industry – Page 2 – Geo-Mexico, the geography of Mexico

Cement production in Mexico

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Nov 032012

In 2011, Mexico produced 35.4 million tons of cement, 3% more than a year earlier. The first cement-making plant was built in Mexico in 1906, a few years after cement was first officially approved for use in the construction sector. Cement demand grew only slowly prior to a spate of public infrastructure projects in the mid 1940s.

Cement production in Mexico, 1999-2011. Source: Camara Nacional de Cemento

There are currently six major cement makers in Mexico. About 20% of production is sold in bulk to large construction companies. The remaining 80% of production is sold in 50-kg bags, used either by formal residential construction firms (50% of the total) or in informal (do-it-yourself) projects (32% of all purchases).

Cemex holds a 49% share of the domestic market, followed by Holcim Apasco (21%), Cruz Azul (16%), Cementos Moctezuma (10%). The remaining 4% is split between Cementos Chihuahua and Lafarge Cementos. A seventh company, Cementos Fortaleza (part-owned by Carlos Slim, the world’s richest man), is due to open early next year.

Cemex, based in Monterrey, is one of Mexico’s most important multinational companies. It is the world’s third largest cement producer and distributor, with operations in fifty countries worldwide. In 2004 Cemex received the Wharton Infosys Business Transformation Award for its creative and efficient use of information technology. Before Cemex, who had ever heard of cement mixers, armed with GPS devices, satellite links and computer systems hooked up via satellite links to the parent company’s HQ, cruising cities? The strategy allowed the company to achieve enviable levels of operating efficiency while meeting demanding delivery deadlines even in congested urban areas such as Mexico City.

China leads the world in terms of the volume of cement production, making around 2,000 million metric tons (mmt) a year, followed by India (710 mmt), Iran (72), USA (68), Turkey (64), Brazil (63) and Russia (52). Mexico (35.4) places 15th on the list, behind Japan, South Korea, Egypt and Thailand, but ahead of Germany, Indonesia, France, Canada, the UK and Spain.

On a per person basis, annual cement consumption in Mexico is about 300 kg/person, well below the levels recorded in the USA (1100 kg) and elsewhere. (The extreme cement consumer in recent years has been Dubai, with the staggering figure of 8000 kg/person!) Cement production may be a good indicator of how much construction is taking place, but is not very good news for the environment and climate change, since high quantities of carbon dioxide are released into the atmosphere during the production process. Globally, cement making is responsible for up to 10% of people’s total carbon dioxide emissions each year.

The carbon dioxide comes from three distinct sources:

During the conversion of raw materials into clinker
From the combustion of fuels needed in the cement kilns
Indirectly, from producing the energy required to power production machinery such as grinders and electric motors.

However, according to the Center for Clean Air Policy’s Sector-based Approaches Case Study: Mexico,

“Mexico’s cement industry is among the most modern and efficient in the world today. All the 50-plus kilns operating in the country’s 34 cement plants are dry-process. Mexico’s cement manufacturers are also using energy efficiency enhancing technologies such as preheaters and precalciners in many of their facilities. Moreover, a number of plants make use of some forms of low carbon alternative fuels.”

“Between 1992 and 2003, emissions of CO2 by the cement industry in Mexico increased roughly 25%. This compares with a nearly 108% increase in cement sector emissions from all developing countries during that same time frame and a 34% increase in U.S. cement industry emissions. The relatively slow growth of emissions from Mexico’s cement sector is an indication of the high overall efficiency of the sector.”

A future post will look at the location of cement plants in Mexico.

Mexico’s growing industrial might

Mexico's geography in the Press, Updates to Geo-Mexico 6 Responses »

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.

Mexico’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.

Related posts (specific industries):

Rapid growth in Mexico’s vehicle manufacturing and assembly sector

Updates to Geo-Mexico 1 Response »

Sep 202012

Mexico is rapidly becoming a world leader in vehicle production, which includes cars, commercial vehicles such as large trucks, pick-ups and SUVs (sports utility vehicles). Back in 1995, Mexico produced fewer than a million vehicles and ranked 12^th globally. By 2011 it was making 2.68 million, placing it 8^th in the world (see table). During the 16 year period, Mexico surpassed France, Canada, the U.K., Russia, Italy and Spain. China and India moved ahead of Mexico during the period.

Mexico’s impressive 1995 to 2011 growth of 185% was third among top vehicle producers, but trailed way behind the amazing growth of China at 1170% and India at 515%. Others experiencing significant growth include Brazil up 109%, Russia up 101%, South Korea up 84% and Germany up 35%. Except for Spain, which edged up less than 1%, all the other other major vehicle producers experienced significant declines in the number of vehicles produced: USA (- 28%), Japan (-18%), U.K. (-17%), France (-15%) and Canada (-12%). The data clearly indicate that vehicle production is shifting rather quickly from the major producers of past decades to a number of emerging economies with lower labor costs. Germany appears to be the only exception to this shift. In North America, production has shifted from the USA and Canada to Mexico, largely as a result of NAFTA.

2011 Production Statistics (Source: International Organization of Motor Vehicle Manufacturers)

Country	Cars	Commercial vehicles	Total	Change from 2010
(millions of vehicles)
China	14.5	3.9	18.4	0.8%
USA	3.0	5.7	8.7	11.5%
Japan	7.2	1.2	8.4	–12.8%
Germany	5.9	0.4	6.3	6.9%
South Korea	4.2	0.4	4.7	9.0%
India	3.0	0.9	3.9	10.4%
Brazil	2.5	0.9	3.4	0.7%
MEXICO	1.7	1.0	2.7	14.4%
Spain	1.8	0.5	2.4	–1.4%
France	1.9	0.4	2.3	2.9%
Canada	1.0	1.1	2.1	3.2%
Russia	1.7	0.2	2.0	41.7%
TOTAL	59.9	20.2	80.1	3.1%

Mexico vehicle production grew by over 14% from 2010 to 2011, the fastest among all major producers except Russia, which advanced at a very impressive 42% (see table). Available data indicate that Mexico’s rapid growth has continued into 2012. Interestingly, the USA’s growth of 12% over its lackluster 2010 total placed it 3^rd, ahead of India (10%), South Korea (9%) and Germany (7%). Surprisingly, Brazil and China grew by less than 1%, though China’s 2011 production level of over 18 million vehicles was over twice as many as its nearest rivals, the USA and Japan.

Just looking at commercial vehicles, which include pick-ups and SUVs, Mexico ranks a very impressive 5^th in the world with over a million vehicles, behind only the USA, China, Japan and Canada. On this list, Germany and South Korea drop back to 11^th and 12^th behind Thailand, India, Brazil, Turkey and Spain.

Source of data:

International Organization of Motor Vehicle Manufacturers

Related posts:

The geography of tequila: trends and issues

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Sep 152012

The production and export of tequila has been one of Mexico’s major agro-industrial success stories of recent times. In this post, we look at some of the related trends and issues.

Rapid rise in production

For the period 2009-2011, Mexico produced about 250 million liters of tequila a year. Of this total, 60% was “100% agave tequila“, where all the sugars are directly derived from the Agave tequilana weber azul, and the remaining 40% was “mixed tequila” (tequila mixto) where at least 51% of the sugars are from Agave tequilana weber azul, but the remaining sugars come from other non-agave sources.

Tequila production, 1995-2011. Data: Tequila Regulatory Council.

This is a dramatic increase compared to the period 2001-2003, when the average production was about 140 million liters a year. During that period, 100% agave tequila contributed only about 20% of the total. The relative importance of 100% agave tequila has clearly increased very rapidly in the past decade.

Agave supply: from shortage to glut

While there is a clear upward trend in total production, there are periods where production has fallen, most recently from 2008 to 2009, when production fell by 60 million liters. One of the possible reasons for a short-term blip in tequila production is if there is a shortage of agave. Agaves take about 10 years to mature, so there is a lengthy time lag between planting and the first harvest of newly planted areas.

