Global Trade This Week – Episode 211
What’s going on in Global Trade this Week? Today Pete Mento and Doug Draper cover:
1:13 -Bajio Region in Mexico as a Major Economic Zone
4:36 -China’s Economic Struggles & Investment
7:43 -Halftime
14:25 -American Soybean Exports to China Drying Up
17:55 -Remember the Importance of Export Compliance
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Unknown Speaker 0:00
Doug, you're watching global trade this week with Pete mento and Doug Draper,
Pete Mento 0:08
Hello everyone, and welcome to yet another International Edition of global trade this week. I would much prefer they were domestic editions, but we do the show where we are. So I'm Pete Minto, and with me is the greatest co host that's ever co hosted. Doug Draper, how are you, buddy?
Doug Draper 0:26
I'm good. I'm good. Pete, thanks for joining across the pond, my friend.
Pete Mento 0:35
Yep. Greetings from Denmark, everyone. And no, you're not having an acid trip. The walls in my room are actually slanted, so that's why it looks that way.
Doug Draper 0:49
Yeah, yeah, I noticed that when we jumped on you had me a little, a little confused there. But anyway, for our audience, there's a little bit of a delay the internet in Copenhagen is good. It's not great. So if there's a, if there's a lag that that is the reason why,
Pete Mento 1:08
yeah, we'll work it out. Alright, Doug, I kicked off the show. So you're the first topic. Hit me, buddy.
Doug Draper 1:13
Yeah, we gotta rock and roll. So major economic zone is developing down in Mexico, Pete, the bayou region is starting to really develop. It's in central Mexico and as it was described to me, it's kind of like Houston, Austin, San Antonio, and it's just north of Mexico City, and it is manufacturing growth. There's investment money flowing in. People are flocking to the region. More people, more money, more consumption with retail. And this region is definitely going to be exploding, in my opinion, in 2026 The interesting thing is that I read a or listened to a podcast where somebody indicated that the city 2026, city of the world is going to be Mexico City, which jives well with this. So, aerospace, automotive, General Logistics to support that. Manufacturing is is really, really rocking and rolling. So it's a region, not a city or a state down there, but it's also driving demand and consumer behavior, right? You get manufacturing, you get growth, and you get investment, which means you get people, and people need to consume. And it's a it's a region that is developing rapidly. I equate it to like China, when everybody in the farms from China came to the coast as things started to develop. So I think it's an important region we need to keep a look, keep an eye out for and that's all I had to say about this one. Pete, I know we're a little stretched for time, so I wanted to get your read. Have you heard about this regional area in Mexico, and what's your take on the growth and development?
Pete Mento 3:08
I've been following Mexico's growth and development very closely now for about 10 years, and we've said this on the show many times. It is it's the next big thing, but it's already a big thing. Mexico's economy has been growing like a weed for about a decade now, and with the tariffs and with the the cutout for usmca qualifying goods, it's only going to grow opportunity for for manufacturing, design, research and development that this country is on the brink of something pretty incredible. So it doesn't surprise me that there's been a massive influence, influx of money, influx of capital, and the rebuilding of this area. I think it just goes to show the power that that particular economy has, benefiting from Canada and Mexico being so close, while at the same time benefiting from the rest of the world realizing that Mexico makes great products.
Doug Draper 4:00
Yeah, it's, it's a region to look out for, for sure, right? I was interested or surprised that somebody that this podcast I listened to said Mexico City is the next big thing, but it makes sense for all the things that you just said, and then I brought brought to attention. So interesting. We'll see how it develops.
Pete Mento 4:20
Well, we're actually close. You. What's that? So we'll watch it. We'll watch it closely. On global trade this week, Doug, Legend of the year, yeah, we'll do a remote show from from that part of the world.
Doug Draper 4:34
I like it. I like it.
