U.S.-Mexico Energy Relations 20

Most of the unfinished business in Mexico’s energy industries is outside the public’s view.

An exception is the request for dispute-settlement consultations filed on July 20, 2022 by the U.S. and Canada Governments, invoking Chapter 31 of the U.S.-Mexico-Canada Agreement (USMCA). Canada According to the USTR, the Mexican government’s recent policies have been in apparent violation of obligations of the USMCA in relation to the treatment of investors and U.S.-sourced products in the oil and gas and electric power industries.

Renewables Private investment in renewable sources of energy began in earnest following the Energy Reform of 2008.

The Energy Reform of 2013-14 created a wholesale market for generation and an independent system operator National Center for Energy Control (Centro Nacional de Control de Energía-CENACE) to prioritize the dispatching of power based on economic merit.

The current administration. However, reversed these instructions and ordered that the Federal Electricity Commission’s (Comisión Federal de Electricidad-CFE) power be generated first, including power from plants using coal or diesel. Foreign companies in both conventional and renewable power are worried about the future of their investments.

Refining The Mexican public is also worried about the massive investments of the current administration in the refining business. On presidential orders, the Energy Ministry (Secretaría de Energía-SENER) initiated plans to build a large refinery with a daily through-put capacity of 340,000 barrels. The cost is expected to approach $20 billion when completed in 2023 or 2024. Another investment of about $2 billion was in 2021, with the purchase of the 50% interest held

by Shell Oil Company in the refinery in Deer Park, Texas.

Analysis ______

The President assured the public that the purchase would quickly pay for itself in profits and increase Mexico’s energy security. Since then, $600 million in profits may have been earned, but none has yet been repatriated. As refinery output was already under long-term contracts, no new supply has been delivered in Mexico.

The Deer Park investment is of a different concern to the Houston Metropolitan Area. The new legal owner is a Delaware-registered holding company that is a twiceremoved affiliate of Pemex.

Environmentalists would like to know how that company would respond, financially, to a major environmental or safety incident. A parallel concern is the residual financial liability of Shell in the task of environmental remediation when the time comes to decommission the nearly-100 year-old refinery. A Shell chemical engineer in Houston told me that the cost of decommissioning would likely be a billion dollars.

Upstream Unitization is a topic that haunts U.S.-Mexico energy relations but went unmentioned by USTR. The Transboundary Hydrocarbon Agreement of 2012 set forth a framework for bilateral consultations but stopped short of a template for a unit agreement that would include the critical matters of operatorship, governance, and redetermination.

Where in other jurisdictions, disagreements are settled by an impartial arbiter, by the unitization rules published in Mexico, SENER— despite the obvious conflict of interest—would decide on the equities and operatorship. Regarding the 2017 discovery of a possible giant oil and gas field by investors led by Houston’s Talos Energy, LLC, Pemex quickly claimed that a portion of the reservoir extended into its adjacent block.

Pemex promised that it would drill an offset, or confirmatory, well in its block in 2018, but the drilling of that well, named Asab-1, has been rescheduled to 2023 at the earliest.

Meanwhile, despite the absence of any empirical data from a well, in July of 2021, SENER ruled that Pemex had a hair over 50% of the reservoir and would become the operator of the future unit area. In response, Talos announced on September 3 that it would seek remedies under the USMCA.

Conclusions Much of the grief of energy investors and consumers may be traced back to the government’s desire to reposition the two legacy state energy companies as the principal commercial actors in their markets.

USTR hopes that the matters under dispute can be resolve without any damage to the U.S. trade and investment.

Natural gas USTR complains of SENER’s policy to require that commercial and industrial users of natural gas source their supplies from Pemex or the Federal Electricity CommissionCFE. Beyond this complaint, lie two other matters of unfinished business: underground gas storage and a secondary market in natural gas pipeline capacity. Storage has been authorized by law since 1995 but nearly 25 years later not one cubic foot of underground storage exists. The severity of the winter storm of February 2021 in Chihuahua would have been much less had CFE’s generators had gas from underground storage.

The lack of a secondary market in pipeline capacity means that operators and regulators are unnecessarily limited in their ability to forecast bottlenecks. At the level of local gas distribution, the market has been limited by the practice of financially motivated city directors of public works to deny permits for expansion of service, denying the public the use of a safer, healthier fuel with a smaller emissions profile.

George Baker is the Houston publisher of Mexico Energy Intelligence™ and the director of the platform www.energia-mx.com @Energia_com You can find his commentary in the Houston Chronical and in the Dallas Morning News.

