Mexico’s Dependence Challenges – Feb 24

North America

Mexico’s Dependence Challenges 

The ice storms in Texas disrupted natural gas supplies to Mexico, and this revived the question of Mexico’s energy independence. State-run energy company Pemex has focused primarily on oil and left the natural gas sector. And although Mexico is an oil-producing country, it does not have the refining efficiency or capacity to meet its domestic demands. Hence the U.S. meets nearly 75% of Mexico’s gasoline needs.

If the Mexican government wants to build structures to strengthen the energy sector, it cannot do it alone – Mexico needs foreign direct investment. However, since Mexico president, Lopez Obrador came into power, he has made moves that have discouraged investor confidence, such as rewriting gas contracts, canceling electricity projects, and taking steps toward ending subcontracts in the labor force.

It is so dire that the chambers of commerce from Canada and the U.S. have expressed concern over the growing role of the state in economic projects. They have also warned that this could affect investment behavior going forward.

It is time for Mexico to put in place policies that will encourage foreign investors to invest in the energy sector. Energy is not the only commodity Mexico is dependent on. During the Texas ice storm, there was an acute shortage of groceries in New Mexico. This is because many of the sores receive deliveries from Irving, Texas, daily. During the storm, there was a power outage, and warehouses in Texas could not load up trucks. 

In the words of Cherry Singhal, Assistant Professor of Operations and Supply Chain Management at the University of New Mexico, ‘because of the perishable foods, grocery stores are dependent on frequent deliveries from warehouses, and that is where the problem lies.’

To avoid repeat situations, Mexican grocery stores must diversify their procurement sources so they are not stuck when there’s a challenge like this. They must also begin to think of building large warehouses that can store groceries as well. 

Europe 

Germany Supply Chain Overhaul 

Germany is proposing a law that obligates companies to respect human rights in supply chains. Globally, people working in supply chains have suffered labor rights abuses, and communities have been scarred from the impact of environmental damage caused by the mining and industrial agriculture sectors.

How should supply chain professionals, organizations, and professionals involved in these sectors respond? Proactively I must say. We must begin to reassess our operations to ensure that children and adults aren’t suffering from environmental harm, lack of health and safety measures, and labor rights violations. We must investigate and address human rights abuses or environmental harm in their supply chains.

Once the law takes effect, organizations who do not comply will be sanctioned and this will affect overall trade and output, however, we must not wait for sanctions before doing the right thing. 

Europe’s Slow Recovery

In 2020, the EU approved 672.5 billion euros for the recovery and resilience facility. This fund was to help member states recover from the impact of the pandemic. However, even with the approval of this fund, member states will experience recovery at different rates. Southern European countries that rely heavily on tourism may recover at a slower pace as travel and tourism are still heavily restricted. On the other hand, states with sizeable industrial and manufacturing sectors may experience a quicker recovery. 

This highlights the importance of developing the manufacturing, industrial and agricultural capabilities of each country. It is also crucial to strengthen the supply chains that will help these industries thrive. 

The uneven recovery may shine a spotlight on the competition between member states and further politicize the recovery, exacerbating the political and social issues in Europe. If this happens, we may see countries formulating trade policies to favor themselves but ultimately may work against the E.U. as a whole and weaken its hold in global politics. 

North America  

America – Iran Strategy

The Obama administration’s goal in the Middle East was to ensure that Iran did not become a nuclear power. How did he go about this? His administration initiated an agreement with Iran to stop the country from its nuclear weapons program and permit international technical monitoring of the program. If Iran complied with the terms of the deal, U.S offered to allow Iran to normalize its relationship with the outside world and increase its economic well-being. 

However, Trump opposed the Iran nuclear deal and imposed significant sanctions on Iran. He sought to weaken Iran economically and expand the goals of the agreement to cover missiles.

With Biden in power, there have been speculations on his exact stance, and although given American politics, Biden will incline to reintroduce the Obama strategy, it may not be the best solution. 

Withdrawing the sanctions Donald Trump imposed will revive Iran’s economy and may ultimately strengthen its resolve. 

This will affect the U.S aim of securing dominance over the middle east as a world power. 

North America 

Cuba’s Economy Woes

Cuba’s economy seems to be reaching a breaking point. For over a year, there have been anecdotal reports of fuel shortages. Economic problems in the agriculture sector have compromised domestic production and led to shortages. The COVID-19 pandemic killed international travel to the island and thus its lucrative and crucial tourism industry.

Cuban’s economy has strongly been reliant on patrons. In the 15th century, the Spanish first established this client-patron relationship using Cuba as a critical resupply station between the Old World and the New. But as the Spanish Empire faded, so did Cuba’s economic prosperity. After that, Cuba allied with America, but Washington’s heavy-handed political control led to another revolution, and the Cuban economy again fell into disrepair. In 2017, the Trump administration not only reinstated past restrictions but also introduced more severe sanctions against Cuba. 

Right now, Cuba’s major goal for its people is survival. But in what areas can the Cuban authorities be taking action to mitigate and overcome its economic woes? For the Cuban government, it is basically about generating revenues, growing quantitatively and qualitatively, and adopting a strategy that aims beyond mere survival.

As the Cuban government makes efforts to revive its economy, it must lay more focus on its major exports of petroleum, nickel, medical products, sugar, tobacco, fish, citrus, coffee and make foreign policies that will strengthen trade between Cuba and its current trade partners. 

Cuba’s supply chain professionals and the private sector will also need smart regulation that foments competition, eliminates the discriminatory treatment it suffers as compared to the State sector and foreign investors, channels its actions to generate foreign exchange (through investments and trade), and enables it, together to the State sector, to satisfy demand and projects of national interest, and push economic growth. 

 

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