What’s Driving Mexico’s Growth?

July 23, 2014

07/22/14 Forbes

shutterstock_102739391Mexico’s increasing purchasing power, as well as key reforms passed by recently elected President Enrique Peña Nieto, have contributed to what economic experts at HSBC say may become the world’s eighth-biggest economy by 2050. While it hasn’t received the recent media attention of other emerging economies like Brazil or India, Mexico has quietly positioned itself to be a major economic force in the long term.

One of the primary drivers of Mexico’s recent growth comes from the manufacturing sector. Merchandise goods rose three percent in 2013, a modest but encouraging gain, and one that is expected to improve over the remainder of 2014. Global economic recovery is expected to help Mexico continue its own improvement, especially in the appliances industry, which is expected to grow significantly in the near future. The Boston Consulting Group expressed substantial confidence in Mexico’s manufacturing, noting that manufacturing could add between $20 billion and $60 billion to Mexico’s economy through 2018.

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As Ties With China Unravel, U.S. Companies Head to Mexico

June 2, 2014

New York Times, 06/02/14

mexico-chinaSALTILLO, Mexico — Jason Sauey calls them lemmings — all the American companies that rushed to China to make things like toys and toilet brushes, only to be searching now for alternatives in Mexico and the United States. His own family-owned plastics company, Flambeau, nearly made the same mistake around 2004, he said, when competitors contracting with China undercut prices and seized market share.

Flambeau resisted, turning instead to its factory here in central Mexico. And now the company — which makes Duncan yo-yos, hunting decoys, plastic cases and an array of industrial items — is reaping the rewards, Mr. Sauey (pronounced SOW-ee) said.

Revenues at its Mexican plant have grown by 80 percent since 2010, according to company records, prompting a search for a second location near Mexico City. And in the past year, a dozen corporations have come to Flambeau and requested bids on projects worth tens of millions of dollars for things like smartphone cases and car parts.

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Mexico Reports Surprise April Trade Surplus on Manufacturing

May 27, 2014

Bloomberg, 05/26/14

manufacutiringMexico reported its third trade surplus in a row in April, the longest streak in almost two years, as manufacturing exports surged, signaling the economy is recovering from a poor start to the year.

The surplus totaled $510 million last month, the national statistics agency said on its website today, more than estimated by any of the nine economists surveyed by Bloomberg, whose median projection was for a $433 million deficit. Foreign sales of manufactured goods, which accounted for 83 percent of exports last month, increased 7.1 percent from a year earlier, the most since September. Automotive exports rose 12 percent.

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US and Mexico boost manufacturing credentials

April 25, 2014

maquiladora1Financial Times, 4/24/14

The US and Mexico have become attractive as manufacturing locations relative to other large economies over the past 10 years thanks to slow labour cost growth and falling natural gas prices, according to a leading consultancy.

The analysis of the world’s largest manufacturing economies from Boston Consulting Group shows that costs have been rising fastest in resource-rich countries such as Brazil, Australia and Russia, while China and some European countries such as France and Italy have also experienced significant increases.

The trends are expected to drive long-term movements in manufacturing activity towards the US and Mexico.

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US-Mexico border no barrier to supply chain links

December 4, 2013

Financial Times, 12/2/2013

Photo by Flikr user Rockin RobinIt would be easy looking at the border between San Diego, in the US state of California, and Tijuana, in the Mexican state of Baja California, to conclude that the formidable fence was a barrier to all cross-border interactions. The fence and other defences against unauthorised border crossings have only grown since the September 11 2001 attacks on the United States sharply increased concerns about the US’s border security.

Yet it is a tribute to the power of the North American Free Trade Agreement that companies have continued in the years since 2001 to move goods freely across the heavily policed frontier.

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More U.S. companies opening high-tech factories in Mexico

December 2, 2013

The Los Angeles Times, 11/29/2013

Expert TakeFaced with rising wages in China and high shipping costs, many businesses are finding manufacturing close to home more appealing. But despite its advantages, Mexico has problems.

