USMCA Updated; Mixed Reactions

Canada Deputy PM Chrystia Freeland, Mexican President Andres Manuel Lopez Obrador, Mexico Deputy Foreign Minister Jesus Seade and USTR Robert Lighthizer at a ceremony in Mexico City on December 10, 2019 where the USMCA was updated.

The busy Avenida 9 de Julio en Argentine capital Buenos Aires. Argentina will see the strongest growth in e-commerce among Latin America's top three economies this year, but also the worst advertising decline among the top three. (Photo: Argentine Government)

Latin America e-commerce jumps, ad spending outgrows Western Europe.


Top officials from Canada, Mexico and the United States on Tuesday signed an update to the U.S.-Mexico-Canada Agreement (USMCA) that was signed in November last year. The trade deal has been awaiting ratification in the United States and Canada and was ratified by Mexico in June.


To avoid the impasse in the US Congress, a deal was reached between Democrats in the United States (who control the US House of Representatives) and the governments of the US, Mexico and Canada.


Reactions have been mixed, with some praising that the latest deal saves the USMCA and this avoids a disruption in US trade with Mexico, while others criticizing what they see as onerous restrictions on labor regulations in Mexico and continued doubts amidst little to no transparency about the update.

"This is undoubtedly good news for the region, but some questions remain about the details,” Duncan WoodDirector of the Mexico Institute at the Wilson Center, said in a statement.   “It seems that whilst the word 'inspections' has been avoided, 'facility-based enforcement' and in-country 'labor attaches' will raise the spectre of foreign interference for some in Mexico."

Ruti Smithline -- co-chair of Morrison & Foerster's Latin America Desk and co-chair of the firm's Investigations and White-Collar Criminal Defense group – says the fate of previously introduced anti-corruption measures remains uncertain.


“The featured provisions, located in Chapter 27, would require United States, Mexico, and Canada to adopt or maintain anti-corruption measures to prevent and fight bribery and corruption in trade and international investment in an effort to build integrity within both the public and private sectors,” she says. "This chapter could ultimately have the greatest impact on Mexico, which has some of the highest levels of perceived corruption in Latin America and has been criticized for not rigorously enforcing its own existing anti-corruption laws."


Adriana Ibarra, a partner at the International Trade and Commerce Group at Baker McKenzie in Mexico says the new agreement will provide certainty that in the very near future there will be a new treaty that will govern trade relations between Mexico, the United States and Canada.

“Although we still have NAFTA in force, it was essential for the productive sector to determine what the rules of the game will be for planning its supply chains and production processes in the region,” she said. “Despite being more restrictive than NAFTA in certain matters, it also contemplates new disciplines and represents a modernization 25 years after NAFTA entered into force. For this reason and although it is necessary to know the details of what was agreed today, it represents a reason for celebration."


Miguel Noyola, a partner at the International Trade and Commerce Group at Baker McKenzie, in Washington, D.C. also point to the agreement as reducing the fear that the United States under President Donald Trump would break up the close commercial relations with Mexico.


"If ratification is achieved, it should facilitate business structuring and planning, as the risk of a US withdrawal from its trade and investment partnership with Mexico and Canada should be greatly reduced," he said.

Christopher WilsonDeputy Director of the Mexico Institute at the Wilson Center, says passage of the USMCA will restore certainty for businesses already heavily invested in the North American production platform and modernize NAFTA by creating rules for 21st Century issues like e-commerce and digital trade.

"In order to reach the deal, Mexico made significant commitments, especially regarding the implementation of a major labor reform passed earlier this year to ensure workers have access to real collective bargaining,” he said. “While not every provision in the USMCA promotes greater regional competitiveness, on balance, the agreement is a good one, and its ratification will strengthen the economies of all three countries.”

However, some Mexican business groups bemoaned a lack of clarity and conflicting information on how the rules would actually be enforced under the deal, the text of which has not been made public, Reuters reports. 


Meanwhile, DHL says the new USMCA will reduce customs time by 80 percent, while breadmaker Bimbo says it will make Mexico more competitive, El Financiero reports. 


E-commerce in Latin America is expected to grow by 18.8 percent this year and reach $83.9 billion, according to a new report by Germany-based SAP, the world's largest business software company. The figure is nearly twice the $44.4 billion level five years ago.

The growth is notable since Latin America’s economies are barely growing, with the International Monetary Fund predicting a GDP expansion of only 0.2 percent this year.

Although Mexico’s economy is smaller than that of Brazil, it will lead the way in e-commerce, with $28.8 billion compared with $20.9 billion in Brazil.

