0:00

In the past few decades it's been like watching

0:03

the world shrink right in

0:05

front of us .

0:06

Once considered key to increasing trade , fostering

0:08

peace and raising the standard of living , globalization

0:11

is now seeing a pushback .

0:13

Globalization has turned our planet into the super

0:15

connected place where everything's

0:17

buzzing Borders

0:19

. They've become kind of blurry Businesses

0:23

. Oh man , they're popping up all over

0:25

the globe In tech . Well

0:28

, it's like the ultimate game changer

0:30

, making even the most remote spots

0:32

possible market hotspots

0:35

. But the winds of change are

0:37

blowing once again .

0:38

And the issue was raised at Davos , with new data

0:40

showing world exports and imports are now

0:42

in retreat for the first time since the Second

0:44

World War . Partly driving this retreat nationalistic

0:47

policies and protectionism .

0:49

Enter globalization . While

0:52

it might sound like we're hitting the brakes

0:54

, it's a bit more complicated than

0:56

that . Countries are

0:58

revisiting the whole global trade angle

1:00

thanks to the volatile past few years we've

1:03

witnessed from rising trade

1:05

tensions , evolving geopolitics

1:07

and supply chain crises driven by COVID

1:09

.

1:10

Yeah , the showdown with Russia

1:12

. You also have supply

1:15

chain issues , post pandemic tensions

1:17

with China . Everyone's wondering what

1:19

globalization will look like in the 21st

1:22

century .

1:23

We're moving from that whole worldwide

1:26

party mode to a chill regional

1:28

hangout scene .

1:30

In this series on Things of Change podcast

1:32

, we're going to unravel the layers

1:35

behind the shift . Specifically , Mexico

1:37

is emerging as a standout beneficiary

1:40

, as US companies aim to

1:42

divest from China and invest

1:44

closer to home .

1:52

If you'd known how important the technology

1:54

economy was 20 years ago , would

1:57

you have done things differently ? The

2:00

internet , cell phones , the cloud

2:02

and data Things

2:05

have changed . We're here to talk about it

2:08

.

2:08

Hi , I'm Jed . Hi

2:11

, I'm Shikor . Welcome to Things

2:13

of Change , your new economics

2:15

and technology podcast . So

2:23

, jed , you know I'm always chasing performance

2:26

. I'm always chasing outperformance

2:28

, even though I'm probably

2:31

better off just putting my money

2:33

in NASDAQ or

2:35

the SNI . I am one of those people who

2:37

are like you know what . I

2:40

think I could be better . I think I'm better

2:42

than all the hedge funds , all

2:44

these typical rigged markets

2:47

. I think I can outperform

2:49

the SMP . So I'm always chasing

2:51

. Okay , what's the next trend

2:54

? Is there a vibe shift ? Is

2:56

there a new social media platform ?

2:57

Vibeshift okay .

2:59

I'm just trying to see what's happening out

3:01

there . So I come from

3:03

like a manufacturing world and

3:05

so I still have . Some of my closest

3:07

friends from school are still

3:09

in the manufacturing world , right , and

3:12

there was a consistent theme of them

3:14

saying hey , you know what , I'm traveling to Mexico

3:16

this weekend

3:18

and I'm like you've been in Mexico

3:21

like three times this month . What's happening

3:23

? Right , Usually

3:25

they're flying to China to

3:28

set up the assembly lines , to

3:30

set up manufacturing and stuff . I was interested , I'm

3:32

like what is happening ? And he

3:34

was like , dude , we're moving production manufacturing

3:37

line out to

3:39

Mexico because it's cheaper and it's

3:41

closer . And that was the whole play

3:43

and I started thinking it

3:46

makes so much sense . The labor's

3:48

there , the workforce can be trained

3:50

, it's near right . So

3:52

it kind of solves a big

3:54

, big problem with global supply

3:57

chains , which was the big issue over

3:59

the past few years . I

4:01

was just looking at , okay , what's out there that's

4:03

outperformed , the SMP , right

4:05

? No-transcript

4:08

. The Mexico index has

4:10

kind of done that . It's really

4:12

been a better performer

4:14

than some of the big heavyweight

4:16

indexes that we see

4:18

in the US . That's super popular , Agreed

4:21

. The US indexes , being

4:23

that massive , still crush

4:26

it . But it's interesting

4:28

seeing that a Mexican index

4:30

is up there with the best .