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Insight

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Cross-Border

Cross-Border Supply Chain Resiliency Is Imperative for U.S.-Mexico Economies By

Rep. Henry Cuellar (TX-28) 22 In recent years, several disruptions derived from the COVID-19 pandemic and border security issues have negatively impacted our supply chains along the southern border. These challenges have accentuated infrastructure inefficiencies and have introduced the need for a more resilient supply chain. As vice chair of the House Appropriations Subcommittee on Homeland Security, I have worked diligently to improve our border infrastructure and create a more resilient, more efficient, and safer border that will enhance our shared commerce with Mexico.

The United States and Mexico are connected by strong economic ties. Not only is Mexico one of the United States’ largest goods trading partner, but our southern neighbor may also be the solution to unreliable global supply chains.

Mexico is the second largest economy in Latin America, behind Brazil, making it a partner with a strong logistical capability. Mexico’s location also makes it a gateway to markets in Central and South America.

Trade between the U.S. and Mexico is indispensable for the prosperity of both economies. The United States is Mexico’s primary export market for goods, with approximately 80 percent of Mexican exports directed to the U.S. After the enactment of the North American Free Trade Agreement (NAFTA) in 1994, U.S. merchandise exports to Mexico increased from $41.6 billion in 1993 to a peak of $265.9 billion in 2018, while U.S. merchandise imports from Mexico have increased from $39.9 billion in 1993 to $358 billion in 2019. Most of this trade transited through land ports of entry across our southern border.

The United States-Mexico-Canada Agreement (USMCA) strengthened this relationship when it came into force in 2020. However, in March 2020, the COVID-19 pandemic disrupted economic activity across the globe, forcing companies to reconfigure their supply chains with the aim of making them more flexible, agile, and resilient. Coupled with rising security threats in fentanyl trafficking, arms trafficking, human smuggling, and the influx of migrants coming into our country, these challenges exposed many inefficiencies in our supply chains and highlighted the need to improve our border infrastructure.

These issues present significant obstacles to the efficient flow of commerce and trade to the U.S., making efforts to improve and modernize our land ports essential.

As a senior member of the House Appropriations Committee, I secured language authorizing the designation of a future I-27 interstate across Texas and to New Mexico. I also secured $7.5 million for the I-35 corridor project to conduct comprehensive evaluations and analyses from ports of entry to inland ports. Additionally, the fiscal year 2022 appropriations legislation included $245 million in federal funding for rail-highway improvements, more than $2 billion for highway infrastructure programs, and $625 million for consolidated rail infrastructure and safety improvements.

With this interstate development, Laredo will become the only land port of entry with access to four major interstate corridors: I-35, I-69, I-2 (83 South), and I-27. This will help facilitate the approximately 6.9 million commercial trucks that cross the U.S.-Mexico border every year. Additionally, the I-27 corridor will help facilitate goods traveling to more than 60 countries.

Insight

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Additionally, to ensure the resiliency of our supply chains, I included language in the current appropriations legislation which will direct the State Department to report on efforts to bolster our North American supply chains. This report will focus on critical emerging technologies, such as semiconductors and healthcare industry products, and will help fortify our supply chains so we can quickly respond to disruptions caused by security challenges or other emergencies.

Furthermore, I have worked to ensure our U.S. Customs and Border Protection (CBP) personnel have the resources they need to secure our border while not hindering commerce.

The fiscal year 2023 appropriations legislation recommends $15.74 billion for CBP, which is an increase of $893.8 million over the previous year. This recommendation includes an increase of $50 million for non-intrusive inspection equipment to improve safety with a minimal impact on the flow of goods. I have also ensured language is included in the bill to direct the U.S. Government Accountability Office to conduct a study on federal efforts to modernize land ports of entry. The study will include a description of how agencies determine and prioritize modernization projects and will help ensure our ports are modernized efficiently and effectively.

Last November, I also voted in favor of the Bipartisan Infrastructure Law, which included $3.4 billion for 26 major construction and modernization projects at land ports of entry on the northern and southern borders.

All these projects will create local jobs and reinforce security and safety while making our supply chains more resilient.

About Congressman Henry Cuellar

Cross-Border

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American attorney and politician serving as the U.S. Representative for Texas’s 28th Congressional District since 2005, which includes the cities of Laredo, Mission, Rio Grande City, and San Antonio.

Congressman Cuellar is the only Texas Democrat serving on the powerful U.S. House Appropriations Committee. He is the vice chair of the House Appropriations Subcommittee on Homeland Security, while also serving on the Defense Subcommittee and the Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies.

Congressman Cuellar was named Chief Deputy Whip for the 117th Congress, where he works in a bipartisan manner to serve the American people.

Congressman Cuellar supports equal opportunity for men and women of all backgrounds. His legislative principles are based on the belief that education, family values, and hard work should open doors to new opportunities for all Americans.

