Uncertainty over NAFTA hasnÔÇÖt stopped MexicoÔÇÖs car manufacturing cities from thriving
SAN LUIS POTOSI, Mexico — During his campaign, Donald Trump called American investment in this city “an absolute disgrace.” He lobbied Ford to stop building a $1.6 billion factory here, and the company acceded.
It appeared that this colonial capital, booming thanks to auto companies lured by the North American Free Trade Agreement (NAFTA), could be undone by the Trump administration’s efforts to gut one of the world’s most profitable free-trade zones.
But after more than a year of strained NAFTA negotiations, the unemployment rate here is approaching zero. On the horizon, a sprawling BMW factory glitters, nearly completed, in the desert sun. Recruiters stalk the main plazas with pleading signs: “We are searching for talent.”
Even as NAFTA talks continue, Mexican cities like San Luis Potosi continue to thrive, a sign of how deeply entrenched the U.S. automotive industry — driven primarily by low labor costs — is in Mexico.
“The feeling we are receiving from our customers is that nothing is going to change,” said Jorge Luis Gonzalez, the manager at a factory owned by Samvardhana Motherson Group and producing hundreds of thousands of rearview mirrors every year for more than a dozen major automobile companies.
Why are cities such as San Luis Potosi thriving while NAFTA’s future remains unresolved? Part of the reason is that Mexico has reshaped the auto industry in ways that cannot be undone as quickly or as dramatically as Trump has suggested.
And increasingly, it appears that trade negotiators are reaching the same conclusion: U.S. officials were optimistic that an agreement with Mexico on key parts of a new North American trade deal would be announced this week and would require more manufacturing work to be done at higher wages, probably in the United States. But experts are expecting concessions for companies already operating in Mexico.