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Mexico

The fact that 2024 is an election year in both Mexico and the USA only adds to a challenging situation for recyclers in Mexico already faced with low scrap volumes.

The country’s minimum wage increased 20% this year and Congress is considering measures that could lead to further steep increases in labour costs, including: 20 working days’ paid paternity leave on the birth or adoption of a child; doubling the Christmas bonus from 15 to 30 days’ pay; and reduction of the working week from 48 to 40 hours. Since such changes would win votes, there is a strong probability that all these proposals will become law. This would create a major challenge for the Mexican recycling industry, which is more labour-intensive than its US and European counterparts and which still relies on medium- and small-sized yard operations that do not have the capital to invest in the technology needed to replace labour.  

The strength of the Mexican peso continues to be a headache for the economy. Mexico’s export industry and foreign investors, who generally budget in US dollars, are seeing higher costs owing to a combination of inflation and a lower dollar value. Mexico’s revenues in US dollars now buy far fewer pesos than before. And as money remittances from Mexican migrants who work in the USA contribute 4% of Mexico’s wealth, a strong peso also affects the budgets of families supported by relatives working north of the border.  

At the time of writing, the peso stands at 16.68 to the US dollar - below the 2023 average of 17.73 and the 2022 average of 20.12.

In the USA, the combination of economic conditions, trade wars and an election year have given a push to protectionist measures. Fourteen US-based extrusion companies filed a trade case against 15 countries - including Mexico - in October last year and, earlier this month, the US Department of Commerce announced preliminary countervailing duties: apart from two Mexican operations (one owned by a US firm) which were hit with a 77.82% tariff, Mexican extruders would attract tariffs of between 0.19% and 1.68%.

While no tariff at all would have been better, the trade case may end up being a blessing in disguise for Mexican extruders because they may replace the volumes that the USA is currently importing from countries on which it imposes higher tariffs. However, the coin is still in the air because the trade case is still open; preliminary anti-dumping duties should be announced by May 1 and the final countervailing duties are expected by July 15.

Besides dealing with the challenges set by Mexico’s own economy and policies, its industry will need to navigate an uncertain geopolitical scenario in which trade wars may lead to measures that hamper competition.