Why a Former Freight Broker Is Making a Major Bet on Mexico

Tracy Alloway (0:02)

Bloomberg Audio Studios. Podcasts, radio, news.

Joe Weisenthal (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:23)

And I'm Tracy Alloway.

Joe Weisenthal (0:24)

So obviously, Tracy is something that we've grown more interested in lately, and it has very interesting sort of macro trade, maybe political implications. Is this sort of the booming numbers we see in US-Mexico trade?

Tracy Alloway (0:38)

Absolutely. So US-Mexico trade has picked up, as you have pointed out.

And I'm kind of curious about the reasons why. This is what most interests me at the moment, as well as the physical process of moving goods from Mexico into the US. But there's this story, this idea here about friend shoring. So given the Trump trade war and its ongoing evolution under the Biden administration, tensions have been rising with China. There's this idea of companies maybe moving some of their production away from China into either Southeast Asia or maybe Mexico. So we've seen a bit of a pick up.

I really want to know what is driving it. Is it actually that friend shoring idea or is it maybe something else? I know Mexico, for instance, is a really big exporter of car parts. So how much of that is driving it? I've seen Brad Setzer discuss this a little bit on Twitter. So I am excited to get into Mexico US trade.

Joe Weisenthal (1:36)

Totally. And you mentioned sort of Trump kicked it off after he won the 2016 election by beginning the process of tariffs on China and rewriting NAFTA, which became the USMCA and really sort of encouraging a shift in supply chains to North America, to the Western hemisphere. And then it probably really accelerated further with COVID and just the massive headaches that everyone had getting stuff out of China. And so, right, that's sort of when the idea of like friend shoring or near shoring like really picked up like just sort of this supply chain resiliency idea.

And then this raises all sorts of other interesting questions because of course, if you're a Chinese company, like you're a Chinese automaker, say, or a company that makes other high tech goods, and maybe you're worried about tariffs, we're like, well, can you set up in Mexico and get around evidence so that it's like, so it is still coming in from Mexico, but the beneficial owner is somewhere in China. Like there are some really interesting questions that arise out of cross border US Mexico trade.

Tracy Alloway (2:40)

Yeah, it's funny you mentioned that. I was just reading an article in the FT that came out recently, and they were talking about the number of container ships going from China to Mexico has hit 881,000 in the first three quarters of 2023, which is up from like 689,000 in the same period from 2022 So a lot of growth just in the space of a year. And it does beg the question again, of what exactly is coming through Mexico? How much of this is a genuine shift in US trade away from China versus this sort of rerouting?

Joe Weisenthal (3:14)

Totally. So we see the numbers and we want to get a better understanding of what are the types of goods and so on. And I'm very excited to say we really do have the perfect guest. It's someone from the freight world who has been working with US Mexico trade for a long time. And now the co-founder of a new company that's sort of gonna focus on freight that goes cross-border from Mexico to the US.

Matt Silver, co-founder and CEO of Cargado. Matt, thank you so much for coming on Odd Lots.

Matt Silver (3:41)

Absolutely, thank you for having me. Excited to be here.

Joe Weisenthal (3:44)

All right, so really simple question to start. If there's some piece of machinery that you want to ship from say Texas to California, how much easier is that than shipping a piece of machinery from Mexico to California? Or maybe to flip it the other way around for a given unit of good, what is the complexity of getting that good across the border rather than just shipping it domestically?

Matt Silver (4:10)

So shipping something from Texas to California, if you're a logistics provider or a trucking company, your main responsibility is to make sure that you get the freight picked up at that location in Texas, that it's scheduled to delivery and that ultimately you go deliver the load on time and that you get what was considered the bill of lading signed by the receiver and it turns into proof of delivery and you're good to go. When you're moving a shipment from Mexico to the United States, and let's say you were going from somewhere like Monterey to California, you would get that load picked up in Monterey by a Mexican trucking company that would bring the freight up to the border. They would clear Mexico customs, go through US customs, dealing with a Mexico customs broker and a US customs broker and a border crossing carrier. And then you're working with a US trucking company that's gonna bring that load from say Laredo, Texas to Los Angeles.