Pete Mento 4:37
My first topic is one that I've been I've been waiting to talk about, but I didn't really have an action plan from China that I could I could discuss. China has made the reasonable decision to make massive, massive investments in its own economy, and they're talking about big public works projects, working on deteriorated infrastructure, putting as much money as they possibly. Possibly can back into their economy, and why? Because the trade war is beginning to debilitate their economy. I'm no stranger. In for probably 10 years, maybe longer, I've been letting everyone know that China's economy was tenuous at best. You add covid And now a protracted trade war, they're really in trouble. So they're trying to find ways to replace all those exports, because the domestic consumption is not making up for it, and the exports to the US were a financial lifeline that now is it's just not something available to them. So Doug, you know, this type of of quantitative easing and this type of of pushing money into the economy. It might have short term opportunities, but long term is just compounding the problems China's already in. As much as this might be a good thing for now, I think long term they're going to regret that they did it.
Doug Draper 5:53
Yeah, good point. Two comments on that. One is, is the is the narrative coming out of China, from China, or is it the US is perception, or the narrative that the US wants to push out to the American people about, hey, the trade war is working. Look at the impact it's having. They're not as successful, and we're really impacting their economy. I'm wondering how much of that comes into play. And then the second piece of it is kind of related to that, is that the US is part of the global economy. It is not the global economy. So I would assume that China is pivoting, which we've seen in different reports, to say, All right, well, if the US isn't going to participate in the level that they did in the past, we'll go sell other things to other countries, and we'll do alignment and trade deals with other parts of the world, with other consumers and other countries. So I get it, I'm just a little hesitant, but I want to put that on the side, that how much of this narrative is real and how much it is posturing to benefit the American people, to say what we're doing with our sanctions are working.
Pete Mento 7:16
It's not posturing. It's, it's, it's a necessary fiscal decision their economy, by all measurable accounts, ones that we can actually get access to, and then the anecdotal evidence of what's going on with the US. It's really suffering, and the rest of the world has not been able to make up for the never ending glutton like consumption of the US consumer. So they're hurting, buddy, they're hurting.
Doug Draper 7:42
Yeah, good. All right. Well, that brings us to one of my favorite parts of the show, which is halftime. It's brought to us by CAP logistics. Check them out@caplogistics.com we're appreciative of their support of the show week in and week out. So I know that's not a diet pepsi that you are a diet coke that you just gulp down on. So get your energy and let me hear your first half time topic.
Pete Mento 8:07
So I'm reading the news today, as I always do, and I'm on bbc.com and they have this story about how China, at an air show, had a had a, what do you call it like a, like a demo. They did a demonstration of their new flying cars. So there's a company in China that is making flying cars, Doug, I'll say it again, flying cars, cars that fly, they look like big drones with seats in them. Not the point. The point is, finally, at my advanced age, I'm getting one of the things that was always told in the future, I would have jet packs, flying cars, right? Watches that I could have video conferences on, you know, recreational flights to the moon. We were supposed to have all these things by now. But of course, the flying cars crashed into one another and pummeled it to the earth because they are inherently dangerous as a concept. So that might be why we don't have flying cars. But Doug, one of my favorite Instagram groups or handles, is called Tommy loves retro, and it shows all these 1940s and 1950s and 1960s video clips of what the future was going to look like, right by the year 2000 what was the American home going to look like? And none of that shit has happened. And I feel so let down like I feel personally abbreviated, that these things have not come to pass. You know, we can send people to Mars, but I can't have a flying car or jet pack. This is in a word, bullshit. Doug,
Doug Draper 9:46
yep, well, when I heard of this, yeah, sorry, Pete, I'll let you finish.
Pete Mento 9:53
Oh, no, I'm done. Okay, cool.
Doug Draper 9:55
So Jetsons, you know George and his boy, Elroy, right? They. Immediately, what I thought when you sent this over this morning. And yeah, I love those perspectives. I'll have to get that handle that you mentioned of magic toasters and vacuum cleaners and things of that nature. So I love the fact that they're pushing it out there, years and decades away from it coming to fruition that the infomercials of the 60s had promised us in the year 2000
Pete Mento 10:30
man, it's just not fair. Doug, it's not fair. Hit me with yours, pal, what's your halftime this week?