As demand for tequila has risen, some of the major producers have experienced temporary shortfalls and been unable to source as much agave as they would have liked. One of the consequences was that independent agave producers entered the market, seeking to profit from such periods. Such independent producers could do well, provided they were able to predict agave shortages a decade in advance. During the 1990s, hillsides all over Jalisco were planted with agave, many for the first time, providing a significant boost to agave supply a decade later.

Not all independents came out of this on top. The supply of agave now exceeds demand. Many of the major tequila companies have increased their own acreage of agave, or have signed forward-looking contracts with major independent growers in other areas of the designation of origin zone. Many independent agave farmers are losing out; they planted agave a decade ago, but failed to forecast the current glut.

Tequila makers currently consume about 1 million metric tons of agave a year. The Agriculture Secretariat estimates that there are about 20,000 independent growers who have no contracts, and 223 million agave plants of diverse ages for which there is no current or short-term market. As many as 30 million agave plants were considered “very mature” in 2009 and a total loss in 2010. It is likely to be several years before the production of agave falls back to a level sustainable with demand.

Exports continue to rise

Tequila exports have risen very rapidly since 2001, with only minor anomalies along the way. Mexico currently exports about 160 million liters a year. Tequila exports have performed well despite the now lengthy economic woes being experienced by the major importing countries.

Foreign ownership

Mexico’s tequila makers have undergone a similar experience to the country’s major brewing companies, in that all but one of the major tequila firms are now owned by foreign corporations. A proposed deal in which the last of the big Mexican tequila companies, José Cuervo, would also have been taken over by British firm Diageo (which owns Baileys, Johnnie Walker, J&B, Smirnoff, Captain Morgan and Guinness) was called off in December 2012.

Environmental concern

The major environmental problem associated with tequila making is wastewater. For every liter of tequila, 10 liters of wastewater (vinazas) are produced. The vinazas are nitrogen-rich, and contain high concentrations of chemicals, including heavy metals and salt.

The National Chamber of the Tequila Industry recognizes that only about 60% of vinazas are disposed of properly. Most of the remaining 40% (about 2.5 billion liters in 2008) are thought to be pumped untreated into local streams and ponds, damaging the ecosystem and destroying stream life.

The Mexican government fines distilleries that do not have adequate treatment plants for the vinazas they produce, but in the past many companies have opted to pay the fines rather than solve the problem at source.

The vinazas problem was one of the reasons why UNESCO recently considered revoking the Tequila region’s World Heritage status, awarded in 2006. Another issue that made UNESCO unhappy was a recent decision to locate a landfill site in Amatitán in the center of the World Heritage zone. In the end, UNESCO officials agreed that progress was being made; the area kept its heritage status.

There is hope on the horizon. A new cost-effective option for tequila firms seeking to dispose of viñazas has been developed by a local corporation Tecnología Nacional de Aguas. Called Proshiemex, it uses the viñazas to produce methane-rich biogas which can contribute to heating the boilers of the tequila distilleries. The remaining sludge can be easily treated in accordance with all applicable environmental norms.

Source of data:

Tequila Regulatory Council Statistics

Related posts:

The geography of tequila: how is tequila made?
The geography of tequila: where is tequila made?
The origin of tequila [link to article suggesting that the town of Amatitán has a longer history of tequila making than Tequila].

Mexico’s beer industry loses its national identity

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Aug 112012

The beer industry in Mexico is dominated by two major players: Grupo Modelo and Cuauhtémoc-Moctezuma, the brewing division of Femsa (Fomento Económico Mexicano).

In 2011, Mexico’s breweries produced 79 million hectoliters of beer, of which Grupo Modelo was responsible for 59%, and Cuauhtémoc-Moctezuma about 25%. Between 1991 and 2011, production had almost doubled, increasing by 92.6%. The record year was 2008, when 82 million hectoliters were produced.

The map shows the locations of the major breweries belonging to Grupo Modelo and Cuauhtémoc-Moctezuma (Femsa), as of mid-2012.

The location of Femsa and Modelo breweries in Mexico

The location and inauguration dates of Femsa and Modelo breweries in Mexico

Grupo Modelo produces 13 brands, including Corona, Modelo Especial, Negra Modelo, Pacífico, Victoria, Estrellita and León. Its international sales rose 4.7% in 2011 to about $2.8 billion. Its best selling brand abroad is Corona Extra, the leading Mexican beer in the USA, while its Modelo Especial brand is that country’s third most popular brand. Corona is the leading import brand in some 40 countries, including Australia and Canada. Grupo Modelo (2011 net sales $6.5 billion) has a presence in about 180 countries.

Cuauhtémoc-Moctezuma produces 21 brands, including Tecate, Carta Blanca, Superior, Sol, Indio, Bohemia, Dos Equis and Noche Buena. It sells to 50 countries. The division represents 23.5% of the total revenues of parent company Femsa (Fomento Económico Mexicano).

Several things have changed since our two previous major posts about beer:

The emergence of two major beer-makers in Mexico [10 Sep 2010]
The geography of Mexico’s beer industry [17 Sep 2010]

First, beer consumption has been rising. The average consumption in 1994 was 49.6 liters/person/yr. This figure had risen to 61 liters by 2000 and to about 70 liters by 2008. Part of this increase is due to the fact that the average age of the Mexican population has been steadily rising for several decades. See, for example, Is Mexico experiencing a demographic dividend? A 2005 report from the national beer industry claimed that the average annual consumption of beer in Mexico was 50 liters per adult

The most significant changes in the beer industry are in ownership. In 2010, Dutch brewer Heineken bought 100% of the shares of Cuauhtémoc-Moctezuma, Mexico’s oldest brewer, created in 1890.

Now, it has been announced that Grupo Modelo, founded in 1925, is being bought by Belgian-US brewing company Anheuser-Busch InBev. Anheuser-Busch InBev previously held a non-controlling 50% in Modelo, and is buying the remaining 50% for $20.1 billion. This deal should be finalized in the first quarter of 2013. When completed, it means that virtually all of Mexico’s beer, bar a few small specialist breweries and microbrews, will be in the hands of European firms. Microbreweries include Pepe’s y Joe’s in Mazatlán; Cervecería San Ángel and Cervecería Santa Fe Beer Factory, both in Mexico City; and the Beer Lounge, in Guadalajara.

Both major beer-makers in foreign ownership? Another small but important part of Mexico’s national identity will have been lost…

Ever wondered how ropes are made? A photo essay about Villa Progreso, Querétaro

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Jun 282012

This account of the rope-making industry in the small village of Villa Progreso in the state of Querétaro, is based on information collected during numerous student interviews conducted in the village in the 1980s.

Villa Progreso in the 1980s

Preparing to start. Rope-maker starts to twist the strands.

Villa Progreso is nestled in the hills at the end of a road, east of the town of Ezequiel Montes. The rocky soil is not very fertile, and water is in short supply, so agricultural production is limited, though maguey plants grow well here, even when neglected. The local maguey plants used to supply the raw material for rope-making, the main “secondary” occupation in the village.

However, as the village’s population increased, and as more and more families became dependent on rope-making, another maguey product, ixtle de henequen (henequen fibers), had to be trucked in as the raw material from other states, in particular from Yucatán and Tamaulipas.

The trucks are either rented by the villagers or supplied by the village “distributors” (who eventually buy the finished ropes from the village). About 40 metric tons of henequen are needed each week to keep the rope-makers supplied.

In the 1980s (all monetary figures are from that time), raw henequen was bought by the distributors for about 50 pesos a kilo, and then resold to the villagers at about 95 pesos a kilo. The distributors are “middle men” who, in the words of one student, “make a lot of money doing nothing” and “live in the largest, most expensive homes in the village.”

Once the villagers have purchased a supply of henequen, they perform the various tasks to turn it into ropes. The first step is to “comb” it to make fine fibers and to clean the henequen.

The fibers are then shaken in the wind to further separate them before being stored in a large sack. The ends of the top fibers are then tied onto three wires (see first photo). These wires are made to spin by a wheel.