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Insight

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Bilateral Relationships

A Blueprint for Comprehensive Economic Integration By

Ken Salazar U.S. Ambassador to Mexico

24

The recent meeting between U.S. President Joe Biden and President of Mexico Andrés Manuel López Obrador reaffirmed a new era of cooperation fostered by our governments and drew a blueprint for the future of our bilateral relationship—a future in which a prominent role for the private sector in our economic integration will be crucial for the prosperity of the people of North America.

Our countries face unprecedented global challenges resulting from an ongoing pandemic, inflation, global food shortages linked to an unprovoked Russian war in Ukraine, China’s predatory trade practices, and disruptive climate change. As neighbors, partners, and family, our countries jointly tackle long-term challenges such as migration and security through comprehensive mechanisms such as the United States-Mexico Bicentennial Framework for Security, Public Health, and Safe Communities.

In the early 1980s, few people imagined how integrated our economies would become. After the 1994 implementation of the North America Free Trade Agreement (NAFTA), trade in goods and services between our countries increased by 503 percent, representing more than $2 billion in daily commerce.

While our economic integration was already profound, the United StatesMexico-Canada Agreement (USMCA) is elevating our shared prosperity even higher, while providing mechanisms to address trade disagreement.

The U.S.-Mexico CEO Dialogue that followed the July 12, 2022, meeting between our two presidents served as an ideal forum in which to further define our cooperation under the auspices of the USMCA. The pandemic underscored the need to bring our supply chains closer to home and the USMCA represents the perfect mechanism through which to do that while providing certainty for investors, safeguarding the rights of North American workers, and protecting the environment. Likewise, the North American Leaders Summit and the High-Level Economic Dialogue later this year complement the USMCA by offering us a chance to better coordinate our bilateral and regional economic policies to maximize our hemisphere’s competitiveness.

The U.S. and Mexico have the natural resources and the technical know-how to lead the world into the clean energy future our planet demands. Each wildfire in the western United States or rainless day in Mexico’s north reminds us that climate change is happening now.

Making the green-energy transition requires enlightened government leadership that unleashes privatesector innovation for the common good. Recognizing that, our presidents vowed after their bilateral meeting “to tackle methane emissions from oil and gas and other sectors, accelerate the transition to zero-emission vehicles, and deepen our efforts to seek naturebased solutions.”

Insight ______

Bilateral Relationships

Underpinning our mutual prosperity is the historic agreements our governments have reached to build a modern, safe, and efficient 21st-century border. Through President Biden’s Bipartisan Infrastructure Law, the U.S. will invest $3.4 billion in construction and modernization projects at ports of entry on our land borders, and Mexico has pledged to invest $1.5 billion in the next two years on similar projects.

These investments will benefit our nations and our economies by facilitating trade, enhancing border security, facilitating the legal transit of people, promoting cultural exchange, and reducing pollution. The U.S. and Mexican private sectors are integral parts of this coordinated border strategy.

Our dynamic bilateral relationship impacts every aspect of our citizens’ lives. I have seen what we can achieve together—and it is limitless. With the collaboration of public- and privatesector organizations, together we can foster the stable investment climate that is the foundation for prosperity in both countries.

This year we celebrate 200 years of formal diplomatic relations. The progress we have achieved in advancing prosperity for the people of both countries leaves me optimistic about the bright future of the relationship.

And my optimism is heightened because we now have much more than just goodwill: we have a blueprint to define the way forward.

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About Ambassador Ken Salazar

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Ken Salazar was sworn in as United States Ambassador to Mexico on September 2, 2021.

In 2009, President Obama nominated Mr. Salazar to serve as Secretary of Interior where he had a lead role on the Obama-Biden agenda on energy and climate, the nation’s conservation agenda including America’s Great Outdoors, and Indian Country. Ambassador Salazar has been a lifelong fighter for civil rights and the inclusion of Latinos in the American dream.

In 1998, Amb. Salazar was elected Colorado Attorney General and became the first Latino ever elected to statewide office in Colorado. He was reelected as Attorney General in 2002. In 2004, Attorney General Salazar was elected to the United States Senate for Colorado becoming the first Latino Democrat to be elected to the United States Senate since 1972.

Amb. Salazar has been admitted to practice law in state and federal courts, including the United States Supreme Court.

He and his family have farmed along the banks of the Rio Grande River in New Mexico and Colorado for more than four centuries.

Insight

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Economy

The Dallas County Inland Port:

A 21st Century Model For Economic Growth By

Dr. Elba Garcia, Dallas County Commissioner for District 4 (with information compiled from other sources)

26

It is often mentioned, but what is the Dallas County Inland Port?

