January 24, 2017 11:09
U.S. President Donald Trump's decision to renegotiate the North American Free Trade Agreement has set alarm bells ringing among scores of Korean firms that do business in Latin America.
According to the Korea Trade-Investment Promotion Agency, 183 Korean businesses have operations in Mexico alone, accounting for 40 percent of Korean firms doing business in the region. They employ around 34,000 workers there and generate some US$22 billion in annual sales, most from exports to the U.S.
GS Caltex opened a factory in Mexico only last September to supply materials for car interior parts to Kia's Mexican plant and those of other global carmakers. Scheduled to start operations in the first quarter of this year, the plant is capable of producing 30,000 tons of materials annually.
But if the U.S. slaps a 35-percent tariffs on Mexican products, as Trump has threatened, cars made there will lose their competitiveness and carmakers' suppliers will also suffer.
SKC set up a Mexican joint venture with Japan's Mitsui Chemicals last year to produce polyurethane. The firm has been supplying polyurethane to global carmakers including Kia. If they pack up and leave, SKC is considering having the Mexican plant roll out products for home appliance makers, while its U.S. subsidiary will handle polyurethane supply to carmakers.
Korean chemicals manufacturers like Hanwha and Hyosung also have production facilities in Mexico, and POSCO operates a zinc galvanizing and steel sheet plant there.
One staffer with a company that has facilities in Mexico said, "Materials and parts makers are not expected to suffer an immediate impact, but they will have to revise their mid- to long-term strategies to expand their client list and diversify."
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