Americas Part 1

Canada

Although Canada has a large amount of unproductive land due to the cold climate and the Canadian Shield, they successfully leverage their resources. They have the 3rd largest gas production, 10th largest oil production, fishing (Atlantic+Pacific), and deforestation (timber) for the burgeoning industrial revolution in Europe. They export to the US, China, Japan, the European Union, South America, India, and Russia. Canada's most robust dimension attractiveness is in Politics and Competence, with an overall EPIC grade of A-

According to the Bureau of Industry and Security (.gov), In 2021, the U.S. increased imports of Oils, Minerals, Lime, and Cement from Canada from $60.3 billion in 2020 to $105.3 billion, an increase of 74.8% ($45.0 billion). In 2021, the imports of Oils, Minerals, Lime, and Cement from Canada constituted almost half of the total U.S. imports (47.3%) of those commodities. Feb 15, 2022

In 2021, of the $307.0 billion in U.S. exports to Canada, the top commodity sectors were Machinery and Mechanical Appliances (22.2%), Transportation Equipment (17.0%), and Chemicals, Plastics, Rubber, and Leather products (16.4%).Feb 15, 2022

Demand for supply chain services is growing, along with the need for skilled staff. In today's networked global economy, organizations rely on effective supply chains to remain competitive.

The Ambassador Bridge is the busiest crossing on the Canada–United States border

United States

The United States has been the world's largest economy for 100+ years due to its advantage in geographical location and later on innovation. The Great Plains, coastlines, and naturally navigable rivers (Missouri, Arkansas, Red, Ohio, Tennessee, and Mississippi) make the land the best in the region. The country shifted from agriculture-extractive-manufacturing to services. Recently, the emerging nations of China and India have presented challenges to the US economy. In 2021, the US lost its #1 rank of the world's largest economy in the world to China. The US is focusing on identifying areas of potential weakness in its trade relationships with East Asian nations and is taking action to strengthen supply chain resiliency. The United States overall EPIC grade is an A-

The top 10 destinations for U.S. Exports in 2010 were Canada, Mexico, China, Japan, the UK, Germany, South Korea, Brazil, the Netherlands, and SIngapore.

The top 10 sources for imports were China, Canada, Mexico, Japan, Germany, the UK, South Korea, France, Taiwan, and Venezuela,

Supply Chain Management Market Value (2023) US$ 25.7 Billion

Supply Chain Management Market Forecast Value (2033) US$ 78.5 Billion

Supply Chain Management Market compound annual growth rate (CAGR) - (2023 to 2033) 11.8%

Mexico

We first look into the "golden triangle" as the starting point of Central America. Its economy thrives in oil and gas production, minerals, and a large workforce.

Economy B+

Mexico is a services-based country. Manufacturing automotive, electronics, consumer durable goods, and aerospace. They also have agriculture and produce oil and gas, providing a third of the government's revenue. The population is young and growing--adding to the labor force. They enjoy the United States foreign direct investment (FDI), but a new partner has entered their field: China. Chinese wages passed Mexican ones sometime around 2014 or 2015, which motivated China to move some manufacturing to Mexico for an advantage in labor and FDI. There is a tight relationship in trade with the US and China. 

Politics C+

The ease of doing business in Mexico can have its challenges. They have a cumbersome and slow bureaucratic infrastructure, irregular payments, and corruption is endemic at every level in Mexico. Foreign investors may participate freely and own 100% of any stock company incorporated in Mexico which can attract China to invest. Monopolies and oligopolies dominate the economy. They have a stable political system, but prosecution, enforcement, and sanctions are rare.

Infrastructure B-

Infrastructure lags compared to more industrialized nations but its most extensive in Latin America. The US/Canada trailers are too big and heavy and therefore require smaller trailers for crossing. Rail still needs investment. Air transportation is their strongest infrastructure as they contain the largest airport networks in the world. Major cities have access to utilities but have poor telecommunications connectivity.