This is often an old bicycle wheel. Some villagers turn the wheel themselves as they walk backwards feeding fibers onto the wires, via a rope that is wound over the wheel; others rely on children or family members to turn the wheel.

The rope gets longer… and thicker…

As the person carrying the sack walks backwards, they continue to feed the three strands of fiber, gradually creating three fine strands of rope. The spinning process is repeated, using the fine strands as the basis, and the rope can be made as thick as you like by successive spins.

The entire family helps (note cloth tied as sunshade)

The main output from this system is strands of rope of various thicknesses, used for things such as clothes lines. Short strands of henequen are not wasted, but formed into natural cleaning pads.

The work is done by the entire family. One worker pointed out that “it is better to have a large family as like this all can work for each other”. Any workers who have no family have to hire extra workers and are unlikely to make any profit.

On a good day, one family can produce about 72 ropes, each about 5 meters long, which can be sold for around 1800 pesos. However, it takes about 1 kilo of henequen to make 7 or 8 ropes, so the family only makes about 800 pesos [about 5 dollars at the then exchange rate] a day after they have paid for the “raw” henequen. The average family size, including children, in the village was between 5 and 6 individuals. 800 pesos a day is not much income to support the entire family!

The finished ropes are bought by the distributors, who in turn sell it on to other distributors in other places, and so on. The main markets are Mexico City, where about 90% of these ropes are eventually sold.

The workers in the rope-making industry in Villa Progreso have tried to organize themselves, but with only limited success. For example, three years before the interviews, they had formed a cooperative, but decided to quit the group when they realized that the managers of the cooperative also wanted part of the profits. So, at the time of the interviews, they had returned to working independently without any outside help.

Sales of rope fluctuate with the economy, and also seasonally, with the highest demand during the rainy season, partly because these natural fiber ropes tend to disintegrate more quickly during damp conditions.

The final stage, with finished ropes

As one student concluded, “It is very visible here how the middle men (distributors) take advantage of the cheap labor available and make a large profit by only buying and selling raw materials and by buying and selling finished products. thus, the distributors are getting richer by exploiting the workers and the workers are remaining as poor or getting poorer than before. The workers have been pulled into a situation that they can not easily escape from.”

How have things changed since the 1980s?

Sadly, I haven’t had the chance to return to Villa Progreso since then, but things appear to have changed considerably. Newspaper accounts such as “Artesanos dan nuevo aire al ixtle” (“Artisans give new life to Ixtle”), which appeared in the national daily El Universal in 2008, suggest that the residents of Villa Progreso are now emerging from some very hard times.

The price of natural fiber ropes could not compete with cheaper plastic alternatives and the rope-making industry went into near-terminal decline. Many of the able-bodied young men left to look for work north of the border. A small number (mainly the older inhabitants) remained home and continued to make ropes by hand for the limited market that remained for their products.

Now, though, a new industry has arisen based on the henequen fibers (usually known simply as ixtle). Enterprising villagers have turned their hands to fashioning nativity scenes and decorative items out of ixtle. Isaías Mendoza Guzmán is described in the article as making pieces that are more than two meters tall and take three months to complete, clearly indicating a high level of sophistication in the final product.

Villa Progreso now holds an Ixtle and Nopal Fair (Feria del Ixtle y el Nopal) towards the end of April each year in the La Canoa “ecotourism park”.

Villa Progreso is by no means the only place in Mexico where rope-making is an important activity. Similar rope-making methods are used elsewhere in Mexico. For example, John Pint describes in “Mexican artisans of Lake Cajititlán” how rodeo-quality lariats are made in the village of San Miguel Cuyutlán, near Guadalajara. Demand for these high-end products apparently remains strong.

Photo credit:

How to get there:

Villa Progreso is about 10 km east of the town of Ezequiel Montes in Querétaro. From Mexico City, take the Querétaro highway (Hwy 57D) north-west to San Juan del Río. Then take Highway 120 past Tequisquiapan to Ezequiel Montes. Once in the town, turn right for the road to Villa Progreso. Allow 2.0 to 2.5 hours for the drive.

Related posts about the same general area:

The maquiladora export landscape

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Oct 102011

InfraNet Lab is “a research collective probing the spatial byproducts of contemporary resource logistics.” Given its emphasis on spatial aspects, it includes many topics of interest to geographers.

InfraNet Lab was included on Planetizen’s 2009 list of the 10 best planning, design, and development websites. Planetizen describes InfraNet Lab as:

“An intense and directed blog focusing on the physical manifestations of controlling resources. It’s a fresh look at the impacts of modern world’s infrastructural needs and the intertwined networks between urbanism, architecture and landscape that result. With archives dating back to April 2008, InfraNet Lab offers a crash course in innovative ideas that reframe the infrastructure conversation around the impacts of human resource dependence and, ultimately, methods for making improvements. An insightful and inciting read for anyone feeling underwhelmed by the status quo of modern-day infrastructure.”

One post on InfraNet Lab of particular interest to us is the guest post by Juan Robles, following an InfraNet Lab seminar at Daniels Faculty of Architecture, Landscape, and Design at the University of Toronto. Robles writes about the landscapes resulting from the growth of maquiladoras in Mexico. He looks at how the necessary infrastructures and networks for maquiladoras to succeed have developed, and how they have transformed the Mexico-US border area. The changes have certainly been profound:

“The ongoing processes of trade and communication that now integrate the 21st century regional economies have created numerous territories of abundance. Among these spaces the maquiladora landscape, in the northern border of Mexico, has seen the greatest change in the last 50 years.”

This is a well illustrated account of the spatial changes associated with maquiladoras, and includes a variety of useful maps and graphics.

Shanty towns support maquiladoras. Credit: Juan Robles/InfraNet Lab.

InfraNet Lab is a valuable resource for AP, A-level and IB. In InfraNet Lab’s words:

The globe’s networked ecologies of food, water, energy, and waste have established new infrastructures and forms of urbanism linking dispersed entities. These agglomerations evolve and shift as resources are uncovered or depleted. While these ecologies exist at the service of our contemporary lifestyles, they have typically remained hidden from view and from the public conscience. Yet as resources of food, fuel and water begin to run scarce, new resources are mined and new networks develop.

InfraNet Lab takes the view that “Long accepted patterns of globalization are being called into question as transportation costs soar and resources run scare, transforming mobility and trading patterns. New local, regional and international networks of goods, movement and trade are beginning to emerge.”

This means that InfraNet Lab offers some very valuable resources for courses such as the IB Geography’s Paper 3 for Higher Level students which looks at the impacts of all kinds of international interactions.

Mexico’s multinationals: Groupo Bimbo, one of the world’s largest food companies

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Oct 032011

The word “Bimbo” in common English usage refers to an inept person, an airhead or a “cheap” flirtatious “dumb blond”. In Spanish, “Bimbo” has no particular meaning, but is the name of Mexico’s predominant bread baker, a massive multinational company. It is so well-known that in many parts of Latin America, packaged, sliced white bread is often referred to simply as “pan bimbo”.

Grupo Bimbo is the world’s largest bread baker and fourth largest food company on the planet behind only Nestle, Kraft and Unilever. The firm has a presence in 17 countries, supplying consumers with more than 150 brands, via a network of 42 plants in Mexico (see map), 25 elsewhere in Latin America, 34 in the USA and 2 in China. It is currently the only bread company that has a national footprint throughout the USA.

While most people may not be familiar with Grupo Bimbo as a corporation, virtually everyone in the Americas at one time or another has consumed Bimbo products. The company makes over 7,000 different products using various brand names, including Sara Lee; Thomas’ English Muffins; Entenmann’s pastries; Arnold’s, Orowheat, Mrs. Baird’s, Wonder (in Mexico only); Freihofer’s; Stroehmann’s; Brownberry; Old Country; Milpa Real and Tia Rosa (tortillas and related products); Barcel (chips and salted snacks; Marinela (sweet snacks); Boboli (pizza crusts); Coronado (cajeta) and El Globo fancy pastry and coffee shops.

