The Mexican business of Trump’s Secretary of Commerce

Wilbur Ross, U.S. Secretary of Commerce, the man appointed to renegotiate NAFTA, owns an auto-parts company with eight operating facilities in Mexico
12/02/2017
19:39
Ciudad Juárez, Chihuahua
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Wilbur Ross, U.S. Secretary of Commerce, is founder and shareholder of at least eight auto-parts factories in Mexico, that supply automotive components to major car companies. U.S. president, Donald Trump, appointed the 79-year-old businessman as Secretary of Commerce and the man responsible for the renegotiation of the North American Free Trade Agreement (NAFTA).

As reported by data from the U.S. Labor Department, Ross has shipped 2,700 U.S. positions to Mexico, since 2004. Together with a group of investors led by Franklin Mutual Advisers, he founded the International Automotive Component Group (IAC Group) in 2006, while acquiring giant Lear Corporation in he same year, via ACG, on of the largest suppliers of automotive components based in Ciudad Juárez, Chihuahua.

According to IAC Group website, the company holds eight facilities in Mexico: Arteaga, Ramos Arizpe and Saltillo in the state of Coahuila, Hermosillo in the state of Sonora, Santa Catarina in the state of Nuevo León, San Miguel Xoxtla in the state of Puebla, El Marqués in the state of Querétaro and Toluca in State of Mexico, in addition to Lear’s already existing facilities in the country. These Mexican facilities are registered under IACNA, with a AAA fiscal certification reserved for companies with the most efficiency and which are entitled to fiscal benefits and credits. As stated in the public registry, the Mexican facilities renewed licenses the same day Trump was sworn as the 45th U.S. president.

One of Lear’s main facilities is based in Ciudad Juárez, where it exports auto components, automotive seating and electrical systems for U.S. cars, while IACNA is in charge of manufacturing auto components for door and trim systems, instrument panels, consoles and cockpits, flooring and acoustic systems as well as complementary exterior components according to the group’s website. Major customers of Ross’ company are BMW, Fiat Chrysler Automobiles, Ford, General Motors, Honda, Mercedes, Nissan, Toyota, Volkswagen, Hyundai/Kia, Volvo Truck and Freightliner.

Until October 2016, Ross was owner and founder of the International Textile Group, with a facility in Mexican state of Morelos, a manufacturer of airbags and interior leather furnishing for automobiles, among other textile solutions.

U.S. law compels any public official, except the president, to serve 90% of their private companies shares so as to avoid any conflict of interest during office, something which Ross agreed to during his hearing in the U.S. Senate. However, the disposal of shares on his behalf to this day remains unknown. In 2006, Ross sold his company WL Ross & Co., owner of IAC Group, to Invesco, though he remained a majority shareholder and decision maker until 2014, when Ross resigned from the IAC Board of Directors to become Chairman Emeritus.

During his confirmation hearing with the Commerce Committee of the U.S. Senate, Wilbur Ross assured that the North American Free Trade Agreement (NAFTA), the 23-year-old trade agreement between Mexico, the U.S. and Canada would be one Trump administration’s top priorities, at the same time he declared himself “pro-trade”: “I am not anti-trade," he said. "I am pro trade. But I am pro sensible trade, not pro trade that is to the disadvantage of the American worker and the American manufacturing community."

In an attempt to put offshoring to a halt, Donald Trump has threatened car manufacturers, who chose to base their production in Mexico instead of the U.S., with the payment of a “big border tax”, a 35% tariff to which Ross limited himself in saying “It is a complicated issue”, he added, “I think tariffs play a role both as a negotiating tool and, if necessary, to punish the countries that don't play by the rules.” during his hearing at the U.S. Senate.

As for Mexico, the renegotiation of NAFTA under Trump, could represent a strategy for his own benefit as Ross is owner of at least one auto-parts company with eight different facilities in Mexico, according to investigative reporting by EL UNIVERSAL.

