We are driving with full throtle on the highway of the economy, ending the year 2023 that maintained a behavior of stability and economic predictability in the first 3 quarters, leaving the 4th quarter a litle below the desired expectation but which, even so, it ends up being very good, which is equivalent to having slowed down a litle, but without losing the rhythm. 2024 Economy
A year ago, I commented on the importance of prioritizing increasing the value of industries during 2023, today we observe the economic framework in Mexico came to be ideal and unexpected during this year even for the most optimistic, the announcement and arrival of investments was the order of the day, even some that were kept secret and revealed unit the operations began, all this lead the country’s main industrial centers to experience very high activity levels. 2024 Economy
The investments arrival in Mexico is tangible, it is reflected in the growth of industrial spaces that, unfortunately, at the same time have uncovered other types of problems in developed cities that are experiencing expansion, where the cities infrastructure is being overwhelmed creating permanent alterations in communities, road traffic that exceeds what is reasonable, saturation of residential areas and an important list of factors that would take a lot of detail, factors that we will not discuss at this time along with the questioning of the economic spill true impact generated in local communities in comparison of the total investment announced in media.
Companies in Mexico that were prepared to face 2023 with proper financial planning, and that made estimates taking as reference the exchange rate projected during 2022, experienced in 2023 the bonanza of exchange gains that were channeled in accordance with their operating guidelines for the year in course, which could have gone to innovations or simply to compensate for situations that arose and that were not contemplated in the original plan.
Meanwhile, American companies went through 2023 where, at least during the first quarter, they experienced the opposite of Mexican companies, as they faced exchange losses due to the initial volatility of exchange rates compared to 2022, despite the announcements of the American federation were clear, it was difficult to contemplate these conditions extending throughout 2023, but managing this during the second quarter to maneuver towards predictability with a beter calculaton to overcome the losses and anticipate the exchange differences for the rest of 2023. 2024 Economy
The weakness of the US dollar, in the face of the global economy, has been decisive for many projects and strategies at diverse latitudes in the world, for companies from countries that took advantage of it both in their respective domestic economies and in international businesses. The United States in its domestic economy, and simplifying for the purposes of this article without being the only reason, has managed a strategy of high interest rates to promote a cheap US dollar that atracts countries to buy American products and services, and as well as to invest in American territory, seeking to strengthen the entry of foreign currency into the country to continue the process of healing up the impacts and deficits generated during the years of the pandemic. 2024 Economy
Although the later in the United States is a strategy based on the experience of previous administrations, the current times economy uncovered very interesting and unexpected learnings that force us to rethink several details for 2024. It is thanks to these economic conditions experienced in 2023 that the United States could stimulate the atraction of international buyers for products to benefit American manufacturing, but the fastest growing sector was the service markets exported from the United States around the world. The hiring of services of all kinds, associations, specialists, consulting, etc. has had one of its best booms in terms of international sales due to the increase in demand for American specialists who, traditionally, are considered a luxury in developing economies, which now the global exchange rate with an accessible US dollar has allowed.
In Mexico, services also had a significant rebound but more focused on consumer products than on services related to industrial activities, but even so the market for Mexican companies that offer subcontracted labor for industrial facilities showed one of the greatest growths during 2023, with demand for jobs in Mexico and abroad without being able to supply.
The value of some industries positively rebounded while others remained in seasonality, this caused by global supply strategies that offset direct benefits. For example, the automotive industry in the United States boasts an increase in its car exports, but at the same time there was a large increase in car imports to the country, generating a deficit in its indicators. This is a topic that is covered every week in the financial news, but here is the interesting part:
The production of automotive components presented an unprecedented boom to satisfy the domestic market and even the export market, this being the case of exporting high-value components. The interesting thing is that a large part of the components exported abroad returned to the United States assembled in the cars that entered as imported, many covered by the statutes of the T-MEC (USMCA) in IMMEX operations. In this area, Mexico also exported a large quantity and variety of automotive components to the United States, some of which were high-value components.
The supply and demand of jobs maintained beneficial levels, at a macroeconomic level, both in Mexico and the United States, with jobs in service companies showing the greatest growth. This increase in service markets resulted in an atack on the supply of positions in industries, since part of the workforce has chosen to move towards service positions in their search for jobs with less physical requirements, within a more welcoming and cozier environment than a manufacturing plant.
Given the desperation of the lack of interest in industrial positions, some companies have increased their support in mass recruitment agencies to find candidates in an accelerated manner, but the reports from the industrial frontline workforce market are very interesting and alarming, by showing this preference towards service positions. Speaking with the managing director of a renowned mass recruitment agency in México, his comments confirm how, in addition, the collapse of cities infrastructure is playing an important role in complicating daily commute within cities.
The bonanza of economies in motion, at high speed, generates impacts at various moments in the companies’ value chain that try to keep up pace, which force them to be creative to solve these with internal opportunities to diversify the scope of positions to fill open positions, in cases it can reach worrying levels of staff workload saturation.
High-speed operational activity is not bad, but a lot of expertise and proficiency must be taken to successfully manage it, with an anticipating medium and long-term vision, since the lack of expertise generates a focus on day-to-day indicators, leaving in low priority to continue innovating solutions that could be the key to continue advancing in case the accelerated growth presents some change of pace; In terms of analogy, the ability to move forward and visualize an alternate path in case of encountering sudden or announced traffic.
What plans to capitalize on 2023 growth in innovation do you have for 2024?
I wish you all the best of success in your resolutions, goals and objectives for 2024.
By Pedro Castillo
Pedro Castillo currently works at Therma-Tron-X, Inc. as Managing Director for Mexico and Subsidiaries, is a Founding Partner at INQ Strategic Partners LLC, and has more than 25 years of experience in various industries. Pedro holds a bachelor’s degree in Mechanical Engineer with a minor in Administration from ITESM Monterrey Tech (IMA’97), and holds a Master’s Degree in Science with a major in Manufacturing Systems from ITESM Monterrey Tech (MSM’10). Pedro is founder and collaborator of altruistic and commercial initiatives, as well as currently participates in the Boards of Directors of companies, initiatives and associations in Mexico and the United States. Pedro resides in Wisconsin, USA.
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