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Critical Concerns Around Compliance & Geopolitical Uncertainty Featured in Redwood’s Cross-Border Index

Redwood Logistics (Redwood), one of the fastest growing fourth party logistics (4PL) providers in North America, has pinpointed several key issues that are significantly influencing cross-border commerce. These concerns include the forthcoming elections in both the US and Mexico, increased border security protocols and rigorous inspection procedures, all of which are hindering trade flow and leading to considerable trucking delays.

Mexican trucking companies are also currently in limbo, anticipating new investments in Mexico’s infrastructure and awaiting the resurgence of demand in the United States. The situation is exacerbated by the strengthening Mexican peso against the US dollar, which may undermine the competitiveness of Mexican exports.

“Compliance and trade regulations, such as the ‘Carta Porte,’ are crucial to ensuring the swift movement of goods across the border,” said Jordan Dewart, President, Redwood Mexico. “A balanced approach that prioritizes trade efficiency while addressing immigration concerns responsibly is going to be crucial to keep cross-border trade flowing seamlessly.”

Further analysis indicates that the recent pivot from cargo inspections to immigration enforcement has continued to escalate freight wait times substantially at southern border crossings. The shift in focus from quick transportation to thorough inspections threatens the fluidity of cross-border trade, as initially noted in Redwood’s 2023 Q4 Redwood Cross-Border Index.

“Adjustment to these new compliance measures is imperative to sustain the robust trade relationship between Mexico and the United States,” added Dewart.

On top of increased border compliance, Mexican trucking companies find themselves in a challenging holding pattern, eagerly awaiting the ripple effects of new investments in Mexico’s critical infrastructure and a resurgence in demand from the United States. This sense of anticipation stems from the hope that these developments will spur economic growth and enhance trade facilitation. Yet, the current uncertainty surrounding the timeline for these improvements and the recovery of US demand leaves these companies navigating a precarious balancing act—striving to maintain operational readiness while managing the financial strains associated with prolonged periods of inactivity or reduced capacity.

“The current holding pattern on manufacturing in Mexico, awaiting US demand recovery and infrastructure investment, places Mexican trucking companies in a precarious position,” stated Dewart. “It’s a critical moment for us to seek innovative solutions and maintain flexibility to adapt quickly to changing market demands.”

Finally, the continuous strengthening of the Mexican peso against the US dollar presents a significant challenge for Mexican exporters. A stronger peso increases the cost of Mexican goods abroad, potentially diminishing their competitiveness in the international market. This shift in currency valuation could deter foreign buyers, leading to a decrease in demand for Mexican exports. The situation underscores the importance of closely monitoring currency trends and implementing strategic measures to mitigate the impact on Mexico’s export-driven sectors.

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