Competence B-

Competence is where there has been the most potential for catapulting their positioning globally. There is a growing working age population and available labor pool, but they face some challenges due to their shortage of trained workers. They also have low automation and low education which consequences in low productivity.

How can Mexico leverage its advantageous elements to outweigh the challenges it faces?

Mexico is still one of the largest economies in the world, ranking #13. Mexico has been strategically used by Asian countries for their raw materials and components, finishing goods with cheap labor, which then gets distributed to the US and Canada without import taxes due to NAFTA. In July 2020, NAFTA was replaced with the United States-Mexico-Canada Agreement (USMCA) to seek more mutually beneficial trade to mitigate the decline of US manufacturing and the reduction of Mexican wages. Consequently, China's resilience led to a new plan to move their manufacturers to Mexico to take advantage of the land and labor that benefited Mexican wages. With an increase in FDI inflows, the government has planned to invest in infrastructure (i.e., the inauguration of Felipe Angeles International Airport in March 2022) and automation for a more effective and efficient supply chain. Mexico's location and lower labor costs compared to China have made it an increasingly attractive destination for investment (i.e., a $5B new gigafactory plant for Tesla in 2024) despite security concerns, infrastructure limitations, and regulatory obstacles. Mexico also shows a steady increase in its logistics performance. Therefore, Mexico can leverage its advantages to outweigh its challenges with its labor force, resources, and some help in its political sector.

According to the Smart Border Coalition: The San Ysidro (San Diego) and El Chaparral (San Diego and Corpus Christi) ports of entry jointly constitute the world's busiest land border crossing. 40% of the total population residing in communities along the U.S.-Mexico border. There are more than 106 million individual crossings.

 https://www.bsigroup.com/globalassets/localfiles/en-us/screen-reports/2020/bsi-supply-chain-risks-mexico-business-tips-during-covid-19-outbreak.pdf 

Costa Rica

Moving down to the isthmus of Central America, we have Costa Rica. They are a diversified exporter and have an attractive investment destination (due to their skilled labor force, long-standing democratic stability, and world-class companies) with established operations (like Hewlett-Packard, Intel, and Microsoft).

Economy C+

Costa Rica's leading economy is agriculture, which includes tropical fruits and vegetables, beef, sugar, rice, dairy products, ornamental plants, and timber. But in recent years, there has been a shift from commodities to IT hubs due to their free trade zones. Also, tariffs on exports to China and the EU are nearly eliminated. Manufacturing and US support services have been the main priority. A prolonged population boom has attracted FDI from China and the US. There is a trade deficit mainly from oil imports, but tourism partially offsets the growing trade deficit.

Politics B

Bureaucratic inefficiencies result in administrative delays, but procedures are fair and transparent. Adding to low corruption, Costa Rica is a trusting place to do business, but launching takes time and effort. Their legal and regulatory framework is strong and transparent, but the judicial system needs to be faster and simpler. FDI licensing requirements have decreased, investments are secure, and contracts are upheld. One highlighting feature about Costa Rica disbanded their armed forces in the 1940s.

Infrastructure C-

Road transportation is dangerous as there are robberies on highways, which have caused truck freight to shift to air freight. Rail transportation is minimal, but it does link Puerto Limon and Puerto Caldera for direct access to the Pacific Coast and the Caribbean. Sea transportation has trade relations worldwide, with the most trade in the US, Europe, and Asia. There is congestion in air transportation, which reduces the reliability of receiving freight at airports. There is a solid utility infrastructure, and there is investment in terrestrial microwave networks and satellites for multinational services like 5G (2023).

Competence B-

The workforce is advantageous because they have a skilled and high-quality workforce. There is an increase in productivity level. The trade unions define minimum wage, and the unitization is low in the private sector. Costa Rica has the highest literacy rates in Latin America, and English is commonly spoken. There is free primary education and vocational solid training for leading trades and technical occupations. Some strengths of a SCM include international shipping and tracking and tracing. In contrast, there are some weaknesses in the logistics services (HR, lack of coordination), and customs has complex documentation where 50%+ time is spent on preparation of documents.