4:32

Huge shift . Huge shift , man , and

4:35

that's interesting . You mentioned that If

4:37

you are listeners of Things have Changed podcast

4:40

, there's also one of the companies that was

4:42

on the show that is increasingly really

4:44

thinking about Mexico too , which

4:46

is ASSAK . You

4:49

might remember one of our first actually our

4:52

first Things have Changed episode with

4:54

a guest was with Dylan

4:56

Terrell , co-founder of ASSAK . So

5:00

this microfinancing company

5:02

started in Africa , so

5:04

it has that experience of dealing with markets

5:07

that are still developing and it's interesting

5:09

, dylan has been going back

5:11

and forth to Mexico the last few

5:13

months as well . So there are some exciting

5:16

developments there to be seen only

5:19

from the manufacturing side . We

5:21

talked about microfinancing , that's

5:23

, on the financing side of things that are getting

5:25

more and more interested in Mexico

5:27

as a place to do business . So

5:30

really interesting stuff that's happening

5:33

in Mexico . But our listeners might

5:35

ask why Mexico

5:37

all of a sudden ? Why are we seeing

5:39

all this growth and interest

5:42

in foreign direct investments from

5:44

companies all across the globe

5:47

looking at Mexico as a partner ? And

5:50

I think the story there

5:52

really comes from the interesting

5:54

relationship that US

5:57

and China has had in the past few years . I

5:59

mean , dude , we've been

6:01

watching this whole thing change

6:03

from the start right . Ever since

6:06

, I think , trump was

6:08

elected in 2016 , trade

6:10

tensions between US and China

6:12

kind of started getting a little more

6:15

hot . You know , and you saw it on the news

6:17

a lot , we saw figures that people

6:19

weren't paying attention to in the past . Dude

6:22

, when we were looking into this , like

6:24

, still up to today , our relationship

6:27

with China is so strong , like it has with other trade

6:29

partners , but our relationship , particularly in the United

6:31

States , is pretty strong with China . I

6:33

looked at how much of

6:36

our smartphones in the US

6:38

were imported from

6:40

China . Okay , staggering

6:43

number as well . Dude , 80%

6:46

of our freaking smartphones are

6:48

imported from China . That's

6:51

a ridiculous number .

6:53

That's in everyone's hands . Don't

6:56

forget every single item in your home , from

6:58

toys , games like batteries

7:00

now Everything comes from China

7:02

. But let's not forget China changed

7:05

the landscape of business

7:08

across the world 30

7:10

years ago . What China did with setting

7:12

up the manufacturing out there your Nikes

7:14

, your clothing , your iPhones

7:17

everything manufacturing went to China , and

7:20

that freed up so much capital . Us

7:22

businesses got extremely profitable

7:25

. You couldn't be a

7:27

CEO and not

7:30

say the word China in your earnings call . It

7:32

was that important , like how we

7:34

see earnings calls today , where it's

7:36

just like AI , ai , ai . A

7:38

year ago it was metaverse , metaverse , metaverse . Before

7:41

that it was crypto . We've always had

7:43

these big trends , but

7:45

the trend of China was there

7:48

for like 30 , 35 , 40

7:50

years since the 1980s . So

7:52

huge , huge unlock that

7:55

Asia provided to the West

7:57

Exactly .