Simply put, the Dallas County Inland Port (DCIP) is a 120-square-mile (76,000-acre) area that encompasses five Dallas County cities: Hutchins, Wilmer, Lancaster, DeSoto and Dallas, and more than 100,000 residents. Economically speaking, the DCIP currently serves as a base of operations for 110-plus employers, and that number is still growing.

Although there is no waterway for shipping, what makes this area so attractive to businesses is that the DCIP has direct access to three major interstate highways, I-35, I-20, and I-45, making all major North American markets accessible within 48 hours by truck.

Of particular note is I-35, which provides access to goods from Mexico through the Port of Laredo, the number one inland port along the U.S.-Mexico border. This allows goods from Mexico to move east/west through the United States, typically with a stop at one of the many warehouses in the inland port.

Additionally, the DCIP has access to multiple rail lines including Burlington Northern Santa Fe, LLC, and Kansas City Southern. It is also home to the Union Pacific Dallas Intermodal Terminal which carries goods via rail throughout the United States.

Union Pacific Intermodal Facility The Union Pacific Intermodal Facility (UPIF) processes 360,000 containers annually and has the capability to process up to 500,000. The facility typically processes two to three trains per day and has the capacity to process up to three or four trains per day.

Due to port congestion on the west coast and a shortage of chassis to transport cargo containers by rail, the facility currently processes one train every few days.

The UPIF is situated on 367 acres. Over one million cubic feet of dirt was excavated to build the site, making it the second largest UPIF in the United States, and the only intermodal facility in the country adjacent to an interstate highway.

The DCIP is the fastest-growing industrial area in the U.S. It currently supports 30,000 jobs and projects an additional 6,000 jobs to be created over the next three years.

There are now over 120 companies, both large and small, that occupy space in the Port, among them are Walmart, Procter & Gamble, Georgia-Pacific, Kohls, Unilever, and Medline Industries. DCIP houses FedEx’s second-largest U.S. facility, and Amazon occupies about four million square feet of buildings.

Insight ______

Economy

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Plaquemines Port Harbor & Terminal District The projected growth is expected to be enhanced even further by new cargo traffic expected to soon flow through Plaquemines Port Harbor & Terminal District in Louisiana.

Plaquemines Port is partnering with APM Terminals North America to open a deep water, multimodal, state-of-the-art container terminal located at the mouth of the Mississippi River in 2023.

Plaquemines Port is currently the thirteenth largest tonnage port in the U.S. As the only natural deepwater port in that area of the Gulf of Mexico, it has the ability to process the increasing number of multiple megavessel container ships.

As a convenient, cost-effective alternative to congested ports on the west coast, Plaquemines Port is expected to deliver up to a million cargo containers to Dallas, Austin, and San Antonio. The Dallas County Inland Port is well situated to accommodate the ship-to-rail and ship-to-truck traffic coming into the area via the Union Pacific Intermodal Facility or via interstate highways.

Insight

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Economy

Need for Regional Coordination Other than a transportation management authority, local chambers of commerce and economic development organizations, there is no entity or authority coordinating, advocating for, or planning the development of the Port as a regional entity, or guiding and promoting its growth.

28

There is no single source that is gathering statistics for the area, making it difficult to obtain data on the DCIP; however, Dallas County is working to establish the Inland Port of Dallas County Local Government Corporation (LGC) to coordinate advertising and marketing, oversee the overall status of the Port, and efforts to improve the Port’s alliances with ships, railroads, and other entities important to the regionwide development of the Port. Dallas County Commissioners took a major step toward this goal in June 2022, voting to move forward with a plan and begin discussions with the municipalities that reside within the Port’s boundaries to create an LGC that would serve as the Port’s governing authority.

The Dallas County Inland Port has experienced explosive growth over the last decade, becoming an enormous economic generator and jobs-creator for North Texas. It is a key link in the national and international supply chains serving the United States, positioning the region to continue its growth for decades to come.

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Insight

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Economy

30

More Oaxaca in The World, And More of The World in Oaxaca By

Alejandro Murat Hinojosa, Governor of the State of Oaxaca.

Oaxaca on the Path of Growth Oaxaca stands out for its investment potential, its tourist allure, and the quality of its original products. Through dedicated and coordinated work with the other areas of government, the present state administration has strengthened these three pillars of value, and participates in some of the most important infrastructure projects in the country. This has allowed Oaxaca, after the slowdown and natural disasters of recent years, to be one of only three entities in the country to achieve five quarters of growth.

Mezcal, a Fundamental Pilar In addition to being a state emblem, mezcal is the livelihood of thousands of families, generating 128 thousand jobs in Oaxaca. We proudly lead the nation in production of this distillate, which, in 2021, exceeded eight million liters.

Since 2016, the production of Oaxacan mezcal has increased by 177 percent.