How did Grupo Bimbo get to be so big?

Grupo Bimbo was established in Mexico City in 1945, and has grown mainly through acquisitions. In 2008 it paid $2.4 billion for the US food operations of George Weston Foods Ltd of Canada. In 2010 it bought Sara Lee’s fresh bakery division for about a billion dollars. These acquisitions enabled Bimbo to double its total revenues in the last decade to almost $10 billion.

Grupo Bimbo plants, 2011

Grupo Bimbo has a worldwide network of more than 41,000 distribution routes serving an astounding 1.8 million points of sale, varying from tiny corner stores in remote villages to major supermarkets in big cities.

Bimbo product with biodegradable packaging

In recent years, Grupo Bimbo has been busy boosting its green credentials via a series of environmental initiatives. These include a 90-megawatt wind park in Unión Hidalgo in the state of Oaxaca, which will generate almost 100% of the power Grupo Bimbo requires to run its plants in Mexico, and will be the largest wind park in the global food industry. It will diminish Grupo Bimbo’s environmental footprint and mean that almost half of Grupo Bimbo’s total global electricity consumption will come from renewable sources.

Grupo Bimbo is one of only ten Mexican companies that have earned the Socially Responsible Company Award from the Mexican Center for Philanthropy (CEMEFI) for ten years in a row. The company is involved in numerous environmentally and socially-responsible initiatives, including Reforestamos Mexico, an NGO committed to protecting Mexico’s forests and rainforests. This has worked with young people from 40 rural communities to help restore forests and raise awareness about the need for certified forestry products and forestry carbon certificates.

So, next time you go shopping, keep your eyes open for Grupo Bimbo brands and see how many Grupo Bimbo products you can recognize…

The financial flows involved in Mexico’s vehicle manufacturing industry

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Sep 192011

In previous posts, we have seen Where Mexico’s vehicle assembly plants are located, as well as looked at some of the reasons for Mexico’s success in this industrial sector and examined Mexico’s vibrant autoparts sector.

In this post we analyze the varied financial flows involved in the industry. Both local and international financial flows underpin vehicle manufacturing in Mexico.

The following are some of the most important financial flows in the vehicle manufacturing sector.

International financial flows are in green
Domestic/local financial flows are in magenta

1. Foreign firms form Mexican subsidiaries and invest in Mexico; start-up capital to construct the factory and set up the business comes almost entirely from outside the country and enters Mexico as FDI. In recent years, FDI for auto firms has varied from $1 billion to $3 billion.

2. In many cases, local partners are involved, and they also contribute some of the start-up funds.

3. The factories employ workers, in some cases several thousand of them. These workers earn wages and spend most of their wages in the local economy. Each manufacturing job therefore has an economic multiplier effect, and generates more (indirect) jobs in the local economy. These jobs include positions in shops, services, transport, banking, auto-repair, etc. It is estimated that the economic multiplier for vehicle manufacturing is 3:1 – in other words, for every dollar spent in the industry three more are spent in the economy.

4. The factories purchase parts (components), some from Mexican suppliers, and some from overseas.

5. The factory produces vehicles, some of which are sold in the local market, via a series of vehicle distribution/sales points. This generates smaller two-way financial flows within the country.

6. Most of the parts and vehicles made in Mexican auto factories are exported. This generates another major financial flow, as purchasers overseas send funds back into Mexico to pay for their goods. This financial flow (a) allows production to continue and (b) generates profits for the factory owners (the car firms and shareholders).

7. The majority of these profits leaves Mexico, and is repatriated to the corporation’s home country, but both the workers in the factory, as well as the factory owners, pay taxes (state and federal) which remain in Mexico. In the case of shareholders, it is usually a financial flow towards their home country.

Previous posts in the mini-series:

Class exercise:

Use the description of financial flows above to draw an annotated diagram or a map to show the financial flows associated with the manufacturing of vehicles in Mexico. If you can think of additional flows that might be important, add those as well. Compare your diagram/map with that of other students and discuss the results.

The reasons why Mexico is fast becoming a key player in aerospace manufacturing

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Sep 172011

In a previous post, we looked at why Querétaro has become a hub of aerospace manufacturing, home to major manufacturing or research plants for such firms as Bombardier and GE.

In this post we take a further look at the aerospace industry in Mexico, which, according to ProMexico, the Mexican federal agency that promotes trade and investment, has expanded at 17% a year since 2005. Mexico’s aerospace manufacturing, which began as a relatively simple assembly industry, has evolved today into sophisticated aero-parts and fuselage manufacturing, well supported by specialist education and training programs. In the next phase, Mexico is expected to acquire full service airplane assembly meeting all relevant international design and innovation requirements.

The shift in aerospace from simple assembly to complex design, manufacturing and research, echoes what has already happened in some other sectors, such as vehicle manufacture.

Today, the aerospace industry employs 32,000 people in 16 Mexican states. the four most important states for the aerospace industry in Mexico are Baja California, Querétaro, Nuevo León and Chihuahua.

Approximately half the jobs in the sector are located in Baja California, mainly in either Tijuana or Mexicali. The first two aerospace companies to locate in Baja California (in the mid 1960s) were Rockwell Collins and Switch Luz. Today, aerospace firms in Baja California make electronic components, air conditioning systems, cable harnesses, hoses and seals, rustless steel bolts, turbine connector assemblies and blankets for commercial and military aircraft. Honeywell International has been influential in developing aerospace in Baja California since 2007, when it opened a testing facility in Mexicali.

How important is the aerospace sector in Mexico?

The number of aerospace manufacturing companies in Mexico is expected to grow from 232 in 2010 to more than 350 in 2015.
The aerospace sector is expected to provide 37,000 direct jobs in 2015, 28% more than in 2010
Exports of aerospace parts were worth $3.1 billion in 2010, a figure expected to jump to $5.7 billion by 2015.

The major factors that have helped Mexico set up and develop aerospace manufacturing are:

Mexico has the second largest fleet of private aircraft in the world after the USA,
Since 2009, it has become one of the world’s largest recipients of aerospace foreign direct investment
Mexican firms meet technical requirements and delivery schedules
Mexico offers easy access to raw materials for all phases of production
The Mexican market is economically, socially and politically stable
The government has offered strong support for the aerospace industry in Mexico. Import duties on aeronautics components were abolished in Mexico in 2007, the same year that Mexico and the USA signed a Bilateral Aviation Safety Agreement to facilitate cross-border aviation-related trade and services
Several Mexican states, especially those along the northern border have a well-established industrial infrastructure
The proximity of Baja California to the established aerospace industry and important aerospace markets in California, has been an important stimulus to aerospace firms in that state
Overall, Mexico offers lower production costs
Labor costs are not as cheap as India and China, but that is more than compensated by reduced transport costs. Aerospace parts made in Mexico can reach an assembly plant in the USA in 16 hours by road, compared to about 21 days from China by sea.
There is a large pool in Mexico of skilled labor, trained for electronics and auto-parts manufacturing.
Mexico’s workers are well educated, with sound engineering and technical skills

The available evidence suggests that there are now more engineering courses and graduates in Mexico each year than in the USA. The number of engineering graduates in the USA has not risen in recent years, and the number of engineering courses has actually declined. In Mexico, the numbers of engineering courses and graduates have both continued to grow at a very rapid rate. Specialist courses are already training students for the aerospace industry. For example the private university CETYS, with campuses in Tijuana and Mexicali, has added aerospace to its graduate and undergraduate curricula and also offers a Master’s in Aerospace Engineering. Undergraduate programs in aerospace have been introduced at two public universities: the Autonomous University of Baja California and the Tijuana Technological Institute. The Tijuana Technological University has started to train technicians in assembling harnesses for the aerospace industry, modeled on a curriculum developed for a technical school in Toulouse, France (the home of Airbus).