 

A billionaire worthy of an art collection

Wilbur Ross has two passions: businesses on the verge of bankruptcy and Surrealist paintings by Belgian artist René Magritte. He has been hailed as “King of Bankruptcy” for his work as a high-stakes investor in failing businesses and their transformation into gold mines. As for his art interest, he owns an original Magritte collection worth over US$100m, according to Forbes magazine. He is Wilbur Louis Ross Jr. after his father, judge Wilbur Louis Ross, and was born in Weehawken, New Jersey in 1937. He learned how to use a shotgun, run a magazine and be a host at a radio station during his time in Yale, where he intended to become a writer until he “ran out of ideas”, as he stated in an interview. In the end, he decided to enter to Harvard and get a job in Wall Street.

Ross first started taking chances with companies on the verge of bankruptcy at age 24, when he first worked for an established business counseling firm in New York. This is how he met the man who would later appoint him as U.S. Secretary of Commerce, when back in the 80’s, Donald Trump was about to declare bankruptcy of the casinos he owned in Atlantic City. Ross represented the casino investors and negotiated with the bondholders to reach an agreement that allowed Trump to continue in the casino business.

By the end of 1999, Ross turned from advising to investing and together with other investors he founded WL Ross & Co, a company that would later acquire IAC Group.

Catholic Ross believes in business making. Despite of what his current boss may say on offshore trade, Ross thinks this is the best way to make money, as he started investing in companies manufacturing goods in Mexico to supply for the U.S. market shortly after founding his own firm. In 2002, he founded the International Steel Group with products made in Mexico and finished in the U.S. A couple of years later, he followed the same business model in the textile industry with the International Textile Group and in 2006 he launched the International Automotive Components Group to be followed by most recent International Coal Group.

Wilbur Ross is considered a Democrat due to his participation in an investment fund for the U.S. and Russian governments during the Clinton administration and for being an adviser to New York City Mayor Rudolph Giuliani. Until 2016, he was registered in the Democrat Party for which he helped funding political campaigns since 2006. During the last election he supported Republican Marco Rubio until July 2016. After Donald Trump’s Republican nomination for the U.S. run for presidency, Ross contributed with US$200,000 for his campaign.

 

 

 

 

 

Hope or conflict of interest?

Mexican and U.S. businessmen in the Mexico-U.S. border are not sure whether Ross’ appointment is a sign of hope, for he could “put some sense” into Trump’s plans regarding trade between Mexico and the U.S. or a potential conflict of interest, as they know the implication of NAFTA first hand and they understand how Ross could take advantage of such a renegotiation.

For Tom Fullerton, a professor of Commerce in the Americas at the University of Texas in El Paso, Ross could be “the key that could put some sense in Trump”, he explains: “Ross could be Mexico’s closest ally, because he understands how much is at stake for both countries, he can tell good from bad for both”. The economist assures that Ross could represent hope “if he truly understands the range of opportunities for Mexico and the U.S.”.

President and CEO of Cesar-Scott Inc. a manufacturer of shoulder harnesses for U.S. cars, Gustavo Farell, agrees, “As I see it, Trump’s appointment of Ross is good, because this is a guy who knows how important free-trade is around the world. This appointment speaks well of Trump”. He adds:“Ross will have to do something good for the whole of free-trade, specifically for NAFTA”, he concluded.

However, not everybody shares their enthusiasm. For Manuel Ochoa, Vicepresident of Business Development of bi-national Tecma, Ross appointment could mean a conflict of interest that favors him and president Trump alike: “NAFTA has twenty-two chapters. I believe that Ross, together with Trump intends to put some pressure to Mexico, to threat the country with the tax and tariffs so as to have a lead and to have those chapters more convenient to the U.S. modified to their benefit”, he explained. In his view, Ross appears to be opportunistic and will seek to improve the trade agreement for the benefit of his investments and for the U.S.

Only last week, president Trump demanded to speed up negotiations of NAFTA: “I have very serious concerns about NAFTA. NAFTA’s been a catastrophe for our country,” Trump said at the White House. “It’s been a catastrophe for our workers and our jobs and our companies. They’re leaving our country. I want to change it. And maybe redo it.”

For businessmen in the Mexico-U.S. border, whatever happens with the trade agreement will have a definite impact in the Mexico-U.S. relations, to which Gustavo Farell notes: “Whatever happens it is important to highlight that Mexico and the U.S. do not exchange goods, but that they create products, together”.

 

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