Oaxaca is also the largest marketer of mezcal, currently reaching 79 countries. From 2016 to 2021, exports of this drink grew to 116 percent, bringing more of Oaxaca into the world.

Today, mezcal is one of the most spiritual forms of liquor, and is considered a cosmopolitan beverage. For this reason, a facility specializing in training, innovation, and protection of this ancient elixir, is being built. The Oaxaca Mezcal Innovation Center is the first of its kind in the country.

Insight ______

Economy

A State that Projects Confidence Today, Oaxaca enjoys good governance and low levels of debt, providing an ideal atmosphere to invest, which is reflected in annual economic growth of 6.8 percent, according to Mexico’s National Institute of Statistics and Geography (INEGI).

With the commitment to facilitate the installation of new companies, this administration has attracted private investments of the equivalent of $1.8 billion. By rehabilitating the Oaxaca 2000 Industrial and Maquiladora Park, the complex went from 17 to 32 active companies, generating $11,000 millions in investment and 1,500 formal jobs.

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Protection and Added Value The state government has consolidated great projects in order to safeguard our products of origin. In 2020, Oaxaca received the Denomination of Origin (DO) Café Pluma, which protects the distinct aroma of the brew from the region. Our coffee growers already receive direct benefits from this DO, reporting historical growth of one hundred percent since it was obtained.

In 2022, Oaxaca became the first Mexican entity with three geographical indications: 1.- Silk from Cajonos, 2.- Wool rugs from Teotitlán, San Miguel and Santa Ana del Valle, and 3.- Wood Carvings: Tonas and Nahuales. Handicrafts from the Central Valleys of Oaxaca.

These honorary distinctions include the protection of the origins, evolution, materials, processes, and designs of these handicrafts, as well as their production and trade criteria.

Insight

______

Economy

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Oaxaca, the Hotspot of Investment Opportunities The transformation of Oaxaca is due, in part, to its great projects, such as the Interoceanic Corridor of the Isthmus of Tehuantepec, which will link the ports of Salina Cruz and Coatzacoalcos. Generating 500,000 jobs in the state within 10 to 30 years, it will be a development engine for Oaxaca and all of Mexico.

With an investment of almost $7 million, this project intends to modernize both ports, increasing their transportation capacity to 1.4 million TEUS (twenty feet equivalent units) per year; reconstruct the railway, reducing travel times from nine to six hours; strengthen air connectivity for cargo transport; and optimize the infrastructure for the supply of natural gas. In addition, the planned road consolidation in Oaxaca with the highways to the coast and the Isthmus, will reduce travel times by half.

With these initiatives, we will be able to integrate our value chains into the Mexican export industry, taking advantage of international treaties with America, Europe, and Asia, which represent more than 1.7 million inhabitants.

These actions will also allow Oaxaca to reach its tourism potential. To this end, airport competitiveness strategies were implemented in 2019 resulting in the international airports of the cities of Oaxaca, Bahías de Huatulco and Puerto Escondido jointly achieving a record number of 2.5 million passengers.

Oaxaca is in fashion! Today, our state is a benchmark for development due to honest practices and a will to succeed.

These elements are essential to Oaxaca achieving social peace, rule of law, and a competitive economy, where well-being is a reality for all people.

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Why Querétaro?,

Through a Logistics Vision By

In this era when nearshoring is becoming increasingly more important for North American companies, they must decide where they should base their operations. The options they have are the three members of the USMCA : the United States, Mexico, and Canada.

In this article, we introduce readers to Querétaro, a state located in Central Mexico that offers an excellent opportunity for investing, working, and living in a great community.

Carlos Canseco and Sergio Nava, The main industries in Querétaro are textiles, agriculture, food and beverage, metal mechanics, appliances, chemistry, plastics, automotive, OEMs, electrical, aeronautical, IT, energy, and financial services.

Transportation and customs Querétaro is an important stop on Highway 57, an international highway that connects directly to Laredo, Texas, one of the most important borders in the USMCA, and one of the top five customs operations in the world.

Why Querétaro?

This is a brief detail of the most important features of the state: competitiveness; foreign investment; logistics, transportation, and customs; innovation and technology; and cluster strategy.

Many of the top 100 Mexican truck companies such as Egoba Transportation; SID Group; TDR Logistics Solutions; San Juan Transport (Transportadora San Juan de SA de CV); Transportes Mexamerik; and Grupo Transpormex, S.A. de C.V., among others, operate in Querétaro.

Competitiveness According to predictions of Latin American innovation cities of the future, Querétaro is ranked number five with the highest economic potential in 20212022. KPMG International, Ltd., ranks Querétaro second best for investment in Mexico.