Upcoming trade event:

Mexico is hosting an Aerospace Summit in the city of Chihuahua, October 18-20, 2011, in the Chihuahua Convention Center. (Graphics used above come from the trade event site.)

Sources include:

Aerospace takes flight in Mexico (Sign on San Diego.com)
Mexico Becoming a New Manufacturing World Hub in the Aerospace Market (PR-Canada.net)

Mexico’s vibrant autoparts sector

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Sep 102011

In previous posts in this mini-series, we have seen where Mexico’s vehicle assembly plants are located and looked at some of the reasons for Mexico’s success in this industrial sector. In this post, we consider the importance of the autoparts industry.

Each year, Mexico makes about 2 million vehicles, of which about 1.5 million are for export. Vehicle manufacturing is heavily dependent on parts manufacturers and suppliers. Vehicle assembly plants often require parts to be delivered in a “just in time” basis, to reduce the costs associated with warehousing and inventory. Mexico’s autoparts industry has grown rapidly in the last decade, and now accounts for about 7% of all the GDP derived from manufacturing activities, and for more than 8% of all manufactured exports.

The autoparts sector comprises about 1100 companies, one-third of which are Mexican-owned or controlled. Autoparts manufacturers employ more than 400,000 workers nationwide and exports of autoparts to the USA are worth more than $25 billion a year.

Car factories breed tire factories. Bridgestone, the Japanese tire-maker, and Pirelli, its Italian counterpart, are both investing in Mexico this year, expanding their production facilities and supply of tires to the North American market. Bridgestone is spending $100 million to upgrade its plants in Cuernavaca (Morelos) and Monterrey (Nuevo León), allowing production to rise to 10 million tires a year. Bridgestone also operates a retreading facility for truck tires in León, Guanajuato. Meanwhile, Pirelli is building a 210-million-dollar factory in Silao (Guanajuato) which will turn out 3 million high performance tires each year.

Goodyear recycles tires

Related links:

For a useful map of major scrap tire piles either side of the border and a scary count of scrap tires, see Border 2012: U.S.–Mexico Border Scrap Tire Inventory, Summary Report (May 2007) (pdf file)

For some other (fun and extraordinary) ideas as to how old tires can be re-used, see Tires as Art.

The reasons why Mexico has become one of the world’s top ten vehicle-making countries

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Sep 052011

As we saw in an earlier post – Where are Mexico’s vehicle assembly plants located? – Mexico’s autoparts and vehicle assembly industry plays a vital role in Mexico’s economy, attracting foreign direct investment (FDI), providing employment and bringing in billions of dollars in export earnings each year.

Mexico also has a large internal (domestic) market for vehicles. According to the Mexican Automotive Distributors’ Association, 820,000 vehicles were sold on the national market in 2010. The market leader is Nissan (with 23.5% of the domestic market), followed by General Motors (19.5%) and Volkswagen (13.2%). Mexico’s best-selling cars are the Nissan Tsuru/V16 and the Volkswagen Jetta. Nissan aims to have domestic suppliers for 90% of all its components by the end of 2011.

Why has Mexico become one of the world’s top ten vehicle-making countries?

Mexico already had a highly competitive manufacturing sector
Mexico has an excellent communications network, with several trans-border highways and rail lines, as well as several major ports. This means lower shipping costs
Stable exchange rate
Significant domestic market (population 112 million)
Mexico has formed an outstanding network of trade and investment agreements. Mexico has the world’s largest free trade agreements network, spanning three continents, and offers preferential tariffs to more than 44 countries.
Competitive labor costs
Responsible federal fiscal policies have increased the resilience of the national economy
Availability of skilled labor and well-educated, multilingual managers
Proximity to the USA, both for investments and for markets
Lower production costs: since 2009, the manufacturing costs for vehicles in Mexico has been between 80% and 90% of the equivalent cost in the USA.
Total production and delivery costs: For vehicles sold in the USA, costs are lower for vehicles made in Mexico than for those made anywhere else, including China, India and Brazil.
Government support: To stimulate higher-value activities (engineering, design, testing, R&D), Mexico’s government offers numerous incentives, including job training and tax credits.

Vehicles made in Mexico are high quality
Mexican manufacturing plants have consistently done well in the annual quality surveys undertaken by market research firm JD Power and Associates. The study has been conducted annually for the past 17 years and provides an important benchmark for the automotive sector. Vehicles made in Mexico usually have fewer defects than those made in the USA. In 2008, the Toyota plant in Baja California won the award for the top ranking plant in the Americas.

The top ten manufacturers:

According to the latest figures from the International Organization of Motor Vehicle Manufacturers (OICA), Mexico was the world’s 9 th largest vehicle-maker (2.2 million vehicles) in 2010, behind China, Japan, USA, Germany, South Korea, Brazil, India and Spain, but ahead of France, Canada, UK, Italy and Russia.

Further information:

For more facts and figures (with graphs and maps useful for teaching purposes): Mexico and the Automotive Industry, a strategic place to invest. Gerardo Ruiz Mateos, Ministry of Economy. June 2010. (pdf file)

Where are Mexico’s vehicle assembly plants located?

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Aug 272011

Mexico is one of the world’s “Top Ten” countries for vehicle production and for vehicle exports. 75% of Mexico’s annual production of around 2 million vehicles are made for export. The industry attracts large amounts of Foreign Direct Investment (FDI). Vehicle assembly plants provide around 60,000 jobs, with a further 80,000 employed in distributorships nationwide and a whopping 420,000 employed in the autoparts sector. The combined exports of vehicles and autoparts bring 85 billion dollars a year into the Mexican economy.

There are more than 25 vehicle assembly plants in Mexico, manufacturing many brands of cars and trucks (see map). In addition, there are 1100 firms specializing in making parts for vehicles. In this post, we consider the location of vehicle assembly plants; in a later post we will look more closely at the characteristics of the vehicle assembly and autoparts industry in Mexico.

As the map shows, certain areas of Mexico have attracted more investment in vehicle assembly plants than other areas. The two largest existing concentrations are focused on Toluca in the State of México, and on Saltillo in northern Mexico. However, the fastest growing cluster is in the central state of Guanajuato, where two major plants are currently in the planning stages.

1. What are the advantages and disadvantages of having several vehicle assembly plants in the same area?
2. What the advantages and disadvantages of locating vehicle assembly plants far apart?
3. Vertical linkages occur when one company controls many or all stages in the production of a product. For instance, an auto company may make its own engines and accessories to attach to the vehicles it makes. Horizontal linkages exist where one company is supplied with the components (engines, gearboxes) it needs by another company. What part do you think vertical and horizontal linkages might play when a major automaker decides where to locate a new vehicle assembly plant?
4. Why are there no vehicle assembly plants in southern or eastern Mexico?
5. What are the main reasons for the cluster of vehicle assembly plants near Mexico City and Toluca?
6. Why has Ford chosen to locate its two plants in northern Mexico in different states?

Discuss your suggestions with your classmates and teacher. The answers to these questions should give you a useful list of the major factors that explain the distribution of vehicle assembly plants in any country, not just Mexico.

Related post:

Car-makers building new assembly plants in Mexico

A case study of clustering in a different industry

Mexico’s shoe (footwear) manufacturing industry: regional clustering

Car-makers building new assembly plants in Mexico

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Aug 232011

Two major Japanese car-makers—Mazda and Honda—have announced expansion plans in Mexico in recent months. They will help ensure that Mexico remains the 9th largest car manufacturer in the world, and the 6th largest vehicle exporter. In addition, Italian auto-maker Fiat is expanding its plant in Toluca.

Mazda plant in Salamanca

Mazda is building a new 500-million-dollar plant in Salamanca (Guanajuato) to assemble its best-selling Mazda2 and Mazda3 models. The Mazda3 is the Mazda’s top selling model in the USA. The Mazda plant, scheduled to open in 2013, will employ about 3,000 workers and produce 140,000 vehicles a year.

