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Mexico Aims To Restart Critical Factories And Supply Chains By Monday

Mexican President Andrés Manuel López Obrador announced on Wednesday morning a plan for the "gradual" resumption of economic activities.

Benzinga · 05/14/2020 12:44

Mexican President Andrés Manuel López Obrador announced on Wednesday morning a plan for the "gradual" resumption of economic activities.

The plan includes restarting factories in the automotive, mining and construction industries by as early as Monday. Other parts of Mexico's economy and social systems — such as public schools — could reopen by June 1.

"It is not a return to normal, it is the return to the new normality," Obrador said during his daily press briefing. "There have already been changes, reality has changed, it is another reality, and we have to start this stage with other procedures, other methods, other attitudes, other behaviors."

Mexico's reopening will include a new four-color coding system in place by June 1 to tell people and businesses what activities will be allowed.

Obrador said Mexico's lockdown — which began March 30 — will remain in place, but by Monday, industries like construction, mining, and car and truck manufacturing will be allowed to operate under certain health protocols to protect their workers.

Auto manufacturers in the United States are still heavily reliant on Mexican factories. U.S. officials and automakers have been pressing Obrador and his administration to reopen factories that are crucial to North America's supply chain.

Christopher Landau, the U.S. ambassador to Mexico, launched a Twitter campaign last month prodding the Mexican government to reopen factories.

"There are risks everywhere, but we don't all stay at home for fear we are going to get in a car accident. … The destruction of the economy is also a health threat," Landau tweeted on April 21.

Volkswagen's Mexico unit said it is planning to reopen its assembly plant in Puebla and its engine factory in Guanajuato City on June 1.

General Motors Company (NYSE: GM) and Ford Motor Company (NYSE: F) have not announced when they will reopen their factories in Mexico.

During 2019, the U.S. imported $25.5 billion in auto parts from Mexico and exported $16.6 billion.

Laredo, Texas, was the top international port of entry for auto parts imports and exports from Mexico in 2019, accounting for $7.01 billion.

Tony Payan, director of the Houston-based Center for the United States and Mexico at the Baker Institute, said the reopening of U.S.-Mexico supply chains will likely be gradual.

"In regards to the trucking industry, logistics and binational trade will recover, but trucking and logistics is a factor of the rest of the economy," Payan said. "Because if people are not consuming, the orders are drying out. Therefore factories are slowing down and therefore logistics, warehousing and transportation is also slowing down."

Photo Credit: General Motors