Mexico Manufacturing Soars

October 30, 2013

In 2013, manufacturing in Mexico boosted the national economy, exceeding estimations of the nation’s recuperation in productivity and trade. The market for Mexican goods abroad made healthy advances, as Asian demand for exports hovered around 15%. U.S. demand for Mexico’s auto manufacturing capacity was mirrored in quite a few other economies of scale as the country reconfigured its near future growth prospectus.

The argument that Mexico is outperforming China as a manufacturing resource for U.S. and other Northern companies is actual, say economists. From the standpoint of U.S. manufacturing and trade, Mexico’s growth prospectus is a mutual benefit. Factories in Mexico also use far more U.S. made parts than competitor, China, and this allows companies to exploit their lead trade position as a bargaining chip.

Manufacturing in Mexico is impacting wages. Wages have been substantially adjusted in line with productivity, but are still lower than China’s in terms of proportionality. Labor productivity is higher as well. This makes Mexico about 29% less expensive due to efficiency, rather than more costly in sticky wages.

Mexico’s direct obligations and duties to the North American Free Trade Agreement also has important benefits, as the country is able to assert authority in exchange not made available to countries outside of the region. A high turnout of goods and open access to the world’s largest consumer market in the U.S. and Canada, means that Mexico’s return on investment is more rapid than those outside of NAFTA’s membership. With free-trade agreements sustained with forty-four countries, Mexico’s free-trade options outpace the U.S. and China.

The presence of adequate energy resources and regulatory control of natural gas and other resources in Mexico offers incentive to businesses. From a global perspective, energy costs only add more efficiency to Mexican manufacturing, once compared to other emerging and developed markets abroad. With energy prices closely linked to the western U.S., Mexico benefits from the regional glut in industrial gas production. New attention to alternative energy and widespread access to electricity in Mexico ensures operations.

Unlike China, Mexico is not under fire over anti-dumping disputes either. The entrance of China into the World Trade Organization as a member has been followed by some disagreement about the Asian giant’s adherence to Western regulatory measures and incorporation as national trade law. Mexico is in a prime position to advance past China in international trade. Its legal system has long been established and close coordination with the U.S. on global export projects means Mexico is ahead of the game.

As international trade becomes more intensified by diversification, Mexico is in a keen position with its existing clusters of industrial production. The acknowledgment that Mexico has a well-developed expertise in the highest producing economies of scale has set the platform for continued growth. Although the country has some internal reforms ahead with most manufacturing companies concentrated in five of the nation’s states, the future looks brighter than ever from the outside looking in.