Honda plants in El Salto and Celaya

Honda, which currently has two manufacturing plants in El Salto (Jalisco), is to construct a third plant, in Celaya (Guanajuato). The new plant will produce the fuel-efficient Honda “Fit” for the North American market. Due to open in 2014, it represents an investment of 800 million dollars and will have the capacity to assemble 200,000 vehicles a year.

Mexican-made cars being exported to China

By early next year, Fiat will be producing 100,000 units a year of its model 500 at its new plant in Toluca, in the state of Mexico. Only 3.5% of these units will be sold in the domestic market. The remainder are destined for export markets, including China, Brazil and the USA. China has already received its first shipment of 100 exclusive “First Edition” vehicles and is expected to take 50,000 a year once the Fiat plant is operating at full capacity.

Related posts:

Mexico’s economic geography is analyzed in chapters 14–20 of Geo-Mexico: the geography and dynamics of modern Mexico. Buy your copy of this invaluable reference guide today!

US firms are near-shoring jobs from China to Mexico

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Aug 112011

Near-shoring means “the transfer of business or IT processes to companies in a nearby country, often sharing a border with your own country” (definition from SourcingMag.com). It is closely related to offshoring, now usually limited to similar transfers as near-shoring, but to more distant locations. Among the best examples of near-shoring are the hundreds of US companies that have set up factories and assembly plants in Mexico under the long-running maquiladora program (analyzed in detail in chapter 20 of of Geo-Mexico: the geography and dynamics of modern Mexico).

Maria Elena Rigoli, the President of Collectron International Management Inc., which helps companies make the move from the USA to Mexico, was interviewed about near-shoring for the 20 December 2010 issue of Food Manufacturing News. Despite reflecting her obvious vested interests, the transcript of the interview is still interesting reading for geographers.

Rigoli first explains how Mexico’s maquiladoras work and then lists the major benefits of moving a company’s operations to Mexico:

Extremely fast shipping times offered by such a close location
Reduced labor costs
Trade agreements with many different countries, including NAFTA
Decades of experience in manufacturing and exporting
Highly-skilled, well-educated workforce

Quotes from the interview:

“Mexico is one of the world’s five largest developing economies. Global market research firm EuroMonitor International forecasts that Mexico will replace Italy as the 10th largest economy in the world within the next decade.”

“The technology used when producing goods in [Mexico’s] maquilas is the same or superior to that in the United States, as technology is typically transferred by the contracted companies individually. Additionally, the large pool of educated technicians coming out of Mexico’s many technical universities are trained to assemble, package, test and manufacture products in a maquiladora setting. This training is either on par or above the average training manufacturing personnel receive north of the border.”

“The growth of Mexico’s share in the aerospace industry speaks volumes about the craftsmanship and quality of products produced in Mexico. Originally, companies like Boeing and Bombardier only outsourced high volume-low tech operations to Mexico, now entire fuselages are designed and built here.”

How do Rigoli’s claims match up to what is happening today?

Well, among the numerous press reports that US manufacturers have started ‘near-shoring’ work from Asia to Mexico, is this one in Asian Shipper., that quotes figures from a survey conducted by consultancy AlixPartners of 80 big US companies.

The survey found that:

9% have already shifted some or all of their operations from Asia to the Americas (= near-shoring).
33% are considering doing it in the next three years

Is Mexico the most attractive location for near-shoring?

63% say, “Yes!”
19% think the USA is better.

What are the major advantages of near-shoring?

30% said lower freight costs
25% said speed-to-market
18% claimed lower inventory costs
16% said time-zone advantages such as easier management coordination
11% liked closer cultural ties with North American managers.

What started as a trickle of US firms moving manufacturing back from China to Mexico seems to be becoming a clear trend. Globalization may have expanded the reach of many such US firms, but near-shoring now seems to be pulling some of them back, closer to home.

Related posts:

Mexico’s Pemex: the government cash cow that environmentalists love to hate

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Jul 252011

Petroleos Mexicanos (Pemex), the giant, state-owned petroleum company, is a symbol of national pride with revenues of over $100 billion in 2008. However, it is cash poor because most of its revenue goes to the government, covering 40% of the national budget. Pemex is $40 billion in debt and its maintenance budget is insufficient to keep its old infrastructure operating safely. About a third of Pemex’s 50,000 km of pipeline is over 30 years old and susceptible to failure.

Environmentalists love to hate Pemex because it has inflicted enormous environmental damage. The June 1979 blowout at the Ixtoc-I drilling rig in the Bay of Campeche resulted in the world’s second largest ever unintentional oil spill: over 450,000 tons, surpassed only by BP’s Deepwater Horizon, but more than ten times the size of the 1989 Exxon Valdez disaster. In November 1984 a series of explosions at a Pemex storage facility in San Juan Ixhuatepec in northern Mexico City started major fires killing about 500 people.

A massive gasoline leak into Guadalajara’s sewers in 1992 resulted in a series of explosions that resulted in over 200 deaths. In recent years numerous smaller, but still fatal, explosions and pipeline failures flooding rivers with oil have brought new attention to Pemex’s environmental damage and failing infrastructure.

It has long been recognized that environmental damage is particularly severe near the conglomeration of Pemex facilities in southern Veracruz near the mouth of the Coatzacoalcos River. The river suffers from chronic heavy petroleum pollution, receiving massive doses periodically when pipelines break. Possibly the only beneficial outcome of the decades of widespread damage caused by Pemex in its principal areas of operation in Veracruz, Tabasco and Campeche was that it prompted the publication in 1983 of Cómo destruir el paraíso (How to destroy Paradise), a book which gave an immense boost to Mexico’s then fledgling environmental movement.

Federal environmental agencies have had only limited success in forcing Pemex to take corrective actions. Pemex recognizes the problems and applies each year for more maintenance funds from the government. The government, however, sets a higher priority on funding exploration since Mexico’s oil reserves are running out. Pemex is fundamental to the Mexican economy but needs investment in maintenance and must become more accountable for its environmental impacts.

Mexico’s environmental issues are analyzed in many chapters of Geo-Mexico: the geography and dynamics of modern Mexico, including chapter 30. Explore the book using Amazon.com’s Look Inside feature and buy your copy today!

The city of Querétaro is becoming Mexico’s aeronautical manufacturing center

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Jun 062011

Mexico’s aerospace sector attracted $1.25 billion in investments in 2010, 25% more than in 2009. The city of Querétaro has become the hub of Mexico’s fledgling aerospace sector, with several companies choosing it as an ideal manufacturing location. Opening a new section of the Bombardier plant in the city of Quéretaro, President Felipe Calderón highlighted the sector’s rapid growth in Mexico; the 200 firms in the sector currently provide 30,000 jobs. The federal government believes that Mexico can become a producer of planes for international markets within the next 5 to 10 years.

Canada-based Bombardier supplies 38% of the world’s business airplane market, and predicts a significant growth in the sector over the next few years. The Bombardier plant in Querétaro will make the fuselage and electrical systems for the new Learjet 85 business aircraft. Bombardier has committed $450 million over the next seven years to expand the plant.

Another firm starting production in Querétaro is Eurocopter, a leading manufacturer of helicopters. It is investing $550 million to build a factory to make components for the aeronautical industry, primarily for export. The components include door structures and tail sections for Airbus and other planes.

A third major company, General Electric, the US-based multinational, has opened its own new advanced engineering center in the city of Querétaro. The $20 million, 8,000-square-meter center is part of a facility making parts for the Airbus 380 airliner. It will specialize in research and design of airplane turbines and power systems. The center, the only one of its kind in Latin America, will employ more than 1,300 highly qualified engineers. It is General Electric’s largest engineering center outside the USA.

Supporting the growth in aerospace industries is Querétaro International Airport, which has drastically reduced its non-renewable energy consumption (and energy costs) by becoming almost totally self-sufficient, relying on solar power. The airport’s solar panels have an installed capacity of 924KW, allowing the airport to profit from feeding surplus electricity back into Mexico’s national electricity grid.