7:58

And I think when we look

8:00

at how our partnership

8:03

has evolved over the years , it's

8:05

definitely on a downtrend

8:08

towards partnership . As I mentioned

8:10

, opening was

8:12

the increasing trade tensions between

8:14

US and China that has been

8:16

more reflecting with how much we're

8:18

importing from the country . In

8:21

almost a lot

8:24

of categories even electronics dude

8:26

the share that we import

8:28

from China is now decreasing

8:30

. Some interesting

8:32

numbers there , looking at US

8:35

machinery imports decreasing from 25%

8:37

to 21% in the same period of

8:40

2023 . It's not

8:42

like a huge number to think about , but if you think

8:44

about how much volume that is

8:47

, that's billions of dollars , billions

8:49

of dollars of trade happening between US and China . So

8:53

where really is

8:55

the US going to start looking for

8:57

its products ? As you mentioned , over

8:59

the last 30 years we've been looking at China to say

9:02

, look , I want to unlock

9:04

my margins , let's go to China

9:06

, let's make this thing cheaper . Where

9:08

are they going now for this stuff ? And

9:12

I think that's where this series is really

9:14

going to shed some light on the

9:17

fact that because this relationship

9:19

from the two largest trade

9:21

partners there out in the world , these

9:25

increasing tensions , are pushing

9:27

us toward a direction where we

9:30

may have to make a little more complex

9:32

supply chains than we have today . Maybe

9:35

we have to get our smartphones from somewhere

9:37

else . Maybe we have to get our tissue paper from somewhere

9:39

else , like things

9:42

are changing once again

9:44

and countries

9:46

like the US are starting to look elsewhere

9:49

to try to build those things

9:51

. Where's the next manufacturing hub

9:53

going to be ? Where's the next place I

9:55

can get raw materials to get processed

9:57

Like now that we're looking at this

9:59

whole electric revolution

10:01

that also became a topic of

10:03

discussion , or supply chains talk ? Like

10:06

we have a risk there where a lot

10:08

of the raw materials that come in for

10:10

processing are manufactured in China

10:12

and China is kind of leading that race . More

10:15

than 50% of EVs sold in the world

10:17

are sold in China . That's insane , dude

10:19

, that's insane .

10:21

The raw materials , all of that , and

10:23

I think what really shed light

10:25

as to how dependent

10:28

the whole world is with the whole

10:30

China trade is with COVID . Right

10:32

, we found out , everything

10:35

that we use in the West , in the

10:37

US , in Europe , comes from China . So

10:39

your medical equipment , your PPE

10:42

stuff , your gowns , your testing

10:44

kits , you know all of that is manufactured

10:46

out there , and so the plan was okay

10:48

. We are too reliant

10:51

on this one source . How

10:53

do we start increasing some diversification

10:56

? Would it be Vietnam ? Would it be

10:58

Brazil ? Would it be Mexico

11:00

? Would it be Canada ? Would it be India ? So

11:02

countries started exploring other options

11:04

. Yeah , and Mexico has been really

11:07

gaining from this . I

11:09

mean , they share such a huge

11:11

border with the US and

11:14

they are riding this wave of nearshoring

11:17

and that's one of these terms

11:19

that's been making the headlines where the

11:21

US is moving manufacturing and

11:23

production closer to their domestic base

11:25

, and that's the nearshoring right

11:28

. And

11:30

the US gets cost-effective labor

11:32

. They have a free trade agreement . Remember

11:35

China , there are tariffs on

11:37

the trade , so , as a result

11:39

, mexico automatically becomes

11:41

a cheaper alternative .

11:43

Very interesting , dude . Very interesting because

11:45

NAFTA

11:48

, which we've talked about a lot in our

11:50

previous episodes as well , is supposed to increase

11:53

the fluidity of

11:55

trade between the North American countries

11:57

, including Mexico and Canada . But

11:59

a large player

12:02

in that game , canada has always

12:04

been a super large trading partner for the

12:06

US and Mexico . Actually , surprisingly

12:09

, dude , doing this research , I've learned that

12:11

Mexico has been manufacturing cars

12:13

since way back . They have the capability to , they

12:15

have the intellectual capital to be able to do

12:17

that . So it's an interesting

12:20

but obvious first choice

12:22

, I think , for the US to participate

12:25

in nearshoring a lot of these activities . It's

12:28

interesting because the percentage

12:30

US goods imported

12:33

from other countries that

12:37

percentage for China has been going down

12:39

since trade tensions has been rising , okay

12:42

, meaning we've been importing less , basically

12:44

, from China ever since that phenomenon has been happening

12:46

and slowly , nobody's

12:48

been paying attention to the freaking Mexico and how

12:51

much we're importing from Mexico . Dude , they

12:53

are now odds as

12:55

far as June 2023 of this

12:57

year with how much we import

13:00

from China . Wow , that's

13:03

actually insane .

13:05

Like comparable Mexico and China

13:07

this year .

