Borderlands Mexico: Widening Technology Gap a Threat to US-Mexico Trade, Experts Say

Panacea, which also has offices in Laredo, Texas, and Mexico City, is a technology company focused on digital innovation and incubation for the logistics industry.

"Unfortunately, I've seen that the gap between the technology that is available and what people are doing with technology, the gap is not closing; at least here in Mexico, that gap is growing" Manuel Farias Martinez, a Monterrey, Mexico-based consultant for Panacea, told FreightWaves. "Instead of people learning what they can do, how to exploit technology, they are not doing it."

Alaster Love, chief technology officer at Panacea, said companies that don't adopt tools such as ChatGPT or Microsoft Copilot, or carriers that are not using smart cameras equipped with facial recognition technology, could lose business to firms that invest in them.

"Commercial transportation is a category that is often stereotyped as a laggard in terms of technology adoption" said Love, who is based in Laredo. "Most carriers, logistics professionals are just so busy keeping the lights on that they can't really start to think about innovation in the future."

Mexico replaced China as the top U.S. trading partner in 2023, with trade between the U.S. and Mexico totaling $798 billion last year. In the first quarter of 2024, trade between Mexico and the U.S. totaled $200.1 billion, a 1.7% year-over-year increase.

As trade between the U.S. and Mexico expands, digital services between the two countries are also expected to grow, according to a recent study by New York-based law firm White & Case LLP titled "The Rise of Artificial Intelligence, Big Data, and the Next Generation of International Rules Governing Cross-Border Data Flows and Digital Trade."

"The digital economy in the U.S. has increased from $1.3 trillion in 2010 to $2.4 trillion in 2021, with services such as e-commerce, cloud services, telecommunications and internet and data services accounting for nearly two-thirds of this total" the study said. "International trade in the digital economy has grown at a similar speed. U.S. two-way trade in information and communication technology services grew from $90 billion in 2010 to $147 billion in 2021.

"Cross-border data flows have played a critical role in enabling this growth, and data volumes have increased exponentially during the same time period. Companies continue to increase their reliance on technologies like AI and machine learning, which require access to massive amounts of data. Seamless cross-border access to data will help spur continued economic growth and innovation."

Frank Kenney, director of industry solutions for software company Cleo, said it's often smaller and midsize carriers — companies with 20 to 100 trucks — that lag in technology investment.

Rockford, Illinois-based Cleo is a global provider of ecosystem integration software and the Cleo Integration Cloud platform.

"Even if you are a mom and pop shop and don't want to make an investment in technology, the guys on the other end can start to extend capabilities to let smaller carriers connect, like C.H. Robinson, which recently built a massive facility in Laredo" Kenney said. 

In September, brokerage giant C.H. Robinson CHRW opened a 400,000-square-foot cross-border facility in Laredo. The facility includes 154 dock doors and room for 700 trailers, while expanding the company's footprint along the U.S.-Mexico border to 1.5 million square feet of logistics space.

Mike Burkhart, C.H. Robinson's vice president of North America surface transportation, said the investment in Laredo was spurred by nearshoring "attracting all kinds of manufacturing to the country."

Kenney said that's only part of the equation: "If you want more efficiency in the supply chain, then you have to have this combination of technology that doesn't just cater to the top 50 companies like C.H. Robinson, but that also caters to everybody, from mom and pop shops all the way up to the billion-dollar companies."

While cross-border commerce is growing, Farias Martinez said tech investments are not happening fast enough south of the border.

"Maybe they are not motivated or they don't have the vision or the general management to drive the business to explore the new technologies" Farias Martinez said. "In Mexico, we have a lot of challenges, a lot of challenges right now. Cargo theft is a big problem. Also infrastructure is very bad and nobody's doing anything about it."

In addition to working as a consultant for Panacea Strategy, Farias Martinez is a professor in the master's program of logistics and supply chain management at the Autonomous University of Nuevo Leon in Monterrey.

"Mexico has this big opportunity with nearshoring, but we are just being reactive. We're not being proactive" Farias Martinez said. "Mexican companies need to start changing the way they think about what they can do with technology and driving the teams to use the new technology, because if you don't use it, you will become obsolete very soon."

AI can help streamline cross-border supply-chain and mitigate crises

Kenney said shippers, carriers and trade stakeholders should be embracing AI and tools that give everyone connected visibility for their shipments.

"What we are now seeing are the sensors and the IoT [Internet of Things] devices being used in transportation" he said. "So the question isn't just where's my truck anymore; now we can see that my truck that got there and the IoT sensors show that the goods on that truck were kept at climate, not exposed to light, the goods weren't tampered with, all of those types of things."

AI technology can benefit everyone, from logistics managers to truck drivers and even dockworkers, Kenney said.

"Even the dock master, the guy who's signing on the proof of delivery, he's not only going to be looking at ‘Is everything there?' He's going to be looking at, ‘What is the condition of the truck, and what was the temperature of the shipments?'" Kenney said. "He can look at a graph to see that the temperature remained where it needed to be. All of that information is going to be powerful, but it doesn't happen if you're not connected."

Love said carriers and logistics providers should be looking at AI tools to automatically manage customs brokerage entries and other cross-border documents.

"Our tagline has always been building competitive advantage with technology" Love said. "How do you get either a trucking company that's going to go to the same request for proposal in Columbus, Ohio, or Mexico City, along with 15 other companies — how do you make yourself different from every other company? It's through technology."

Love said using AI software, customs brokers can take complex entries and cut down on errors and speed up processing.

"The application for AI in either U.S. customs brokerage or Mexican customs brokerage is pretty similar. It's taking a very complex shipment that requires a lot of data entry — not having people who are hungover or pissed off at their boss, or not paying attention and making errors that means that entry is going to be rejected — we apply AI and can get 99.5% accuracy" Love said. "We take an entry that previously took three or four hours of data entry, and we take it to like five minutes using technology."

Kenney said if U.S.-Mexico trade stakeholders can tap into more AI and other advanced connected technologies to streamline freight flows, he sees international commerce expanding in the future.

"I'm really digging C.H. Robinson's move into Laredo, because it's the classic American company saying, ‘There's money to be made here. Let's go down here.' I love that bravado" Kenney said. "C.H. Robinson's move comes with investment; it comes with technology. Mexico could be a place that's looking like Sweden, where you're looking at these companies where there's so much technology and innovation coming in. Mexico is close. We could see that in 20 years."

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