Mexico turns to trucking to fine tune its economy

Across the Border
Mexico turns to trucknig to fine tune its economy

Mexico’s commercial and industrial leaders have grown extremely critical of President Vicente Fox for what they perceive as a lackluster performance characterized by economic inactivity over the past three years. Mexico had zero growth in its gross domestic product (GDP) in the second quarter, and things aren't looking to get any better any time soon.

Yet, on July 3, President Fox stunned everyone by adopting a “financing, modernization and competitiveness” program to reactivate the cargo trucking industry — a program presented to Fox by Leon Flores, the new president of the National Cargo Carriers Chamber (Canacar) (www.canacar.com.mx), the Mexican trucking association.

On the day Flores was inaugurated, President Fox instructed the secretaries of finance, economy and transportation to abide by the program presented by Flores on behalf of Mexican motor carriers.

Fox ordered Pedro Cerisola, Mexico’s transportation secretary, to “debureaucratize” all registration proceedings, including the expediting of driver licenses to qualified drivers, a red tape nightmare which takes as long as two months to complete. Cerisola was also instructed to address the rampant corruption within the federal highway police department, which operates under the secretary’s authority. Carriers are the main “donators” to the police department — a polite way of referring to the bribes the police collect from drivers.

Fox also told Fernando Canales, the country’s economy secretary, to come up with the appropriate studies to solve cross-border cargo problems.

President Fox’s major step was to order Francisco Gil Diaz, Mexico’s finance secretary, to draft a $22 billion 10-year program aimed at providing truckers with sufficient financing to refresh their vehicles (the average age of Mexico’s trucks is currently six-and-a-half years old). This effort is expected to not just bring new trucks on the road but to also reawaken the ailing truck manufacturing industry.

The three secretaries were given 30 working days to develop their bureaucracy-dismantling international and financing programs.
Flores says his proposals are nothing new, but until now there has been no political will to enforce them. Flores feels what swung President Fox to the association's side was the simple, direct manner in which the recommendations were presented — something it took Canacar’s board more than a year to draft.

“As we understand their instructions, these secretaries have to participate in the process and present something for which they will be responsible,” says Flores. “The programs are now official, and we will be fine-tuning our ‘junkization’ program.”

Under this program the Mexican government will supply necessary financing to enable the automotive industry to buy all trucks 20 years or older. Truckers will then use this money as a down payment on new equipment.

“Manufacturers will simply junk the old trucks,” says Flores. “Those old rigs won’t roll any more.”

The move is expected to fully reactivate part of the overall national economy.

“This is a win-win program,” continues Flores, “because just as thousands of carriers need new trucks, the truck manufacturing industry needs them as well. Today, assembly plants are only working at 60% of capacity. They need the help, too.”

Flores recently held a private heart-to-heart conversation with President Fox. “I told him it was extremely important for the government to enact this program in order to revive the economy,” says Flores. “Now, for the first time in history we have a complete program — not just for transportation, but one that reaches into wider areas of the economy.”

Another key proposal to which President Fox acceded is to have every truck in Mexico legalized and paying taxes, and not to issue transit permits to trucks that have been illegally imported from the U.S.

“I also asked the President not to issue license plates to illegal trucks,” Flores continues, “unless the owners can prove the trucks were legally imported and they are paying taxes on them.”

On this issue, President Fox went one step further and ordered the secretary of transportation not to issue new cargo permits, except for new trucks. The cargo carriers who attended Flores’inauguration — more than 1,000 of them — wildly applauded the statement.

“On my request, the President also ordered simplifying the administrative proceedings to get permits, putting an end to useless and absurd red tape,” Flores adds. “This bureaucratic paperwork does not have to mortify society.”

To Flores, justice is finally being done. “These programs represent the requests of a cargo industry that provides a living for 4 million families. We struggle 24 hours a day, seven days a week, year round — our business is to keep our trucks rolling, not parked.”

One reason Mexican carriers appealed for government financing is that permits to operate a cargo truck are viewed by the government as a “federal public service concession.” The Mexican government has a monopoly over cargo carrying, which it has not exercised. Flores says it is the duty of the government to finance — not subsidize — road cargo to spur the economy.

Through Nacional Financiera — the government's financing arm, which lends money through commercial banks — financing is feasible. Commercial banks are reluctant to lend money to small carriers, and truck manufacturers want to give credit only to large transportation companies.

“This is why Nacional Financiera’s endorsement is so important,” explains Flores. “We are creating a financing fund in which for every peso deposited, the government will match it with another one.” Flores hopes to see the financing of as many as 20,000 trucks a year.

Now that the program to modernize Mexico’s cargo industry has been approved, the mood among carriers is one of hope. How fast the program moves ahead will depend on the ability of the secretaries to meet President Fox’s mandate. LT

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September, 2003

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