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Biden Kicks-off US-Mexico Economic Dialogue- The Expert Take

September 20, 2013

by Christohper Wilson

For full article press here

mexico-usa-flag-montageFive years ago, the United States and China launched the Strategic and Economic Dialogue, a reflection of the growing complexity and enormous importance of US-China relations. Earlier this year at their meeting in Mexico City, President Obama and President Peña Nieto agreed to a similar initiative, the US-Mexico High Level Economic Dialogue (HLED), for much the same reasons, and Vice President Biden is in Mexico today to officially launch the initiative.

Before looking at the content of the Dialogue, let’s take a quick look at why this matters:

US Export GrowthMexico is the United States’ second largest export market (Canada is first), and since 2009, exports to Mexico have grown faster than exports to any of our other top trading partners. Some six million US jobs depend on trade with Mexico. Investment and financial flows between the two countries are also important, but the massive trade relationship is still the centerpiece of the economic relationship.

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Making San Diego an international hub

July 8, 2013

San Diego flickr user slack12U-T San Diego, 7/3/2013

An effort to dramatically increase spending on U.S. border enforcement was a key reason for Senate passage of immigration reform and will be key to bipartisan support in the House. The debate has focused on walling off the border rather than thinking of it as a conduit. Yet border states such as California, and cities such as San Diego, have the unique opportunity to leverage proximity to Mexico to generate jobs and bolster economic growth for the themselves and the United States as a whole. By further integrating with its Mexican sister city, Tijuana, San Diego could become an international trade hub of more than 5 million people in a binational, regional metropolis.

The economic challenges of recent years have aroused fear and skepticism in the United States around global trade and outsourcing. While moving manufacturing outside the United States can cost American jobs, not all trade and outsourcing is equal. Mexico’s shared border with the United States mitigates the costs associated with trade and maximizes the benefits. Many goods imported from Mexico are actually coproduced on both sides of the border, creating jobs for American workers. In fact, according to a report from the Woodrow Wilson International Center for Scholars, 40 percent of the value of imports from Mexico was actually created in the United States by American workers — about 10 times the level of value created in the United States for goods imported from China. Coproduction keeps jobs in North America that might otherwise be lost altogether overseas.

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That US natural-gas manufacturing boom? It’s happening in Mexico

July 3, 2013

drawing bar chartQuartz, 7/2/2013

The shale gas boom has done a lot to boost the US economy. It’s such a big deal you can see it from space. All that new natural gas has lowered energy costs, which has led analysts to wonder if it could help make America’s energy-heavy manufacturing businesses more competitive with countries that have low labor costs but over-burdened energy infrastructure. But there’s a lot standing in the way of that vision, including the potential for gas exports to affect the value of the dollar, and the observation that maybe energy costs aren’t such a big deal.

But where the US is faltering, Mexico is taking advantage of all that cheap natural gas to boost factories; last year, pipelines brought more natural gas across the border than ever before. Mexico is already successfully competing with places like China on labor prices, but its energy costs are lower, too. Combine that with its proximity to the United States and deep integration into the American supply chain, and you’ve got a recipe for export-oriented success. Pemex, the country’s state-owned oil company, is spending $3.3 billion to build a new, 750-mile pipeline from Los Ramones, Mexico, near the country’s industrial heartland, to Agua Dulce, near Texas’ shale oil fields.

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Report: Mexico Cheaper than China for Manufacturing Appliances

July 3, 2013

factoryAppliance Magazine, 7/3/2013

Manufacturing in Mexico will increasingly offer cost advantages over manufacturing in China and other major economies, according to new research by The Boston Consulting Group (BCG), which foresees manufacturing adding $20 billion to $60 billion in output to Mexico’s economy annually within the next five years.

The group said that, with the North America Free Trade Agreement (NAFTA), U.S. manufacturers of components for finished goods assembled in Mexico also stand to benefit. The group said Mexico’s improving competitive edge is driven by relatively low labor costs and shorter supply chains, which results from Mexico’s closer proximity to U.S. markets.

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