Noe Torres

MEXICO CITY (Reuters – Mexican firms have been hard hit by international supply chain bottlenecks, affecting the second largest Latin American economy.

Many thousands of cars sat in Mexico waiting for missing semiconductors. But the ripple effect of the shortage of raw materials has been felt across corporate America.

In third quarter reports, businesses raised concern over disruptions to their bottom lines in Mexico. Mexico’s economy is based on free trade and heavily relies upon international supply chains.

The phenomenon is expected to impact traditional pre-Christmas sales. However, rising input costs and inflation have driven up interest rates while Mexico’s growth prospects have been tempered.

James Salazar from bank CI Banco said that you can clearly see the effects everywhere. The problem is many businesses will find themselves stuck if there’s no recovery in demand.

Automakers contribute 3.4% to Mexico’s gross domestic product (GDP). Due to logistical bottlenecks, they have had to perform a series of work stops, which has resulted in a reduction in business.

The conglomerate CYDSA which makes coolants for auto industry, saw its third-quarter sales drop by 2% due to lower production. Vitro (which produces sunroofs, sunroofs, and windshields) saw revenues fall 14% in the third quarter.

Nemak (OTC:) is a manufacturer of components for Audi and Nissan companies. It had previously set a $3.9 billion sales target, but was forced to drop its 2020 goal to $3.82Billion to meet it.

REPORT DELAYS

Many companies have seen delays and lack of material leading to a decline in the level of recovery they had hoped for after the COVID-19-related lockdowns wore off.

Mexico’s economy contracted 8.5% last year. This is its lowest performance since the 1930s. Although it’s expected to grow by 6% in 2018, analysts polled October by the central bank shaved 2/10ths of an percentage point from their 2021 forecast.

Recently, the central bank estimated that the semiconductor crisis could reduce GDP growth by one percent in 2021.

This pain extends beyond the carmaking industry, and also encompasses Cemex, a global cement giant that is a beacon for wider demand.

Monterrey-based company said that in its third quarter, international logistic problems and higher cost hit operating EBITDA (an indicator of profitability) despite sales growing in nearly all markets.

Fernando Gonzalez, Cemex’s Chief Executive Officer, stated that the company had decreased its 2021 capital spending guidance from $100 million to $1.2billion because of disruptions in supply chains.

Axtel Internet Provider stated that it would lose $2.5 Million in revenues during the second half 2021 due to shortages. Due to delays, delivery times of 4-6 weeks became 5-6 months. Making some projects impossible.

Rival America Movil The company owned by Carlos Slim is feeling the pinch as well (NYSE:).

Daniel Hajj (CEO America Movil) stated that “I believe in the whole world, and in all Latin America…there is a lack of handsets.”

CONSUMERS PAY

The Christmas season is only weeks away and companies are at high risk of losing their sales goals due to a shortage of inventory.

Enrique Guijosa is the finance chief for El Puerto de Liverpool in Mexico. He told analysts that there would be a shortage of sports gear due to Pandemic-Induced Shutdowns in China, Vietnam, and China.

Companies pass additional costs onto consumers by imposing restrictions on the availability of goods. This has led to higher prices. Now, inflation is at 6%, twice the goal of central banks.

Gruma, which produces Mexican staple foods tortillas, stated it must raise cornmeal prices and warned of further possible increases next year.

Kimberly-Clark de Mexico (NYSE:) announced an average price increase of 7%, which would be fully in effect at the close of the first quarter 2022.