Nafta end may hit even movie theater popcorn

Bloomberg

As Donald Trump’s administration prepares to renegotiate Nafta, the head of Mexico’s largest movie theater chain is warning that an end to free trade could convince him to buy his popcorn from Argentina instead of the US.
Cinepolis de Mexico SA, the world’s fourth-largest cinema chain, buys about $10 million a year of American kernels from farmers in Kansas, Missouri and Iowa, according to Chief Executive Officer Alejandro Ramirez. He said his company already studied sourcing the corn from Argentina after Trump’s campaign and victory helped push the peso to record lows against the dollar.
For now, the US still wins. But a tax of as little as 2 percent could tip the scales, he said.
While automakers such as General Motors Co. and Toyota Motor Corp. have born the brunt of Trump’s Nafta displeasure, Cinepolis shows how key US exports that are unrelated to manufacturing could become collateral damage. Ramirez, who heads a business chamber including the nation’s biggest multinational companies, said his group is working with its business partners in the US to educate politicians there on the value of economic integration.
“A lot of the value chains are complex, and nobody has really told people that,” Ramirez, 46, said in a phone interview from Mexico City on Thursday. “We all need to work better to inform. In the past, it was not necessary because we never thought free trade would be put at risk.”
That changed with the election of Trump, who has promised to end or renegotiate the North American Free Trade Agreement, which he described as the “single worst trade deal” in US history and a disaster for American workers. Mexico this week began 90 days of consultations between the government and the private sector to prepare for talks expected to start in May. President Enrique Pena Nieto and top officials have said keeping North America a tariff-free area is a key goal.
While Cinepolis’s purchases are just a drop in the bucket of the more than $2 billion in corn that the US exports to Mexico annually, it shows the scope for potential impact if other buyers followed suit. One Tiny Widget’s Dizzying Journey Shows Just How Critical Nafta Has Become How Trump’s Wall Makes Nafta Talks Even Thornier: QuickTake Q&A Ramirez, whose grandfather started the cinema chain more than four decades ago, said his company’s total annual bill in Mexico for American goods is about $40 million. This includes screens, projectors, and $6.5 million of Wisconsin cheese to drizzle over nachos. Overall, Morelia, Mexico-based Cinepolis has about 3,200 movie screens in Mexico, with 1,700 more between Latin America, the US, Spain and India.
While Cinepolis has invested about $140 million in the US, Mexico — where the company has a 68 percent share of the market — remains by far its biggest presence. And in Mexico, about 90 percent of the movies shown in Cinepolis come from the US, Ramirez said. “We’re one of Hollywood’s big customers,” he said.
“We import all of our corn for movie theaters from the US thanks to the fact that there’s free trade,” Ramirez said. “If that wasn’t the case — if we go to pre-Nafta tariff levels — then it would be cheaper to bring it from Argentina.”
Ramirez doubts many Americans are familiar with the concept of supply chain integration, which causes every dollar of Mexican exports to hold an estimated 40 cents of US content, according to a 2010 working paper from the National Bureau of Economic Research.