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Mexico Invests $114 Million to Strengthen Poultry Industry Ahead of US Trade Exposure

Strategic Insights

— 1 min read

The Mexican poultry industry is gearing up for increased competition in 2008, investing heavily in local operations to meet the challenge. Last year, Mexico implemented a safeguard to protect its poultry sector from US imports, imposing a 98.9% tax on US chicken drumsticks and thighs. The tax will be gradually reduced to zero percent by January 2008, in exchange for a US export quota of over 100,000 tons annually. As the safeguard cannot be applied again, the industry has created the Adjustment Plan to boost production capacities, improve bio-safety and health controls, and strengthen the local labor force.

Key Takeaways:

  • Mexico has invested 1.3 billion pesos (US$114 million) in its poultry industry to strengthen local operations.
  • The industry aims to make similar investments each year for the next four years to prepare for increased competition in 2008.
  • The safeguard mechanism, established in NAFTA, allows duty to be raised or lowered to protect specific sectors, and in exchange, compensation is offered.
  • The poultry sector applied a 98.9% tax on US imports of chicken drumsticks and thighs in 2003, which will be gradually reduced to zero percent by January 2008.
  • The US was given an export quota of just over 100,000 tons annually in exchange for Mexico's reduction of the tax.
  • The Adjustment Plan aims to boost production capacities, improve bio-safety and health controls, strengthen the local labor force, and incorporate automatic processes.
  • The plan is designed to help the industry increase its competitiveness ahead of the safeguard's expiration in 2008.

Statistics:

  • 1.3 billion pesos (US$114 million) - the amount invested by the Mexican poultry industry in local operations.
  • 98.9% - the levy imposed on US imports of chicken drumsticks and thighs in 2003.
  • 100,000 tons - the annual US export quota granted to the US in exchange for Mexico's reduction of the tax.
  • 2008 - the year in which the safeguard expires and the industry must be competitive to maintain market share.
  • 4 years - the timeframe in which the industry aims to make similar investments to prepare for increased competition.

Sources:

  • El Economista
  • Corporate Mexico by Internet Securities, Inc.
  • COMTEX
  • COMTEX News (http://www.comtexnews.com)

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