Stronger Mexican peso could pose challenges for US-Mexico trucking
Mexico’s nearshoring wave has helped the manufacturing industry boom across the country, but a strengthening peso and tightening trucking capability could create challenges for cross-border trade with the U.S., experts said.
Matt Silver, vice chairman of cross-border solutions at Arrive Logistics, said the peso’s appreciation against the dollar could impact U.S. shippers and carriers running cross-border freight working with trucking firms in Mexico.
“The most important impact that we’re seeing from the peso’s change is on purchasing transportation,” Silver told FreightWaves. “With carriers in Mexico, they do business in pesos, they pay their expenses in pesos, their employees are paid in pesos. But when the trucking company is moving cross-border shipments, there’s a excellent likelihood that they’re getting paid in U.S. dollars.”
Although the peso’s value has depreciated barely in recent days to about $17.33 per dollar, Mexico’s currency has been on an eight-month resurgence. Around July 28, it reached its highest value against the dollar since late 2015 when it sat at $16.63 per dollar.
The peso’s rally has been supported by the rise of nearshoring — when a manufacturer moves its production operations closer to the product’s end market, together with investors which have been lured into Mexican assets by higher-yielding rates of interest from the country’s central bank.
Silver and Arrive Logistics research analyst Aryan Shah recently wrote a blog post concerning the potential impact the rising peso could have on cross-border freight rates and U.S.-Mexico trade.
Austin, Texas-based Arrive Logistics is a multimodal transportation and technology company providing solutions for each shippers and carriers. The corporate has offices in Columbus, Ohio, Tampa, Florida, and San Antonio, in addition to Guadalajara, Mexico.
“If a Mexican carrier is getting paid 1,000 U.S. dollars a 12 months ago for a shipment, that might need been price 20,000 pesos to them,” Silver said. “Today, that shipment might only be price 17,000 pesos. In order that they’re getting shorted, about 3,000 pesos, roughly.”
Like all business, Mexican trucking firms have monthly fixed costs, which may very well be anything from lease payments on equipment to insurance payments.
“The carriers’ response ultimately will likely be: ‘So long as I’ve got my fixed cost, I’m not going to only eat that change in value of the peso,’” Silver said. “So carriers are going to start out asking for rate increases from shippers.”
Silver said shipments from factories and suppliers from central and southern Mexico to the U.S. may very well be essentially the most affected by rate increases attributable to the peso’s appreciation against the dollar.
“The further south, the longer miles, the longer cost, the larger impact you’ll see from that impact on the exchange rate,” Silver said. “Something shipping out of Monterrey, Mexico, has a brief transit, less fuel costs, the associated fee is lower to operate, you simply don’t feel the impact as much as you do from southern Mexico, and there’s lots more that’s getting produced in southern Mexico without delay.”
The U.S. imports all the pieces from fresh produce, home appliances, computers, electronic components, medical equipment, furniture, auto parts, vehicles and more from Mexico.
America’ land borders with Mexico and Canada include a few of the busiest and economically vital supply chains in North American supply chains. Southern border ports of entry corresponding to El Paso, Pharr and Laredo, Texas, in addition to Otay Mesa, California, handle billions in day by day cross-border trade.
Jorge Canavati, principal at J. Canavati & Co. LLC, said when the peso rises too high in value against the dollar, it makes exports from Mexico to the U.S. costlier.
“The peso has to search out a balance. It’s overvalued without delay, and that is causing exports to change into very expensive,” Canavati said. “Exports are losing competitiveness.”
J. Canavati & Co. is a San Antonio-based company that gives international logistics and trade consulting. Canavati said he believes the peso will eventually find a gradual balance again against the dollar, once the U.S. finds its own economic footing.
“I feel it’s going to balance out, however the peso could perhaps go lower against the dollar at one point by 12 months’s end,” Canavati said. “Once things also balance out in the US with the rates of interest, hopefully we’ll see more balance with the peso.”
Tesla seeks $100M to construct Semi truck charging stations
Austin, Texas-based Tesla is reportedly searching for almost $100 million in funding from the federal government to construct nine charging stations for its all electric Class 8 Semi truck, in accordance with Bloomberg.
The charging stations would stretch along an 1,800-mile corridor along the U.S.-Mexico border, from Laredo to the electrical automaker’s factory in Fremont, California.
The plans were discussed in emails from Tesla executives to the Texas Department of Transportation between May and early June, Bloomberg said.
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Tesla reportedly told Texas officials that the project could qualify for federal grants being distributed under the Bipartisan Infrastructure Law and requested Texas officials to incorporate the charging stations within the state’s funding application, which was submitted last month.
Tesla proposed that every station be equipped with eight 750-kilowatt chargers for Tesla Semi trucks and 4 chargers for Class 8 trucks made by its competitors.
The charging corridor would help Tesla connect its U.S. automotive plants with the $5 billion factory it’s constructing near Monterrey, about 150 miles from the U.S.-Mexico border. The factory is scheduled to open in 2025.
OmniTRAX taps former Amazon exec to steer Texas railroad
OmniTRAX Inc. has named former Amazon global supply chain executive Shariff Gonnella president of the Brownsville & Rio Grande International Railway LLC (BRG).
BRG provides rail transportation to facilities situated inside the 40,000-acre Brownsville Navigation District on the Port of Brownsville in Texas. It includes cross-border rail interchanges that hook up with the Union Pacific and CPKC railroads and serves as a strategic import and export artery between the U.S. and Mexico.
“Texas has continued to shoulder record-breaking freight volumes — stretching shipping infrastructure capability to its limits — and Brownsville offers global shippers the much-needed optionality and efficiency to achieve worldwide markets,” Sergio Sabatini, OmniTRAX’s president and COO, said in a news release. “Shariff’s experience creating international infrastructure capability and his vision to remodel the BRG right into a dynamic, global freight gateway are the perfect skills to assist us meet the continuing demands of nearshoring and international trade.”
Denver-based OmniTRAX is a transportation and transportation infrastructure holding company. It primarily owns or operates railroads, with a network of 25 regional and short-line railroads in 12 U.S. states and three Canadian provinces.
Cargo truck processing returns to Texas border crossing
U.S. Customs and Border Protection announced business cargo processing is slated to return on Monday on the Marcelino Serna port of entry in Tornillo, Texas.
Trade officials anticipate about 300 trucks every week will use the port once service resumes.
The cargo facility on the port of entry originally opened in March 2016, but trade operations were suspended a 12 months later due to limited traffic, in accordance with a news release.
The choice to resume business cargo operations was made following the June 2023 completion of the nearby Samalayuca toll road in Mexico. Tornillo is situated about 40 miles south of El Paso.
The Samalayuca toll road/highway serves as a route for cars and trucks traveling from northern Chihuahua state to the border crossing on the Marcelino Serna port of entry. Upon completion of the toll road, trade officials requested CBP to resume business traffic through the port.
“CBP stands ready to satisfy the growing needs of international trade in our region,” acting CBP Director of Field Operations Ray Provencio said in an announcement.
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