13:08

Yeah , that's an insane

13:10

stat to think about , because Mexico

13:13

is now a major trading

13:15

partner for the US , like

13:18

that's a lot to say , and I

13:20

think the industries

13:23

developing in Mexico today are

13:26

sort of not exactly

13:28

mimicking how China does

13:30

. You know their very low cost labor

13:33

, I think now it's like such

13:35

an evolution from hey . Now we don't have to put this

13:37

on a plane necessarily , we could put this on

13:39

a train , you know . So manufacturing

13:41

all of a sudden becomes a little more up . Near short

13:44

is attractive for that reason . There's

13:46

certain things , dude , you can't put on

13:48

a plane right , because it's too heavy . You

13:50

got to put it on a freaking ship . The shipping

13:52

will take long amounts of time . There's

13:55

very high risk right now in ports

13:57

.

13:58

Think about the emissions . I mean there

14:01

are second order effects , but it's

14:03

just makes sense because a

14:05

lot of these you mentioned , mexico

14:08

has been building cars for a long time

14:10

. It's interesting these

14:13

car companies have made huge

14:15

announcements in Mexico , huge investments

14:18

, just this

14:20

year , just this year , and what they are planning

14:22

to do is the product is built

14:24

in the US , but it's finished

14:27

in Mexico , you know . So you can

14:29

offload certain steps of

14:31

the manufacturing process to Mexico

14:33

, steps that does not require that

14:35

level of sophistication . You can actually

14:38

move out there because they've been doing this for

14:41

, you know , 20 odd years . So

14:43

the auto industry has been booming

14:45

. Bmw $860

14:47

million to expand one of the plants out

14:49

there . Tesla Gigafactory

14:52

in Mexico as well $5 billion

14:54

. So huge investments

14:56

, and it hit like historic highs in 2023

14:59

.

15:00

Yeah , it's crazy to think that as well

15:02

, because if you're thinking about exports

15:05

to the US right , that

15:08

accounts for 40%

15:11

of Mexico's $1.3

15:13

trillion economy . Isn't that

15:15

insane ? That's an insane amount . And you

15:17

just mentioned all these manufacturing partners

15:19

, you know , coming in and expanding in Mexico

15:22

. Although manufacturing pretty

15:24

much follows a trend , especially in Mexico

15:26

, of how the economy

15:28

is going , there are other industries that are heating

15:31

up . You know we mentioned financing

15:33

coming in from one

15:35

of our first guests here at . Things have Changed Well

15:37

. Ternium , a company that has

15:41

steel mills for a business

15:43

right , processing steel , has

15:45

also invested $2.2

15:48

billion in construction of a new steel

15:50

mill in Mexico . So it's not just

15:52

hardcore manufacturing , everything else

15:55

from the supply chain . There's a potential for

15:57

them to start building in Mexico

15:59

, which is an interesting shift .

16:01

The theme of our podcast ultimately

16:04

comes down to one thing change

16:07

right . And we're seeing these since

16:09

COVID . It feels like every few

16:12

months you have this radical

16:14

shift taking place right , and

16:16

this is one of those shifts where

16:19

you're starting

16:21

to see alternatives

16:25

to the

16:27

Asia trade which turns

16:29

out to be all these emerging markets

16:32

around the world . You know Mexico is one

16:34

, india is one , vietnam

16:36

is another , cambodia , Brazil

16:39

, and so this whole

16:41

series is us exploring

16:43

these markets and how

16:46

they are leveling up . Next up , actually

16:48

, we will be focusing on Brazil

16:50

specifically . Brazil is not just killing

16:53

it on the football field , and I

16:55

mean soccer in this case . They

16:57

have some really interesting tech

16:59

companies coming out there , from Stoneco

17:01

and Paxiguro and Mercado

17:04

Libre . So

17:06

they are weaving their own story here

17:08

and we cannot wait

17:10

for you to listen to our exploration

17:12

of how the Samba nation is

17:14

dancing its way through changing

17:17

the whole economic landscape . So

17:19

until then , keep thinking , keep

17:22

questioning and , as always , stay

17:24

curious .

17:28

The information and opinions expressed

17:30

in this episode are for informational

17:32

purposes only and are not

17:35

intended as financial investment

17:37

or professional advice . Always

17:39

consult with a qualified professional before

17:42

making any decisions based on the content

17:44

provided . Neither the podcast

17:47

nor its creators are responsible

17:49

for any actions taken as a result

17:51

of listening to this episode .