Why has Querétaro become the center of Mexico’s fledgling aeronautical industry?

City is centrally located with excellent transport links via highways and railways to both coasts and to several US border crossings.
It is relatively close to Mexico City, the seat of political power and location of almost all federal offices
It has a large, well-educated, easily trained and skilled workforce
The city currently has fewer security concerns than possible rivals such as Monterrey in Nuevo León.
Mexico has a highly competitive business environment with numerous major international manufacturing facilities for other kinds of vehicles.

The changes reflect the trend in Mexico’s manufacturing sector away from high volume, low-cost manufacturing processes towards higher value, high tech industries.

Rising Chinese labor costs: good news for Mexico

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Mar 312011

As labor costs in China rise, so more companies located there pull up stakes and move to Mexico, according to Spanish-language press reports. In 2002, wages were estimated to be 240% higher in Mexico than in China; the difference now is just 14%, and this is balanced by the savings in transport costs resulting from Mexico’s proximity to the USA. In addition, Mexican manufacturers tend to source more components from the USA than their Chinese counterparts.

In 2010, for the first time since China joined the World Trade Organization in 2002, Mexico’s share of US imports rose faster than China’s share. In 2010, Mexico had about 12% of the US import market, compared to China’s 19%.

Companies that have moved some or all of their production in the past year from China to Mexico include Meco Corporation (folding chairs and garden barbecues) which is opening a plant in Saltillo (Coahuila), and Coach Inc (premium leather goods). Mexico’s manufacturing exports jumped 30% in 2010 to 246 billion dollars.

Mexico’s footwear industry: imports and exports

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Jan 102011

We saw in an earlier post – Mexico’s shoe (footwear) manufacturing industry: regional clustering – that Mexico’s shoe manufacturing is concentrated in three major areas: León (Guanajuato), Guadalajara (Jalisco) and in/around Mexico City.

Shoes are also an important international trade item. Latin America’s largest international footwear trade show is SAPICA (Salón de la Piel y el Calzado), which is held in León twice a year. Each time, it attracts 12,000 buyers from the USA, Canada, Europe, Japan, and Central and South America.

Mexico exports: shoes

Exports

Export volume: 15 million pairs/yr
Value of exports: $250 million (dollars). Exports have risen steadily since 2006, despite the global economic difficulties.
Export destinations, by volume: USA 82%, Brazil 5%, Guatemala 2%, Japan 2% and Canada 2%.
Export destinations, by value: USA 84%, Japan 4%, Canada 2%, France 1% and Brazil 1%.

Imports

Import volume: 45 million pairs/yr
Value of imports: $450 million; this figure is rising at 15-20%/yr
Sources of imports, by volume: Vietnam 39%, Indonesia 21%, China 11%, Brazil 7%, Malaysia 5% and Thailand 5%.
Sources of imports, by value: Vietnam 43%, Indonesia 16%, China 14%, Italy 7% and Spain 6%.

Q. What can you deduce about Mexico’s international shoe imports and exports by comparing the percentages for trade by volume and trade by value? (eg. which countries supply more expensive shoes?)

The threat from China

At first sight, these figures do not suggest that Mexican manufacturers have much to worry about from Chinese shoe manufacturers. However, it is believed that many of the shoes entering Mexico from Vietnam and Indonesia actually originate in China. In addition, some Chinese shoes are thought to be repackaged in the USA for eventual export to Mexico.

Shoe manufacturers’ representatives in Mexico opposed China’s entry into the World Trade Organization (WTO) since they feared it would unleash a flood of cheap Chinese imports into the country. In an effort to help protect national manufacturers, the Mexican government has, for most of the past 20 years, levied a compensatory 35% tariff on shoes originating in China.

Challenges faced by Mexico’s shoe industry

Mexico’s shoe industry faces periodic shortages of some raw materials. In addition, the sector’s supply chains and delivery systems need strengthening.
The improvement of product quality may require further investment in technology and research.
As tariff barriers are lifted, Mexico’s shoe manufacturers will face greatly increased competition from overseas.

Source of statistics: CICEG (Guanajuato Shoe Manufacturers Association) Situación de la industria del calzado en México.

Related posts:

Mexico’s economic geography is analyzed in chapters 14–20 of Geo-Mexico: the geography and dynamics of modern Mexico. Buy your copy of this invaluable reference guide today!

Mexico’s shoe (footwear) manufacturing industry: regional clustering

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Jan 052011

Mexico’s footwear industry is heavily concentrated in three main locations. Manufacturing is focused on the city of León in the state of Guanajuato. Factories and workshops in León account for about 68% of all shoes made in Mexico. The two other important manufacturing areas for footwear are Guadalajara (Jalisco) where about 18% of the national production originates, and Mexico City (together with surrounding parts of the State of Mexico), responsible for 12%.

How has this concentration come about?

León, in Guanajuato, is the center of one of the world’s most complete leather and footwear clusters. The area is a leading supplier and exporter of footwear, saddles and hats.

Footwear has been made in Guanajuato since 1645. The earliest association of shoe makers dates back to 1808. The sector is dominated today by firms with majority Mexican capital. Several of the foreign firms which manufactured shoes here prior to the second world war, changed the focus of their production lines in the early 1940s to specialize in supplying military footwear, leaving the making of consumer footwear to firms with national capital.

Concentration of shoe industry in Mexico.

The advantages of concentration

1. Local raw materials. Local inputs of leather and synthetics reduce the transportation costs (and time) for obtaining raw materials

2. Shared suppliers. Supporting the leather and footwear firms are local suppliers which offer machinery and equipment for tanneries, chemicals, leathers and skins, synthetic materials, dyes and textiles, as well as more specialized shoe-related items such as lasts, soles and heels, accessories and fittings. Shared information and machinery Because the shoe firms are grouped together in a cluster, ideas and information and even specialized machinery can all be shared.

3. Labor. This area has long specialized in footwear and leather products, so all firms benefit from the skilled local labor force.

4. Linkages. Both vertical and horizontal linkages between companies are important in the shoe industry. Vertical linkages occur when one company controls many or all stages in the production line. For instance, a company may make its own accessories and fittings to attach to the shoes it makes, or it may tan its own leather. Horizontal linkages exist where one company is supplied with components (heels, soles) made by another company.

5. Economies of scale.

6. Educational infrastructure. The León area has a variety of educational, training and research centers all supporting the leather and footwear sector. This increases the chances of technological innovations, and the speed of their adoption.

The major advantages of León as an industrial location:

The position of León is key to its success. It is located in central Mexico, close to the major urban areas of Mexico City, Querétaro and Guadalajara. On a broader scale, it is close to the major export markets of the USA, Canada and Central America.

Market proximity is enhanced by an excellent communications network, including good road and rail links, easy access to several major airports, and to seaports such as Manzanillo.

The basic statistics (2009-2010):

Number of footwear-related firms: about 8000, half of them in Guanajuato.
Size of firms: 56% micro (fewer than 10 employees), 33% small (10-50 employees).
Employment: the footwear sector provides 140,000 direct jobs, and twice as many indirect jobs, for a total of 420,000.
Mexico’s largest shoe maker: Emyco, whose 4,500 workers make 6 million pairs of shoes, boots and sandals (various brands) every year. This firm alone introduces 100 new models every three months.
Production volume: 250 million pairs/yr, about 1.6% of world total.
Domestic market: 285 million pairs/yr (average of 2.5 pairs/person/yr)

The domestic market is focused on low-cost shoes, with a few exceptions, such as the market for “cowboy” boots. The manufacture of hand-crafted, high-priced cowboy boots is dominated by smaller firms such as Botas Je-Ver, Botas Jaca and Rancho-Boots, each of which employs 50-200 workers. Some cowboy boots are made from exotic hides, such as crocodile, cayman, armadillo, iguana, ostrich and snake. They are a much-prized status symbol among the upper echelons of Mexico’s drug cartels!

