- Mailhot Industries
- By Danny Kucharsky
- In April this year, at perhaps the lowest point during the global economic downturn, Terrebonne, Quebec-based Mailhot Industries officially opened a new $10 million plant in Mexico. Mailhot designs and manufactures hydraulic cylinders for a variety of applications, from construction and mining to refuse and recycling collection.
- A bad move? Think again. “Even though we’re in the recession, our order book in Mexico is solid for the next three months,” says Yvan Morin, President of Mailhot. “In our trade, that’s outstanding.
- Mailhot’s 9,300 m2 facility was financed with the help of an $8.5 million loan from Northstar Trade Finance, one of several companies EDC has teamed up with to assist Canadian exporters and companies that are doing business on the ground in Mexico. Northstar lends money to small- and medium-sized Canadian exporters and affiliates abroad, that traditional banks might turn away, with the loans insured by EDC.
- Mexico’s a key link in the growth strategies for many Canadian companies and Mailhot’s investment is a good example of how Canadian companies are integrating Mexican operations into their North American and global supply chains, with EDC’s help.
- EDC is increasingly active in offering innovative solutions to Canadian businesses and their affiliates in Mexico. For example, last year, EDC established a Master Guarantee program with Scotiabank Mexico. Under the deal, EDC guarantees Scotiabank Mexico loans in Mexico to either importers of Canadian goods and services or subsidiaries of Canadian companies operating in Mexico. Under the agreement, EDC will guarantee up to 75 per cent of the loan amount, to a maximum of USD 5 million.
- “The Master Guarantee agreement with Scotiabank in Mexico supports affiliates’ financial needs in the market,” says Johane Séguin, EDC’s new Chief Representative in Mexico. “It can also be accessed by Mexicans who are buying Canadian goods and services.” Séguin says the program is a unique solution for the Mexican market, that she hopes will eventually by replicated by other financial institutions in Mexico and in other countries as well.
- “This agreement with Scotiabank reflects our shared interest in doing more business in Mexico and growing the presence of Canadian companies in this key market,” she adds. “It also allows us to provide customers in Canada and Mexico with the best end-to-end supply chain financing solutions designed to facilitate international trade and mitigate risks.”
- EDC also recently finalized a re-insurance agreement with Atradius Seguros de Crédito, S.A., the Mexican arm of the global credit player Atradius. EDC can now re-insure 100 per cent of accounts receivable for Mexican affiliates of Canadian companies. This solution could potentially help as many as 2,000 Canadian companies in Mexico.
- “It was something that EDC could not offer directly because of insurance regulations, so this partnership allows us to add more value to Canadian companies and their affiliates by partnering with Atradius to provide them with insurance solutions,” says Stephanie Butt-Thibodeau, EDC Regional Vice-President, Mexico, Central America and Caribbean.
- With all this activity, it’s no wonder that Mexico has been a growing market for EDC in recent years. According to Butt-Thibodeau, EDC supported $1.7 billion in business volume in Mexico under its various programs in 2008, up 22 per cent over 2007. Volume in 2009, however, is so far tracking behind 2008 due to the overall decline in exports caused by the global downturn. In terms of EDC business volumes for developing markets, Mexico is the fourth largest market behind Brazil, China and India. (Overall, Mexico is the fifth largest market for Canadian exports, behind the U.S., U.K., China and Japan.) The number of Canadian companies that EDC supports also continues to grow. Last year, EDC supported 650 companies, a 26 per cent increase over 2007.
- EDC forecasts that Mexico’s economy will likely shrink 6.9 per cent in 2009. But, EDC Chief Economist Peter Hall noted in October that the worst may be over, with several indicators pointing to better times ahead. Business confidence in Mexico is rising and the stock market has recovered almost all of the ground lost in late 2008. Mexico’s international borrowing costs have stabilized, although they are still higher than before the crisis.
- Hall says that the speed of recovery in Mexico, as in Canada, depends heavily on how fast things turn around in the United States.
- Still, while Mexico’s economy has been affected by the global credit crisis, there are many significant long-term opportunities in the market, Butt-Thibodeau says. Mexico is aided by its proximity to the U.S. market and significantly lower shipping costs compared to the Asian market, especially in sectors such as automotive and aerospace where shipping costs are a significant factor. In a challenging economic environment, companies are looking to cut costs and Mexico has a highly skilled labour force with more competitive labour costs than in the United States and Canada, she says.
- Recognizing that there are a large number of opportunities for Canadian companies in Mexico, EDC has recently beefed up its presence in the market, with Séguin leading a four-member delegation in Mexico that also includes a representative in Monterrey. Séguin says it’s a way of increasing the awareness of EDC, maintaining its relationship with key clients and identifying new opportunities for Canadian business.
- “By having a larger team on the ground in Mexico we’re able to bring more visibility and profile to Canadian capabilities,” adds Butt-Thibodeau. “Over the past couple of years, EDC has been increasing its international footprint. For Mexico in particular, in recognition of the size of the market and the number of opportunities, we felt it was important to strengthen our team there in order to be better positioned to support Canadian exporters and to reinforce our commitment to the market.”
- Opportunities for Canadian business in Mexico include the mining, energy, transport, infrastructure, and information communication technology sectors. Other sectors are opening up as well, including the medical equipment supply market. As well, with 14 car manufacturers based in Mexico, there’s a good opportunity for Canadian companies to export to Mexico. “We’re seeing some results of our efforts,” Séguin says. Indeed, as of June 2009, 2,187 firms were registered in Mexico as having Canadian capital, according to NAFTA.
Source: https://www.exportwise.ca/article8
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