Additionally, several U.S. truck companies with facilities in Querétaro are J.B. Hunt Transport Services, Inc., and Charger Logistics. Additionally, Freight App, Inc. (FR8), Transplace an Uber Freight Company, and Sunset Transportation have corporate offices in Querétaro.

Querétaro is one of only two states with zero debt to the country, according to the Ministry of Finance and Public Credit of Mexico. Its location provides easy access to the main cities in Mexico: it is two hours to Mexico City, five hours to Guadalajara, eight hours to Monterrey, and 10 hours to Nuevo Laredo.

The state’s transportation connections are not limited to roads; Querétaro is also connected throughout Mexico and the U.S. by the country’s two main railroads, Canadian Pacific Railway Limited (CP) and Ferromex.

Foreign investment The Mexico Ministry of Economy shows the following foreign investments in Querétaro:

Querétaro has four intermodal terminals operated by Networks and Logistics and V Modal Mexicana, S.C., both Mexican Intermodal Marketing Companies.

Querétaro Intercontinental Airport (AIQ) is the third most important cargo airport in the country with the number one bonded warehouse operated by Términal Logistics SA de CV. Customs operations in Querétaro are very customer-service oriented.

Customs brokers are the fastest in cargo merchandise clearance. Valverde Internacional, Grupo Galván, and CARMI Logistics are some of the most prestigious customs brokers in Mexico.

*million dollars

Transportation and customs and Cluster strategy.

CILQRO (Cluster for Logistics Innovation from Querétaro) is focused on developing key performance indicators (KPIs) for all sizes of companies established in the state. The main KPIs are: fill rate, inventory levels, forecast accuracy, and logistics costs.

Cluster strategy Querétaro has eight separate clusters working with governmental agencies, academic institutions, and the public.

The clusters are: automotive, aerospace, information technology, plastics, medical, energy, wine, and logistics.

The ninth cluster data center will be operational in 2023.

Each cluster has its own ESCA (the European Secretariat for Cluster Analysis) and JICA (Japan International Cooperation Agency) certification. Every cluster director is also trained through Strategy Tools, Global Cluster Leadership Program. Strategy Tools is a world leader in assisting “leaders, cluster managers, cluster staff, and people that want to develop the next generation of clusters in their countries.”

Innovation and technology Querétaro is well-positioned as a technology center with 56 research and development facilities to assist communities in creating successful projects. The state has very close relationships with several of its main universities including Monterrey Institute of Technology and Higher Education (ITESM); Autonomous University of Queretaro (UAQ); The Universidad Anáhuac México (Anahuac University); Technological University of El Salvador (UTEC); Aeronautical University in Querétaro (UNAQ); Arkansas State University; and Polytechnic University of Querétaro (UPQ).

Among the corporations with strong presences in the state are: Bombardier Inc.; Brose Excellence in Mechatronics, General Electric; Kellog Co.; and IBM. Currently, there are 48 of the world’s top innovation and technology companies operating in Querétaro such as Google, Huawei Technologies Co., Ltd.; Alestra; and KIO Technologies.

What does this all mean?

Given all of this information about the businesses, technology, academic and transportation assets, and the state’s financial stability, Querétaro is a great place to invest, work, and live. It offers unlimited opportunities to those seeking a thriving community.

In summation, if you invest in Querétaro, you will not regret it.

Carlos Canseco is a founder, and director general of Querétaro Cluster for Innovation in Logistics. Sergio Nava is a finance director for Innovation Logistics Cluster of Querétaro Founders.

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The Interview ______ Alvaro Luque

Our Objective: 36

QUERÉTARO CLUSTER FOR LOGISTIC INNOVATION

Strengthen Querétaro, Central México and the entire country’s supply chains, generating productivity in fill rate, inventory levels, forecast, accuracy, transportation, manufacturing and customs links.

37

Business ______

KCSM: 25 Years Contributing to Mexico’s Economic Development

38

Twenty-five years after winning the concession to operate 2,619 miles of freight railroad tracks that cross 15 states in the country, Kansas City Southern de México (KCSM) has established itself as a key player in the logistics process of hundreds of industries that transport large volumes of cargo beyond the country’s borders.

During this time, the company has been able to strengthen its rail network with a positive impact on Mexico’s economic development and has helped increase cross-border trade, a pillar of many of the country’s businesses.

KCSM’s objective in the short- and medium-term is to continue strengthening its rail network to offer better

opportunities for international and cross-border trade, with an extension of connectivity to ports and inland terminals.

In San Luis Potosí, investments were made to improve network capacity, automation and signaling, in addition to the construction of an automotive yard.

To date, the company has invested over $4.4 billion in various projects for the construction and maintenance of infrastructure that allow it to be competitive, with an efficient, agile, and safe service, in addition to promoting the development of various regions of Mexico.

