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As Its Economy Improves, Mexico Buys More U.S. Forest Products
By Liliana Caetano Bachelder
Mexico has traditionally been the single largest market for U.S. forest product exports to Latin America, but during the economic crisis that began in December 1994, sales took a beating that will be long-remembered.
The peso devaluation was an especially
serious setback for Mexico’s construction and domestic
furniture sectors. It increased the cost of U.S. exports, limited
the availability of credit, and raised interest rates.
Consumers who had to deal with depressed wages and rising unemployment reacted by putting new construction plans and furniture purchases on hold. The predictable outcome: U.S. wood product exports fell from $474 million in 1993 to a low of $248 million in 1995.
Since those troubled times, however, U.S. forest product exports have staged a vibrant recovery. Exports to Mexico reached $367 million in 1998, an increase of 26 percent over 1997 exports of $292 million. Consumer spending has increased and current demand for furniture is strong.
The bounce-back in domestic demand has been notable. It has increased the importance of this market sector compared to the export-oriented sector of Mexico’s furniture industry, which actually benefitted from the peso devaluation.
Not only did Mexico’s maquiladora manufacturing sector receive a shot in the arm, but U.S. hardwood exports to Mexico–important furniture inputs--are up sharply. The two-way process has recently picked up steam, with the manufactured furniture returning to the United States in the form of finished goods.
U.S. hardwood lumber exports reached a record level of over $80 million in 1998.
Fed by Mexico’s spiraling tourism industry, new construction also provides opportunities for U.S. wood products. The government of Mexico has also appropriated more money for the construction of new infrastructure projects.
Few would question that U.S. wood product sales to Mexico have benefitted from the North American Free Trade Agreement (NAFTA). NAFTA’s market access provisions seem to have softened the impact of the peso devaluation on U.S. wood exports by reducing or eliminating tariffs on U.S. forest product exports to Mexico.
NAFTA immediately eliminated tariffs on 15 percent of U.S. wood product exports, most significantly on softwood lumber when the Agreement went into effect in January, 1994.
NAFTA also created a forum for the discussion of sanitary and phytosanitary issues that have periodically hampered U.S. wood trade with Mexico.
Mexico still faces serious recurring effects of chronic structural weaknesses in its economy. In September 1998, Mexico endured another significant devaluation of the peso. Yet export levels of U.S. forest products are recovering and most products show growth.
The U.S. forest products industry can continue to capitalize on supplying the strong market for furniture, flooring and moldings, as well as a burgeoning tourism industry and the competitive export manufacturing sector.
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The author is an agricultural economist with the Foreign
Agricultural Service’s Forest and Fishery Products Division.
Tel.: (202) 720-2409; Fax: (202) 720-8461, E-mail: bachelder@fas.usda.gov
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