Doug Draper 10:36
All right, there's a new Brit this. It's the China halftime. I don't know if you've heard about this new bridge that is going to open up later this month. It was supposed to open up earlier this year, Huang Jiang. I think I'm pronouncing that correctly, Grand Canyon bridge. It's the highest bridge in the world. The deck of the road is like 2000 feet above the canyon floor, and it spans like close to 5000 feet. And being here in Colorado and in the Mile High City, 52 85,280 feet is a mile high. So this thing is approaching a mile in length. It's going to save travelers about an hour, apparently, with the mountain, the old mountain route, and they say that the winds up on that bridge could reach 50 miles per hour on a continuous, sustainable basis. So my question to you, Pete, is, would you rather.dot.be stuck in a traffic jam on the top of this bridge, or be stuck in a traffic jam in a tunnel. And since you're over in Europe, we'll just use the Chunnel as as the point of reference. So stuck in a traffic jam on top of this world's tallest bridge, or stuck in a tunnel. Which one do you prefer?
Pete Mento 12:01
Stuck in a tunnel. Doug definitely stuck in a tunnel. And the reason why I'm going to go stuck in a tunnel is I'm not looking out the window, seeing that I'm suspended in mid air on something that's relatively new. The Chunnel or the Bay Bridge Tunnel in Virginia. That's been around a while. They've worked out the kinks, but it would be just my luck that I'd be in my jeep in the middle of that thing, and all of a sudden, something that one of the engineers designed when he was high on mushrooms, fails tunnel.
Doug Draper 12:36
Well, the great, one of the great things about the show Pete is that we have diverging takes on it without question. I'd rather be stuck on a bridge. I think my claustrophobia would kick in and I would freak out. I freak out when I drive through the Eisenhower tunnel here in Colorado, I am in a panic. Please, God, make sure the traffic doesn't come to a complete stop in this tunnel, because I will lose my shit if I'm at a dead stop in the middle of the tunnel, so I'm gonna have to be the the other the opposite point of your Pete. I'd rather be stuck on that bridge so I can see things. I can focus my gaze at the car or rights in front of me, and not look over the edge. But oh my god, I would freak out if I was stuck in a traffic jam, in a tunnel,
Pete Mento 13:24
Doug, I should clarify. I would lose my shit in either case. Okay, either one of these would be really bad for my mental health, but I think that being on the bridge would it would make it worse. Being stuck in a tunnel, I would still be an absolute puddle. So for those of you who think that I'm some brave person, let this be an excellent indication I am not. It's just a question of which one would be worse. And I'm going to go, I'm going to go with the bridge for me, for me, or personally, for me.
Doug Draper 13:56
Yeah, yeah. Well, if any of our listeners have been stuck in a tunnel since we are global trade in the channel itself, or in a week, or, excuse me, in a month or so have been over this bridge in China. We'd be, would be great to hear your feedback.
Pete Mento 14:13
Yeah, yeah. No, thank you. Yeah. So that's, that's half time from our friends at Catholic just capital logistics. Check them out at capital logistics.com, Doug, take us to Topic number two.
