Opportunities and Accessibility for the Agricultural Machinery Sector: Focus on Mexico and Vietnam Markets

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The agricultural mechanization sector encompasses a wide range of technologies used to implement agricultural production and livestock breeding, sectors that are the basis of many production chains, and therefore represent the starting point of entire economies.

With a view to market expansion, we have tried to research what could be the new and more interesting frontiers of expansion for such a heterogeneous sector. From an initial analysis, we have identified two countries on which we will focus our attention: Mexico and Vietnam. Albeit geographically very distant, they have some interesting points in common - among these, the importance of the agricultural sector and an expanding economy.

Mexico: market characteristics, opportunities...

As in other emerging countries, the Mexican agricultural sector is made of three main areas: a competitive sector on the international level, producers working on the domestic market and little farmers working for their own consumption. It is a non-homogeneous division on the territory and, while the Northern States present a high level of mechanisation, the Southern ones and the Yucatan peninsula are still little mechanised. Furthermore, in the North there is a strong presence of privately owned groups working with the USA. Despite the difficulties of the farmers which owns only small properties and have difficulty in accessing credit, the agricultural production remains an important element for the food security and the country's competitiveness.

As for agricultural products, Mexico is the largest producer in the world of white corn and most soil dedicated to this cultivation uses mechanical instruments. Another popular product in the country, using mechanical production instruments, is broomcorn. Lastly, the Northern areas have a decent production of wheat. Among famous Mexican productions we can find fresh tomatoes, available in every season and covering all range of price. Other products are fresh fruits and vegetables, legumes and cocoa. As already said, the States presenting a wide mechanisation are the Northern ones: Baja California, Southern Baja California, Chihuahua, and Sinaloa have about 100% of mechanised agricultural surfaces.

The distribution of agricultural machinery basically presents two options:
  • The exporter recurs to an importer/distributor or they can have a Mexican subsidiary
  • The products can be sold in a store or directly, to the end user

Both alternatives depend on the distributive structure of the European manufacturer and on the characteristics of the products (for B2B or B2C). The Mexican market for agricultural machinery has strong growth potential. There are big specialized groups already on the territory, but the specialized components industry is weaker, and it could be a target sector for European companies. The Mexican sector requires evolved standard and the USA are the final partner for its market.

... and market accessibility

Exporting to Mexico does not require any complex procedure, but is good to observe some requirements and comply with local rules.
EU and Mexico signed an Agreement in Principle, entered into force in 2018, following the preceding Free Trade Agreement of 2000. Since this new agreement, the countries eliminated Customs duties on agricultural products, simplified customs procedures and ruled the principles of sustainable development. To be eligible for the exemption of customs duties, the products have to be accompanied by a Proof of Origin indicating the European origin.

Other important requirements, about machinery, are the requirements on standards. Mexico adopted various international standards, but it is often required a conformity to the Mexican Standard Requirements (NOM), as well as a certificate. At the end of August 2020 the requirements have changed, so the interested operators should inquire at the Dirección General de Normas (DGN) de la Secretaría de Economía (SE).

The Mexican importer must register to the authorities. At the moment of export, a document for the transport of dangerous waste must be provided and the exporter have to conform to the requirements for packaging and labelling.

Vietnam: market characteristics, opportunities...

Vietnam is one of the largest producers of rice, coffee and fishery products (shrimps) and the primary sector provides job for a large amount of the working population. Anyway, the growth of the sector suffers a low mechanisation, which makes it difficult for the sector to attract foreign investment. Therefore, the central government tries to increase the competitiveness of the sector with investments on mechanisation, irrigation, refrigerating systems for product stockage, product first processing and labelling. These investments could be very interesting for European manufacturers, as they regard foreign operators too.

Nowadays the mechanisation level in agriculture is extremely low, especially if we consider that a large part of the population is employed in this sector. One of the reasons for this is the little surface for each farmer, making unaffordable any expense for performant machinery, substituting the traditional means. Nevertheless, a range of companies of medium dimension is growing in the last years and they would be able to use a more specialised mechanisation. The machinery market is characterised by imports from China, which present a medium-low price, but a premium price range still exists. To increase the production in a sustainable way, the primary sector must implement a high technology agriculture and develop its value chain to reduce costs, increase the production and have a better quality of the products. The government understood these matters and is involved into providing incentives to farmers, cooperatives and the private industry to increase investment in high technology agricultural solutions in Vietnam. A general plan on the development of high technology agricultural area has been approved since 2020 until 2030 in the provinces of Lao Cai, Phu Tho, Son La, Nam Dinh and Nghe An, and Hanoi. About the opportunities to enter the market, a strategy could be selling machinery and technology to a limited number of big companies and of dynamic cooperatives, make licensing agreements with local farmers, or producing components in the country. There aren’t any specialized distributors for this sector, but many importers specialised in building industry are interested in expanding their business.

... and market accessibility

In August 2020 the Free Trade Agreement between Vietnam and the EU entered into force; it abolished a large part of existing duties and it is going to eliminate the others within 2030. About our sector, some duties are still in force; it is therefore good to provide a proof of preferential origin to gain from the benefits derived from the agreement.

Moreover, the importer has to be registered to the Vietnamese authorities. Finally, some of the machinery must have a regular declaration of conformity and comply with the sanitary and phytosanitary measures of the country.


Valeria Minasi

is an export and internationalization consultant. She collaborates with the ExportPlanning team within the project International Market Accessibility Help-Desk.