In future posts, we will examine Mexico’s imports and exports of shoes, and see if it is possible to identify any patterns to the distribution of shoe retailers in some of Mexico’s major cities.

Source of statistics: CICEG (Guanajuato Shoe Manufacturers Association) Situación de la industria del calzado en México.

Related posts:

Mexico’s economic geography is analyzed in chapters 14–20 of Geo-Mexico: the geography and dynamics of modern Mexico. Buy your copy of this invaluable reference guide today!

The emergence of two major beer-makers in Mexico

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Sep 132010

Beer was introduced to New Spain by the Spanish. The first permit to produce beer in New Spain was awarded by Spain’s King Charles V to Alonso Herrera in 1544.

Initially, beer was a pleasure of the upper classes, and a series of local beer shops supplied their needs. During the 17th and 18th centuries, the status of beer changed and it gradually gained popularity among other social classes. Prior to the 20th century, the main breweries were in major urban centers such as Mexico City and Puebla. (Puebla was Mexico’s second largest city until 1870 when it was replaced by Guadalajara).

Cuauhtemoc Moctezuma brewery in Monterrey

The relative difficulty of transportation links meant that a single brewery could only serve a limited area. Only after the major railways were built in the last quarter of the 19th century, was it possible for a brewery to ship beer further afield. This same period saw significant foreign investment in breweries, primarily from Germany. Technological improvements enabled the breweries to expand production, industrialize more processes and meet the needs of the ever-growing population. The commercial manufacture and distribution of ice also helped the beer producers. Foreign investment, from the USA and Europe, continued to develop the beer industry until the Mexican Revolution began in 1910.

During the 20th century, two major brewery companies emerged, expanding by a combination of building new breweries and acquiring existing ones to bring more and more of the nation into their market areas. These two brewery groups are Grupo Modelo (main brands: Corona, Modelo Especial, Negra Modelo, Pacífico, Victoria, Estrellita, León) and Femsa (Fomento Mexicano; main brands: Tecate, Carta Blanca, Superior, Sol, Indio, Bohemia, Dos Equis, Noche Buena). Between them the control about 80% of the market.

Grupo Modelo

Grupo Modelo currently has a brewing capacity (7 breweries) of 60 million hectoliters. Its new brewery in Nava (Coahuila) will add another 10 million hectoliters to this figure. Modelo started exporting beer (to the USA) in the 1930s. It now exports to more than 150 countries worldwide. It is the world’s 6th largest brewer, accounting for 63% of the combined export and domestic Mexican market.

The granddaughter of the founder of Grupo Modelo is María Asunción Aramburuzabala, whose net worth of $2 billion makes her the richest woman in Mexico.

Femsa

Femsa is the oldest major beer-maker in Mexico. Its brewery division started life in the northern city of Monterrey in 1890 as the Cuauhtemoc Moctezuma brewery (see photo). Femsa brews about 31 million hectoliters of beer a year, including three of the top 5 beer brands in Mexico’s domestic market. In 2010, the company entered into a joint venture with giant Dutch brewers Heineken to become the leading global brewing concern.

In 1943, one of Femsa’s executives co-founded the Tec. de Monterrey (ITESM), a prestigious university that started in Monterrey and now has 31 campuses in 25 cities across the country.

We will continue our look at the geography of Mexico’s beer industry in a later post.

Mexico’s economic geography is analyzed in chapters 14–20 of Geo-Mexico: the geography and dynamics of modern Mexico. Buy your copy of this invaluable reference guide today!

Bicycle manufacturing in Mexico

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Sep 062010

Bike riding is quite a common recreational activity in Mexico, as well as being many people’s chosen means of transport to work.

In recent years, an increasing number of cities have started regular bike festivals or other events. The Festival de Bicicleta in Xalapa, the state capital of Vercaruz, is just one example.

Back in 1972, in Mexico City, famous Belgian cyclist Eddy Merckx, considered by many to be the greatest cyclist in the history of the sport, smashed the world one-hour distance record by pedaling 49.431 km (30.715 miles). He simultaneously established new 10 km (6.2 miles) and 20 km records by covering 10 km in 11 minutes 53.2 secs and 20 km in 24 minutes 6.8 secs. One curiosity of this achievement is that contemporary ads for Windsor bikes purport to claim that he was riding a Windsor bike when he smashed the record, whereas he was actually riding an Italian bike! Merckx’s distance record stood for more than a decade before being broken, also in Mexico City, by Francesco Moser.

Mexico City is catching up with the craze for bike riding, too. It sees bikes as one way to reduce air pollution. About 30 km ( miles) of downtown streets, including the 8-lane Avenida Reforma, are closed to powered vehicles on Sunday mornings, to provide unhindered access for pedal bikes, walkers, and wheelchairs.

Earlier this year, the city began a bike rental system, Ecobici. More than 1,000 bikes were distributed between 85 specially-designed bike stations, spaced around the city center. Users purchase swipe cards which allow them to access a bike. After the trip, the bikes can be returned to any of the stations. City officials anticipate 24,000 riders using the system by the end of the year.

As the postage stamp suggests, Mexico exports bikes, mainly to the USA. The export market has declined, however, in the past decade as several manufacturers who used to assemble bikes in Mexico have moved their operations to China. Firms which have relocated their operations away from Mexico include Huffy (formerly in Nuevo Laredo), Windzy (Monterrey), Brunswick (Ojinaga) and SRAM.

The website of the National Association of Bicycle Manufacturers claims that its 14 member companies produce about 3 million bikes a year and employ, between them, 4,000 workers.

The 14 bike manufacturers listed are:

Bicicletas Cinelli – Santa Catarina, Nuevo León
Nahel – Durango, Durango
Goray – Torreón, Coahuila
Grupo Veloci – Zapopan, Jalisco
Rebimo de Guadalajara – Zapopan, Jalisco
Biciclo – San Luis Potosí
Bicicletas Mercurio, Mérida, Yucatá and San Luis Potosí (they acquired the famous Acer-Mex Windsor brand in 2001)
Bimex – Mexico City
BR – Mexico City
Magistroni – Mexico City
Benotto (primarily a distributor) – Mexico City
Grupo Oriental – Mexico City
Bicicletas Ozeki – Atizapan de Zaragoza, State of México
Bicileyca – Yauhquemehcan, Tlaxcala

Q. Is there any pattern to the distribution of bike manufacturers in Mexico? Try plotting the locations mentioned on a map of Mexico to see if any pattern emerges.

Q. What factors do you think bicycle manufacturers must take into account when deciding where to locate?

Mexico’s manufacturing industry is discussed in chapter 16 of Geo-Mexico: the geography and dynamics of modern Mexico. Mexico’s transportation system is discussed in chapter 17, and its exports in chapter 20.

Ask your library to buy a copy of this handy reference guide to all aspects of Mexico’s geography today! Better yet, order your own copy…

Mexico’s most valuable brands

Mexico's geography in the Press, Other Comments Off

Mar 092010

Consultancy firm Brand Finance recently published its fifth annual survey (2010) of the world’s 500 most valuable brands. The Mexican firms in the list are:

Corona (# 184) – principal product – beer
Banorte (#189) – finance and banking
Claro (#262) – cell phone service
Telcel (#290) – cell phone service
Bimbo (#369) – bread and pastry products
Telmex (#420) – fixed line telephone and internet service
Televisa (#490) – film and television

One noteworthy fact is that three of these—Claro, Telcel and Telmex— are owned or controlled by a single individual: Carlos Slim, Mexico’s richest businessman.

The top ten in the world (in order) are Wal-Mart, Google, Coca Cola, IBM, Microsoft, GE, Vodafone, HSBC, HP and Toyota.

Note that these firms are not necessarily the largest firms in Mexico in terms of sales. Table 16.2 of chapter 19 of Geo-Mexico: the geography and dynamics of modern Mexico lists the ten largest Mexican private enterprises in 2008. Important aspects of several of these major firms are discussed in the chapters about manufacturing, construction and services, transportation, communications, etc.

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