Sep 292012
 

Industrial exports from Mexico are growing rapidly and diversifying. Some of this growth is coming at the expense of China and other Asian countries. For example, as Adam Thompson reported in the Financial Times, Siemens of Germany recently moved its facilities for assembling high voltage electrical equipment for power substations from China and India to Querétero, Mexico. By next year, most of the 160 parts for this equipment will also be produced in Mexico. Siemens has eight other factories in Mexico and over 6,000 employees. As a result of investments like this, Mexico now exports more manufactured products than the rest of Latin America combined.

It is well known that the USA imports a great deal of manufactured goods from China including toys, electronics, clothing, shoes, etc. But China’s market share of US imports has declined recently, from 29.3% in 2009 to 26.4% to day. On the other hand, Mexico’s market share has increased from 11.0% in 2005 to 14.2%. According to The Economist, “HSBC reckons that by 2018 Mexico will overtake Canada and China to become America’s main source of imports”.

Mexico’s location next to the giant US consumer market is a big factor (see “US firms are near-shoring jobs from China to Mexico”.

It is much faster and cheaper to ship goods from Mexico to the USA rather than from Asia. For example, it usually takes two to seven days from Mexico versus 20 to 60 days from China. Mexico’s locational advantage is particularly important for trendy time-sensitive goods and bulky items. For example, in 2009 Mexico became the world’s leading exporter of flat-screen TVs, surpassing South Korea and China. Mexico is also the leading supplier of smartphones for the US market. Furthermore, as Itizar Gomez Jimenez reports in “Beyond the Refrigerator Door: Success of the Electric Home Appliance industry in Mexico”, most of the large household appliances sold in the USA come from Mexico, including refrigerators, kitchen ranges, dishwashers, microwave ovens, washers and dryers.

Attractive wage rates in Mexico are also a consideration. A decade ago wages in Mexico were roughly four times those in China, but now they are only about 30% higher and the gap is closing (see, “Rising Chinese labor costs: good news for Mexico”). Less red tape under NAFTA also gives Mexico an advantage (see, “Can Mexico’s industry compete with China?”). Mexico is fully committed to globalization. It has free trade agreements with 44 other countries, twice as many as China and four times as many as Brazil. To date, drug war violence has not been a serious constraint to Mexico’s growing manufactured exports.

logo-made-in-mexicoMexico’s maquiladora export industries used to assemble mostly imported parts into finished products for export to the USA. Now, most of the parts are manufactured in Mexico for such industries as electronics, automobiles, appliances and airplanes. (see: “Mexico’s vibrant autoparts sector” and “The reasons why Mexico is fast becoming a key player in aerospace manufacturing). Mexico is also broadening its export market. In 2000, about 90% of Mexico’s exports went to the USA, but now it is down to 80%. Mexico is even exporting manufactured items to China such as the new Chrysler Fiat-500 micro automobile.

While Mexico manufactures products under the names of many foreign brands, it also has its own brands and OEM (original equipment manufacturer) companies that design and build products that are incorporated into foreign branded products. For example, Mexico’s Mabe designs and builds two-thirds of the gas ranges and refrigerators imported into the USA. Furthermore, most of the appliances sold under the General Electric brand in North and South America are manufactured by Mabe. LANIX, Mexico’s largest domestic electronics company, makes desktops, laptops, netbooks, tablets, LCD and LED TV and monitors and smartphones for a range of brand names.

A careful look around a typical household in the USA would reveal that many, perhaps a majority, of the durable manufactured goods would carry a “Made in Mexico” label, including automobiles, flat panel TVs, smartphones, all types of appliances, garden and small power tools, etc. etc.

Sources:

  • Adam Thomson, “Mexico: China’s unlikely challenger.The Financial Times, September 19, 2012 (registration required).
  • Itizar Gomez Jimenez, “Beyond the Refrigerator Door: Success of the Electric Home Appliance industry in Mexico” (pdf file). Cover Feature: Domestic Consume.

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  6 Responses to “Mexico’s growing industrial might”

  1. Too bad that less and less people in Mexico can afford to buy these appliances, given the decline in wages and purchasing power of most Mexicans, greatly worsened by the recent Labour Law Reform which will reduce Mexican workers to Chinese-style virtual slaves, but without the benefits Chinese workers have from living in a socialistic-type society (cheap housing, public transport, services, bills and food prices etc.). Is the conversion of Mexico into the US’s cheapest servicer really the answer to this country’s tremendous social, economic, crime and environmental problems?

  2. Patrick;

    You raise some very good points, but I think use of a term like “virtual slaves” detracts from your argument. My understanding is that each year Mexicans are living longer and becoming more education as well as owning more refrrigerators, PCs, cellphones, vehicles, etc. Many have these because of the wages they get working in factories producing vehicles, TVs, smartphones and refrigerators for export. Of course things could and should be much better for average Mexicans.

  3. I agree with rerhoda’s response. When I moved to Ajijic more than 25 years ago only one car was parked on the street where I live. Now one has trouble to find a parking space in the evenings. Mexicans are definitely better off now than two decades ago, and the future looks even brighter.

  4. As the US domestic auto industry closes in the USA it grows here in Mexico.
    Mexico has been slow to take advantage of it’s low wage rates and it proximity to the USA. Most of this growth is led not by Mexicans but by US and others locating here. The demand is more PULL from the USA than PUSH from Mexico.

    The wages paid here in Mexico allow workers to subsist albeit with a TV, refrigerator and washing machine. People are living longer because of having clean water, drainage and doctors in the towns and cities they have moved to. I also suspect many improvements showing up statistically were due to money sent home by mojados.

    Mexico has to do much much more for it’s people to avert further violence. Here in Monterrey I don’t care so much about foreign investment levels – I care more that we have to think carefully about driving around the city after 8pm. I care more about the almost casual daily kidnappings, the robberies of people not related to the drug war by armed criminals who also have little to do with the drug war.
    The savage criminalisation of Mexico has to do with the almost total lack of social and economic justice.
    A few more opportunities to arn $530 US dollars a month will not change much.

    I imagine that I’m preaching to the choir.

    I know what I’m giving for Christmas. The only question is; is it better for the authors if I buy from Amazon USA or direct from the publisher?

  5. On another note related to Mexico’s further industrialisation: LEGO has a plant near to Monterrey with a target of having 1500 employees, right now one of their problems is that they cannot find employees with robotics education and training (amongst other higher level skill/knowledge shortages).

    They do exist but they don’t want to drive to the plant because the area around Cienega de Flores is dangerous. The muderous USA bound heavy truck traffic we all have to live with but the criminal gangs are more dominant in some areas that others.

  6. Yes, I think we’re members of the same choir!
    We’re delighted to hear that Geo-Mexico will take its place among your Xmas gifts, and thanks for asking about book purchase. Purchases of Geo-Mexico direct from publisher are far more profitable for the authors than sales on Amazon (since Amazon takes about 55% of retail!), so direct sales are the way to go.
    If you don’t want to grapple with filling in forms and our online payment system, drop me an e-mail ~ t...@geo-mexico.com or sal...@sombrerobooks.com and we’ll send you a paypal invoice that you can pay at your lesisure. Happy October! Tony

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