Many of our private equity clients with portfolio companies, factories or suppliers in Mexico have asked for our point of view on the potential U.S.-Mexico border closing. Based on TriVista’s experience, and recent discussions with several Maquiladoras (U.S. companies based in Mexico), we have outlined our perspective on several scenarios and outcomes.

Background:

The current U.S. administration has been strictly enforcing immigration laws. Recently it has been threatening to close the border between the U.S. and Mexico. This closing is meant to address illegal border crossings by individuals coming from Mexico and Central America, specifically from Guatemala, Honduras and Nicaragua.

Our Perspective:

TriVista believes the threat of closing the U.S.-Mexico border is a strong negotiating tactic the U.S. government is using to encourage the Mexican government to enforce its immigration laws and block the large groups of Central Americans from reaching the U.S. border. These “migrant caravans,” which in some cases exceed 10,000 people, are the main topic of dispute at the moment.

Mexico’s government has historically responded to U.S. demands or requests quickly. An example was the difficult task of negotiating the new NAFTA (USMCA) which was completed successfully.

Scenarios to Consider:

 Worst Case: The U.S. Administration orders a border closing

• Our predication, and some of Mexico’s Maquiladoras, is that the closure will not last long, perhaps a day or even a few hours. Mexico does not want the border closed as its economy relies heavily on trade with the U.S.

Moderate Case: Parts of the border will be shut down

• If that is the case, Maquiladoras will likely have priority for crossing the border as their products are coming to the U.S. for assembly or production. The next priority would likely be extended to Mexican companies
• Possible points that could be closed include Eastern points of entry such as Matamoros, Reynosa and Nuevo Laredo due to favorable weather conditions which makes living conditions easier for illegal migrants. Juarez and Tijuana have been more difficult entry points for illegal migrants for several reasons including extreme weather in Juarez, and both cities’ reluctance to accept or welcome Central American immigrants
• If parts of the border are closed, we would expect Maquiladoras in the Eastern points to temporarily re-route shipments through Central or Western points of entry

Best case: Mexico will comply with U.S. requirements and eliminate or reduce Central American caravan traffic, resulting in no border transit issues

Summary:

TriVista and other Mexico-based entities with whom we work believe if the border is closed it will be for a very short duration, or specific points of entry will be temporarily closed.

Contact Us:

To discuss border closing or growth strategies in Mexico, contact us at 1.949.218.4830 or info@trivista.com