At the Port of Veracruz, where it recently began direct operations, KCSM seeks greater efficiency for the benefit of intermodal and automotive customers by serving them directly.

KCSM’s investment projects in recent years include Nuevo Laredo, where capacity was expanded at the Sanchez Yard. This allows for increased capacity and reduced terminal dwell time for cross-border trains.

In Monterrey, several works were carried out to add capacity to the Matamoros route and thus increase the flow to the Port of Brownsville.

For 2022, KCSM’s planned investment is $122 million for the development and completion of different projects.

Additionally, the company confirmed an investment of $4 billion for the development of the work and related infrastructure of the Celaya-NBA Line Railroad Bypass, which will benefit thousands of people and drivers in the city of Celaya in the state of Guanajuato. The work is scheduled to be completed in 2024 and will consist of diverting almost 12 miles of track from the downtown area of the city.

Business ______

North America’s railroad, key to cross-border trade At the end of 2021, the signing of the agreement for the merger of Canadian Pacific and Kansas City Southern was announced.

This commercial merger is one of the largest in the sector and represents a great opportunity for Mexico and cross-border trade with its main trading partners.

The company born of the merger, identified as CP-KC, will form the first rail network connecting the United States, Mexico and Canada in a direct, seamless line.

The company will have the opportunity to be more competitive and offer an efficient, agile and safe service, in addition to boosting the economic development of companies in the three countries that make up the USTR trade bloc.

“Given the global scenario

in which supply chains have been affected, we want to look for growth opportunities, so we focus on taking better advantage of the legal framework offered by the USMCA, the benefits of the nearshoring

trend, as well as continuing to invest in infrastructure, technology and process improvements to have a more fluid and safe transportation corridor that adapts to growth and improves service to customers,” explained Oscar Del Cueto.

Great achievements in 25 years The railroad sector’s participation in Mexico’s freight transportation system increased from 12 percent of the total cargo moved in 1997 to 26 percent of all cargo currently transported in the country.

In 1997, KCSM used to cross the Laredo International Bridge with 12 to 14 trains per day. Today, between 30 and 32 trains cross the international border daily, with an international crew that allows for a more agile service.

KCSM’s average train length has increased significantly, averaging 55 to 60 cars per train in 1997. Now they move long trains with up to 120 cars. This has made it possible to offer new services, for example, for the automotive sector and for transporting hydrocarbons

39 in a safe and secure manner.

The rail gauge on the KCSM network has also increased.

When they took over the concession, most of the rail was 90-pound grouted rail and now most of the system is 136-pound welded rail.

This allows larger trains to move at higher speeds, which improves the fluidity of the system and allows for better service.

Business ______

The CostBenefit of Diversifying Logistics Strategies with a Strategic Partner 40

Reducing operating costs in the prevailing economic environment remains a constant challenge for businesses globally as shortages and subsequent price increases of commodities lead to delays, underproduction of goods, and inventory supply constraints.

In today’s world, it is very difficult for product supply to keep up with demand, and this, in turn, brings about higher prices on finished products. It is now not only about generating cost savings, but also about prioritizing the need for a resilient supply chain that optimizes lead times. As a result, the focus is evolving; more companies now look for the best cost value when evaluating long-term investment benefits, rather than just the lowest option.

Businesses must ensure that they have the ability and flexibility to redesign their operations and have good geo-strategic positioning that allows them to adapt their supply chains to constant disruptions.

Inventory must be in the right quantities in the right place at the right time, thus reshoring, nearshoring, and multi-shoring one or more stages of their supply chain may be highly beneficial as shipments from closer proximities are less expensive and have shorter delivery times.

Nowadays, however, having the capacity to meet financial, sales, and service goals also requires having adequate infrastructure in technology and digital terms to ensure a good connection with suppliers, plants, and the customer.

All this represents for businesses the need to explore and manage new projects and strategies to implement new technology, bring manufacturing within the regions where plants are supplied, locate logistics operations such as warehousing and crossdocking closer or within the same end markets—or consider dividing business functions and activities between different locations.

Third-party logistics companies (3PL) provide more than just infrastructure—they provide experienced capabilities both operationally and technologically.

They also bring broader perspectives, and proactive and differentiated service proposals to meet the specific needs of each business. These factors make partnerships with logistics providers that have a local presence in a company’s markets of interest, a good option that brings great opportunities and benefits.

According to Ryder Mexico, companies must strengthen and diversify their logistics strategies to maintain stronger quality control and shorter, more responsive, supply chains to achieve more customercentric, resilient, and proactive businesses.