Other key markets are Argentina ($12.6 billion), Chile ($7 billion), Colombia ($6.6 billion) and Peru ($4 billion).

Among the top three markets, Argentina is seeing the strongest growth, with e-commerce expected to jump 28.5 percent this year despite its economy falling by 3.1 percent.

Mexico’s e-commerce will likely expand by 16.3 percent despite a 0.4 percent expansion of its economy, while Brazil e-commerce will grow by an estimated 9.4 percent despite a 0.9 percent GDP increase.

A large factor behind the e-commerce growth is the increased Internet penetration in Latin America, which is expected to reach 69 percent this year compared with 66 percent last year. Uruguay leads the way, with 88 percent, followed y Costa Rica (85 percent), Argentina (82 percent), Ecuador (80 percent) and Chile (73 percent). Honduras and Guatemala are the laggards, with only 39 and 42 percent, respectively.

Meanwhile, Chile is considered the best in Latin America overall since it ranks second in ease of doing business, first in logistics  and second in digital government.

“Amidts this clear growth in e-commerce, most companies in Latin America need to understand how the experience economy will impact their business and find solutions to take advantage of what they are doing now,” Jorge Barón, head of SAP Latin America’s Customer Experience portfolio said in a statement.


Advertising spending in Latin America is expected to grow by 4.2 percent next year, UK-based ad agency Zenith projects. That puts the region slightly behind North America (4.7 percent), but ahead of Western and Central Europe (2.8 percent).

Both Brazil and Mexico will be among the top ten contributors to adspend growth next year and Brazil will remain a top ten ad market overall, ranking seventh next year as this year. Total adspend in Brazil is expected to grow by 11.3 percent to $15.4 billion in 2020.

While Mexico’s growth in 2019 is estimated at 12 percent this year and 8 percent next year, Argentina – once a dynamic ad market – suffered a significant decline this year, with no improvement expected next year.

“Argentina enjoyed a brief respite from recession in 2017, but succumbed again in 2018,” Zenith says. “Its economy has continued to shrink in 2019, with no respite in sight. “

Zenith estimates that adspend in Argentina has shrunk by 20 percent this year and will fall another 20 percent next year.


Alejandro Ramírez, CEO of Mexico-based movie theatre chain Cinépolis, received the Leadership for the Americas Award for Civic Engagement from the Inter-American Dialogue in Washington, D.C.

Meanwhile, the National Federation of Coffee Growers of Colombia (FNC) received  the Leadership for the Americas Award for Social Equity, while  Cirque du Soleil was presented with the Leadership for the Americas Award for Corporate Citizenship.

The awards were presented on November 12th at a gala dinner at the Mandarin Oriental Hotel in Washington, D.C.

The Leadership for the Americas Award is given to individuals or organizations who have dedicated life-long service to the Dialogue’s mission – advancing democratic governance, social equity and prosperity in our hemisphere.

“Alejandro Ramírez, recipient of the Award for Civic Engagement, is one of the most respected young corporate leaders in Mexico today,” the Dialogue said in a statement.  “Through his commitment to improve the health and education of Mexicans, Ramírez has become an example for rising entrepreneurs in the region.”

Wendy Kopp, CEO of Teach For All, said Ramirez leadership towards ensuring access to quality education and health to all Mexicans is an inspiration.

 “His support of corporate social responsibility demonstrates that it is possible for companies to succeed while being fully committed to their corporate values," she said.

The National Federation of Coffee Growers of Colombia, recipient of the Award for Social Equity, has effectively promoted the economic and social welfare of Colombian coffee growers. For more than 90 years, the FNC has brought social progress to more than 540,000 coffee growing families in 54 percent of Colombia’s territory.

“As a former member of the National Committee of Coffee Growers, I can attest to the fundamental role the FNC plays,” said Marta Lucía Ramírez, vice president of Colombia. “Coffee has been the essence of the social fabric of rural Colombia. The more than five hundred thousand coffee growing families are an example to all Colombians. The Federation has been the key for coffee to flourish in our country.”

Cirque du Soleil, recipient of the Award for Corporate Citizenship, has worked for decades with at-risk youth in Latin America. Using circus arts to build critical skills such as self-esteem, creativity and resilience, they have impacted the lives of more than 100,000 people.

“We are honored to have such a distinguished group of honorees at our annual awards gala,” said Michael Shifter, president of the Inter-American Dialogue. “It is inspiring to see organizations and individuals working to foster prosperity and social equity across the Americas.”

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