How can geopolitical tensions reposition Mexico in the global chemical market?

Mexico could become a regional focal point for manufacturing, provided that tariffs tied to local content requirements are not imposed. However, Mexico’s potential for attracting new producing facilities in the chemical sector is somewhat limited because of the regulatory challenges. Furthermore, many of the required inputs for chemical production come from third countries.

The industry must stay ahead of the curve, with the context changing rapidly. While tensions can present opportunities, they will undoubtedly bring challenges and delay decision making. 

How is the sector adapting to disruptions in supply chains?

First and foremost, everyone is striving to think and act in the short term. Many important decisions will be made regarding both bringing production into the region and relocating from it. Shorter decision times benefit Chemlogis because of our flexibility and agility in service.

COVID-19 taught us that “just in case” is more important than “just in time”, so resilience has become a paramount criterion of supply chains, even above cost. Some features of the big players, such as product traceability, reliability, and specification, are crucial, and many mid-sized and small actors have incorporated these procedures. 

Moreover, M&A and producer consolidation have removed many supply sources from the market and, with all the planning needed by manufacturers to conduct global purchases, greater flexibility and a wider product offering are essential.

What is the advantage of being a mid-sized company?

Larger distributors lack our versatility, as they do not bring the flexibility nor the assets to produce very specific mixes in very specific sizes or formats, for instance. They require large volumes to justify these expenses. In addition, the notion that big players only play among themselves is outdated, given that big distributors normally do not want to get involved with specialties, because they entail marginal turnovers for them.

The distribution business seems to have low barriers to compete since anyone can open an outlet and start selling goods, but knowing your suppliers, the industry, the caveats for each product plus and earning recognition from your counterparts is the hard part. This industry is about being known, and if you are not, you are irrelevant. Therefore, specialties constitute an opportunity for us, allowing us to bring value to the table and avoid the meager margins of commodities. 

What is the possible impact on the sector of the recent hydrocarbon and customs laws?

We will not be directly impacted, but as a country, we are all on the same ship. If the ship gets stranded it will affect us all. Having said that, it is easy to criticize governmental endeavors, but ruling a country of 130 million inhabitants is not. Nonetheless, I believe Mexico should embrace development and welfare as its guiding principles, which require investment, and they, in turn, demand economic openness with clear and irrevocable policies and rules. Industry and private investment are the vehicle to progress and have to be viewed as the vehicle to a better future for our country. Europe focused too heavily on imposing industrial and energetic restrictions and is now facing the economic consequences of those policies like closures, divestment unemployment and huge internal consumptions and production costs. Regulations are necessary, but they should be constructive and measured vs cost.  We are all on the same boat and we all want it to advance; well-designed regulations will allow that.

What are your views on the future of the sector in Mexico?

I am an optimist, and I firmly believe in Mexico’s potential, but there is still work to do and things to change. The only constant in life is change, and you must continually adapt to developments, watching carefully where opportunities lie, how clients’ needs evolve, and what are the real structural market drivers. Moreover, while technology is key, businesses do not run on auto-pilot.  You have to continuously assess where the wind is blowing and remember that the world we inhabit is physical and for human progress. Thus, despite the predictive capabilities machines offer, human cognition will remain essential; human intelligence will trump artificial intelligence for strategic vision and superior execution.