According to this Reuters article, some foreign investors in Mexico are having financial difficulties as a result of Ford's decision -- partly in response to statements by Donald Trump -- not to build a planned factory there:
Ford Motor Co's (F.N) abrupt move to scrap a planned $1.6 billion car plant in central Mexico has spooked a network of suppliers who bet on a growing customer base and dramatized the risk that Donald Trump's agenda poses to the country's broader economy.
Many auto parts makers had started to expand in anticipation of Ford's plant in the state of San Luis Potosi, where industry is "easily 70 percent" dependent on the auto sector, said Julian Eaves, managing director of Preferred Compounding de Mexico, a U.S.-owned maker of rubber compounds operating here.
"It's going to have a huge impact on the local community," said Eaves.
The loss to the economy, Eaves calculates, could run into the hundreds of millions of dollars, and maybe even into the billions, over the next five years, as manufacturing, contracting and indirect jobs all fall short of plans. Officials say they are still analyzing the economic impact of the Ford decision.
The hemorrhaging may be just the beginning of Mexico's pain from Trump's vows to shake up trade and bring manufacturing jobs back north when he takes office on Jan. 20.
Ford ascribed its move to a decline in North American demand for small cars like the ones it planned to make in San Luis Potosi. But Trump had been lambasting Ford for its Mexico operations, months before he was elected president in November.
...In a matter of days, Ford's retreat has turned the factory site into a barren plain bereft of its economic promise.
"It now looks like a cemetery," said Fernando Rosales, 28, a hydraulic hoses contractor preparing to abandon the site. "(There is) only death here, we are all leaving."
...
The U.S. president-elect's broadsides against Mexico have shown how exposed companies in the supply chain are to the whims of U.S. automakers under pressure not to offshore production.
Shares in Kansas City Southern (KSU.N), one of the main railroad operators in Mexico, fell following news of the Ford cancellation and have lost 3.3 percent since Tuesday morning.
Between 40 and 50, mostly foreign-owned, suppliers were ready to come and supply the San Luis Potosi plant, said Sergio Resendez of real estate broker Colliers International.
"This was going to catapult us," Gustavo Puente, the state economy minister of San Luis Potosi, said of the plant Ford originally announced in April of last year. Ford told him the plan was off about an hour before it went public with the news, he said.
Around 12 to 14 of the suppliers had already invested money buying land or signed a contract with developers, said Resendez of Colliers, though Puente suggested the number was fewer.
There's a question as to whether threats by a Presidential candidate, who subsequently became the President-elect, constitutes a measure, but for the sake of argument, let's just assume they are. What we have, then, is a U.S. government measure that has caused financial harm to quite a few investors, in a manner that may be inconsistent with certain international investment obligations. But is there anyone who can bring a claim? Let's look at NAFTA Chapter 11:
Article 1101: Scope and Coverage
1. This Chapter applies to measures adopted or maintained by a Party relating to:
(a) investors of another Party;
(b) investments of investors of another Party in the territory of the Party; and
(c) with respect to Articles 1106 and 1114, all investments in the territory of the Party
It may be a stretch to think that a Mexican investor could bring a claim against the U.S. government for actions that affected its investment in Mexico (the Bayview award may be on point here). And it also seems unlikely that a U.S. investor could bring a claim against the U.S. government for actions that affected its investment in Mexico.
But how about a Canadian investor, if there are any here? Would a Canadian investor in Mexico be considered an "investor of another party," who could then challenge measures adopted or maintained by "a party," in this case the U.S. government?
One other hurdle is that the measures must be ones "relating to" the investors. The Methanex award says some potentially relevant things about "relating to" (starts at para. 127). Is it enough that there is an impact on these investors, or do they need be targeted by the measures?
Not that any of this is likely, of course. It's just that the world of Donald Trump leads to many new and interesting potential international legal claims. See my next post for more.