To achieve the efficiency and

scalability needed for businesses to become resilient and capable of efficient planning, production, and distribution, leading players in the logistics sector, such as Ryder, use their comprehensive services portfolios that include crossborder, warehouse, cross-dock, and transportation management to enable companies to achieve better end-to-end logistics execution and be able to navigate disruptions.

Working with strategic partners is an important element when strengthening business resilience while maintaining dynamic and productive balance and fostering continuous innovation in the supply chain. Organizations that achieve these operational results improve their business decisions to generate tangible and sustainable transformational growth resulting in increased value in an everchanging world.

USMCOC

______

USMCOC Resumes Annual Conference,

Activities

Board of Directors Meeting and Good Neighbor Awards Gala By

Joseph Lopez

On Wednesday, October 20, 2021, the board of directors and executive leadership of the United States Mexico Chamber of Commerce (USMCOC) gathered at the Decatur House, located in the heart of Washington D.C., for the Annual Conference, Board of Directors Meeting and Good Neighbor Awards Gala. This was the first year hosting in-person events since the on set of the COVID-19 pandemic.

41 The historic Decatur House was completed in 1819 and serves as the exclusive residence for guests of the White House and home of the White House Historical Association.

Due to COVID-related restrictions, the Organization of American States (OAS) building remained closed although it is hoped the venue will once again host the awards gala in 2023.

The Annual Conference opened with a welcome by Chamber President and CEO, Gen. Albert Zapanta, USA, (Ret.), who thanked all for attending and for their continued support of the Chamber at both the chapter and bi-national levels. After Gen. Zapanta’s welcome, the morning panel discussions began.

Panel I: Border Issues & Security featured David Aguilar, principal, Government Service Insurance System (GSIS); Robert Perez, former deputy commissioner, Customs and Border Protection, U.S. Department of Homeland Security; Gustavo de la Fuente, executive director, San DiegoTijuana, Smart Border Coalition; Jaime Guerra Pérez, Secretary of Economy, State of Coahuila; moderated by Sergio García Gómez, senior advisor, Trade and Investment, USMCOC.

Editorial ______

USMCOC Activities

Panel II: Energy, Transportation & Agriculture panelists were Emil Peña, senior advisor, Murrah & Killough, PLLC, executive director of National Corrosion Center at Rice University, and Energy and Environmental Systems Institute; Alejandro Solís, principal economist, HRD; H.R. Bert Peña, Esq., principal attorney, H.R. Bert Peña Law Firm; moderated by Ambassador Juan Sosa, president and CEO, U.S.-Panama Business Council and former Ambassador of Panama to the U.S.

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Panel III: Supply Chain, E-Commerce & Manufacturing panel included Dr. José Zozaya, president, Mexican Association of the Automotive Industry (AMIA); Kenneth SmithRamos, partner, Agon; César Remis, head of the U.S. Office for the Implementation of the United States–Mexico–Canada Agreement (USMCA), Embassy of Mexico in the U.S.; moderated by Stephen Lande, president, Manchester Trade, Ltd.

USMCOC

______

Activities

Thomas J. Donahue, former president and CEO of the U.S. Chamber of Commerce and a member of the USMCOC board since 1993, gave the luncheon keynote address. Following this, a Good Neighbor Award was presented to him for his tenure on the USMCOC board while he was both president of the American Trucking Association and the U.S. Chamber.

Dr. José Zozaya, chairman of the USMCOC board of directors, conducted the annual meeting of the Chamber’s board.

Gen. Zapanta presented updates on Chamber programs and activities ranging from cultural to community engagement, as well as COVID financial relief efforts. Preliminary findings of the Chamber’s USMCA Working Group were also discussed.

Alvaro Luque, president and CEO, Avocados From Mexico.

During the proceedings, a Memorandum of Understanding (MOU) was signed between the Association of Mexican Secretaries of Economic Development and the U.S.-Mexico Chamber of Commerce.

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In the evening, the Decatur House hosted the Annual Good Neighbor Awards (GNA) Dinner Gala where several industry leaders were recognized for their accomplishments enhancing cross-border trade and relations.

Joseph Lopez is Manager of International Affairs & Sister Cities with the Greater Irving-Las Colinas Chamber of Commerce.

The private sector GNA recipients included: Patrick J. Ottensmeyer, president & CEO, Kansas City Southern; Alvaro Luque, president and CEO, Avocados From Mexico; and Thomas J. Donahue, former president & CEO, U.S. Chamber of Commerce; member, USMCOC board since 1993; and former president & CEO, American Trucking Association, received his award earlier in the day after he presented the keynote address.

Patrick J. Ottensmeyer, president & CEO, Kansas City Southern.

Thomas J. Donahue, former president & CEO, U.S. Chamber of Commerce.

Editorial ______

USMCOC Activities

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