How can Costa Rica leverage its advantageous elements to outweigh the challenges it faces?

Costa Ricas' economy and infrastructure rank the lowest due to their trade deficits and congestion at the airports (which can weaken international shipments). With FDI increasing, they can plan to fund for a better airport infrastructure. Overall, their logistics performance has been steady increasing which is a good sign of their long-term improvements. In conclusion, Costa Rica has some advantageous elements and with time could start to outweigh their shortcomings.

Panama

Lastly we have Panama at the end of the isthmus which has one of the most critical crossroads shipping in the world. The Panama Canal expanded in 2015 to accommodate larger vessels and hosts the crossing of cruise ships between the Caribbean and the Pacific Ocean. 80% of its GDP comes from canal revenues, ship registration, free trade zone transactions, and offshore banking activities. The remaining 20% stems from agriculture and manufacturing. Unfortunately, there has been a drought in the Panama Canal, which has lowered the canal's efficiency and usage since May 2023. It is important to mention that their currency is the US dollar.

Economy B

80% of the GDP in the service sector is due to the Colon Free Trade Zone (CFZ) which is the largest redistribution center in Central and South America. They re-export, repackage, and perform light assembly. The remaining 20% is in mining, agriculture, manufacturing, and construction. Their foreign direct investment comes from the US and newly China.

Politics C+

The ease of doing business is good but their bureaucracy and corruption is not. Administrative procedures can be long, bureaucratic, and plagued with technicalities. The judicial system is inefficient and thought to be corrupt. There is also a widespread of money laundering. Additionally, a security breach caused information to leak that involved individuals tax evaders which forced out the prime minister of Iceland (2016). In contrast, FDI is attractive in Panama because its business friendly. There is easy repatriation of profits and currency exchange, modern procurement legislation, competition and consumer protection system, tax incentives, and low tariffs regardless of where the product is made. Intellectual property rights are a problem due to complaints from Colombia about counterfeit goods from CFZ.

Infrastructure B+

Panama is a world-class freight trader and, over the years, has significantly improved its infrastructure, making that factor its best logistics performance. Improvements in air, sea, and the Panama Canal have been made from 2008 to now (2023). There is an extensive and modern telephone system with submarine cable and two (2) Atlantic Ocean Intelsat earth stations.

Competence C+

There is a young and growing population with a mix of skilled and unskilled workers. There is stagnant productivity even though the country is high labor intensive. Its most likely due to the labor organizations demanding better wages and working conditions. Their education system has challenges in retention due to tuition fees and the lack of educated workers have caused companies to settle elsewhere. Additionally, foreign labor masks workforce education system problems. Over the last 15 years there has been a decrease in tracking + tracing and timeliness which could also have an effect on the decrease of international shipping.

How can Panama leverage its advantageous elements to outweigh the challenges it faces?

Recent data shows that there has been a steady improvement in infrastructure. There has been an increase in customs, international shipping, timeliness, tracking + tracing, and logistics competence between 2008 and 2018, but it shows a sudden drop in 2023, taking the statistics back to before 2014. This drop in logistics performance is most likely due to the COVID-19 pandemic, which exposes the extensive damage an act of God can have in supply chains for years. Additionally, there has been a current drought since August of 2023, and since Panama relies on the services from the Panama Canal, only time will tell when the country can return to an effective supply chain. Therefore, there are no advantageous elements they can leverage at the moment since their whole economy depends on the Panama Canal, but they can have a continuity plan ready that can help the country pick up from where they left off in 2018.

Leading countries of origin of immigrants in Panama in 2020

Colombia 50,702

China 22,427

United States 16,867

Nicaragua 15,517

Closing Notes

In 2013 the Central American Electrical Interconnection System started operating which created a unified C. American electricity grid. This was established to unify resources, support a reliable and affordable power system transformation, and gain cost-effective renewable options in power generation.

Mexico, Costa Rica, and Panama retain strengths from low costs of taxes, land, labor, and capital. An improvement of skillset in SCM is ideal for better competence.