Doug Draper 14:25
All right. Well, this is coming from my farmer roots, not only being from Kansas and growing up there, but with my company and our our heavy investment into the Central Valley of California. It's an agricultural take Pete. It's about soybeans. And exports into China are kind of starting to dry up because of this trade. So China has sharply, right, and I use that word aggressively, basically canceled imports from from the US, specifically to soybeans. They've redirected all those purchase orders. South America, Brazil and Argentina, right? They are way down, right? And the problem, not only with there's no way to sell their product, is that soybeans, like, what are you going to do with them? Right? These farmers are growing them. It's like the central California part. You never turn off a cow. It continues to generate milk. You have to do something with it when the harvest comes and it is happening. Now, what do you do with soybeans that are not being purchased? Well, you can store them, but there's not much storage capacity, and you can't build silos and appropriate storage mechanisms to accommodate things so quickly, you're going to have impact to logistics and transportation. Rail cars taking this product to the coast for export, trucking the whole nine yards. So not only is it down, it's almost non exist, existent Pete. And so I think this is going to have a big impact on farmers. What I've heard is that they're hoping that the farm bill and the support that the US has given to farmers will help buoy this harvest season. But it's an impact that is affecting our farmers in the in the in the Midwest. I think it's probably being overlooked a little bit. I've seen a little bit more press on it recently, but this is a big deal for the farming community, and it is going to be catastrophic to that region of the country if, if this trade deal doesn't come through, and hopefully it will in the next couple of
Pete Mento 16:38
weeks, from your mouth to God's ears. Doug, I could not agree more. This is an excellent indication of of counter strikes to the United States by using our our disagreement with Brazil as further leverage against the United States by being able to purchase equal amounts from Brazil and not be reliant on American farmers, they're putting these hard working people in a difficult situation, people who probably, you know, made the decision to vote for what's happening right now, and it's, it's incredibly trouble, troublesome because now it's soybeans. What's going to be next? You know, is it going to be and also, India? Will India have a similar situation with American sweet corn, with the fruits and the vegetables that we send there? I don't think this is overdone. I think that there's going to be more of these commodities to come that could be negatively affected. And it's a it's an absolute shame that we're having to go through it. These farmers work very hard. I don't think most people understand how hard they work to make these crops and then to see them unsold or selling them for far less than they intended to can have devastating consequences, long term consequences on the families that operate these farms.
Doug Draper 17:48
Yeah, yeah. We'll have to watch this one for sure. All right, my friend, bring us home on your last topic,
Pete Mento 17:56
yeah, my last topic today, it's, it's Uncle Pete's word of warning, okay, it's my cautionary tale. We are also incredibly focused on imports and so incredibly focused on tariffs, as we should be. They're causing all kinds of Bedlam and chaos inside of our supply chains. Great. I'm begging all of you to not forget about your responsibilities for export compliance. Export compliance is an important a fundamental stool leg, and that four legged stool of American trade policy trying to isolate China. And for those of you who are not paying attention to licensing, license exception and properly reporting your exports, you're going to find yourself in a lot of trouble. The enforcement on these is only going to get more more dire, and the focus is only going to get more acute. If you have not been focusing on it, it's time to and I get it. No one's saving money on export compliance because you're not eliminating and lowering tariffs good for you. What you're doing is keeping people out of prison and your company's good name out of the paper. It's time to focus again, put some effort and some time into understanding your export compliance program and reach out to people who can help, because there's plenty of
Doug Draper 19:15
them. Valid point Pete, because you're right, everything's focused on the inbound flow, not the outbound flow us is a consumer market by first and foremost, and so that's driving all the attention. Put your comment about people going to jail. That's real, right? People think it's kind of funny, but you're the Pro as it relates to this. And it is, it is real, and needs to be highlighted in the spotlight shown on it. I you know being being a sales guy, and my mantra sometimes is asked for forgiveness, not permission, to kind of keep things moving forward. But as you so eloquently put it, you do not want to ask for forgiveness related to compliance. Whether it is inbound or outbound. So good shout out. Good call out. And a very real concern that we need to keep, keep a hold of.
Pete Mento 20:13
All right, buddy.
Doug Draper 20:16
Yeah, yeah, we got to end this thing from from your cabin underneath in the boat that you happen to be out in Copenhagen. I don't understand the curving walls, but when you jumped on Pete, I'm like, What are you on a boat somewhere? Anyway, we can't thank our listeners enough for participating and joining us today. It's a short episode. We got things going on, but we appreciate your engagement. We appreciate you listening week in and week out, and if it's happening in global trade, we will be talking about it here every single week. Thank you for engaging. Thank you for listening. We will see you next time on global trade this week. Thanks, buddy. All right. Travel safe. You. You.
Transcribed by https://otter.ai