Here’s How to Leverage Free Trade Agreements Between the US and Latin America

Avoid Import Tariffs

The US has imposed tariffs on imports from certain countries, such as China, increasing costs for companies that rely on manufactured products from there. However, many products manufactured in Latin America are duty-free because of Free Trade Agreements. In addition to Mexico, the US has a free trade agreement with countries like Colombia, both of which share proximity to the US and high quality manufacturing with competitive pricing.

Leverage Distance From the US

FTAs with countries like Mexico and Colombia have lower customs and duty fees, meaning savings for certain US companies. Geographical proximity to the US helps decrease transportation costs and lead times compared to buying from enterprises in Asia. Shorter lead times minimize the need to maintain costly safety stocks and mitigate risks associated with supply chain disruptions.

Established Manufacturing Culture

Countries like Brazil, Mexico, Colombia, and Argentina have a long history of manufacturing, with large original equipment manufacturer (OEM) ecosystems that meet US quality standards. The automotive sector in Mexico comprises about 20% of the nation's GDP and employs over one million people. Mexico and Colombia have state-of-the-art manufacturing companies with the technical expertise, technology, and world-class quality standards.

Risk Mitigation

International trade is dynamic, everchanging, and therefore risky. Critical products and components are at imminent risk from geopolitical conflict, trade disputes, severe weather due to climate change, and disease. Much has changed in recent years, prompting executives to reevaluate supply chain strategies. The overdependence on China as a source of manufactured products needs to be reevaluated.