Search Results : auto industry

Nov 072016
 

In a previous post – Mexico’s shoe (footwear) manufacturing industry: regional clustering – we looked at the concentration of the shoe-manufacturing industry in three major areas: León (Guanajuato), Guadalajara (Jalisco) and in/around Mexico City. We have also taken a look at Mexico’s international trade in shoes – Mexico’s footwear industry: imports and exports. We now turn our attention to the distribution of shoe retailers within a large Mexican city.

Shoes in Mexico

The retailing of shoes within cities often exhibits distinctive spatial patterns. Many older and larger Mexican cities tend to have all the retailers for a particular item (furniture, electronics, autoparts, etc) concentrated in a very small area. For example, dozens of retail outlets for electronics are located within a few blocks of Mexico City’s main square or zócalo. Electronics stores are in very close proximity to one other, and occupy both sides of the street for several blocks, leaving little or no room for any other retailers.

Another example of retail specialization is Corregidora street, which has several blocks dedicated to the sale of pots and pans, kitchen utensils and table settings.

Elsewhere in Mexico City’s downtown area:

… turn right and continue down Chile street to the intersection with Tacuba street. One of the most fascinating aspects of commercial life in the downtown area of Mexico City is that each area is specialized in some trade or retail activity. Such trading ghettos were also a feature in Tenochtitlán and the practice still exists today. Where you are now walking is the barrio of bridal shops. The greatest concentration of these shops is north of the Heras y Soto House…” (Candace Siegle, Walking through History, a series of walks through Mexico City’s historic center, 1989)

Returning to the subject of shoes, without which no bridal outfit is complete, shoe retailing is also often heavily concentrated in certain sections of Mexico’s larger cities. Perhaps the most extreme example is in Guadalajara, where shoe retailing is concentrated in two main zones. One of these zones is within the central business district, and is comprised of both regular storefronts and a market. The other area is several kilometers west of the center, around Galería del Calzado, a shopping plaza of more than 60 stores entirely dedicated to shoes. The Galería, located where Yaquis meets Avenida México, has a total floor space in excess of 8,600 square meters (92,500 square ft). The shops in Galería del Calzado stock every major brand and type of shoe, and eagerly compete for your pesos.

From a consumer’s perspective, this is all highly convenient and allows for easy comparison shopping. However, I have never been convinced of the advantages of such concentration from the point of view of the retail store owners, unless perhaps they get their stock from a relatively limited number of (shared) shoe distributors?

Despite the success of many Mexican shoe manufacturers, one of the fundamental weaknesses of the supply chain for footwear in Mexico (according to sector analysts) is the absence of any strong specialized marketer dedicated to shoes. Fancy a job marketing cowboy boots, anyone?

Related posts:

Chapters 21 and 22 of Geo-Mexico: the geography and dynamics of modern Mexico analyze Mexico’s 500-year transition to an urban society and the internal geography of Mexico’s cities. Chapter 23 looks at urban issues, problems and trends. Buy your copy of this invaluable reference guide today!

Mar 282016
 

In 2014 there were 285 tortillerias in Chilpancingo, the capital of the state of Guerrero, when the troubles with the drug cartels really started. Now only 185 remain open as a result of drug gangs attacking the tortilla shops and workers, kidnapping owners and forcing others out of business out of fear of the violence.

Chilpancingo, with a population of over 280,000, is situated in the mountains 105 km north-east of Acapulco. As elsewhere, the tortilla shops are concentrated in the poorer barrios where local criminal gangs also tend to be located. Tortillas are sold from small shops with a view to the street, or are delivered door-to-door by young men on motor cycles.

The drug cartels in Chilpancingo, such as Los Rojos and Guerreros Unidos, realized that by controlling the business owners and the employees of tortillerias, they would have a wide-spread and well-placed network of drug distribution points, lookouts and street dealers, operating under the guise of these many small legitimate businesses.

tortilleria

The take-over began in 2014 with the kidnapping of shop owners and workers, often involving a week’s captivity in a secure house, and demands for ransom ranging from 30,000 pesos (US$2100), up to 2 million pesos (US$140,000 for owners of multiple tortillerias.) After release, the victims were forced to co-operate with the cartel’s drug distribution and look-out system, under threat of business closure. The leader of the Chilpancingo tortilla sellers, Abdon Abel Hernandez has been threatened numerous times, kidnapped once, and his family had to borrow a million pesos to secure his release. He says about 35% of the local tortilla industry has shut down since 2014 out of fear.

The regional president of Corpamex (Mexican Confederation of Business Owners) Adrian Alarcon says he also lives with the fear of death for trying to defend his threatened union membership. “Today the tortilla industry is kidnapped by them (criminal groups) just like what happened with public transport when they forced taxi drivers and bus drivers to become the hands and eyes of the narco. The industry is completely infiltrated. The money that comes from the tortillas is used to buy weapons. We are financing them”.

January 2016 march by owners of tortillerias asking for state government help

January 2016 march by owners of tortillerias asking for state government help

He also stated that 36 businessmen were kidnapped and tortured in the central region of Guerrero in the first two months of 2016, with most of the victims being associated with the tortilla industry. “It wasn’t a coincidence”, he said, “that a national survey named Chilpancingo as the country’s worst city to live in. Crime has put an end to everything: investments, jobs, and the desire to make a family here. But if you think the situation here is in a critical state, you should go to Acapulco. Here, the tortilleros are kidnapped, but there they are being killed.” According to Arcadio Castro, leader of the Tortilla Association of Guerrero, 20 tortilla workers lost their lives in 2015 in clashes with organized crime.

The previous chief of police of Acapulco was dismissed after he failed to pass control examinations, known as trust tests, designed to identify those with possible links to organized crime. His replacement expects some 700 of his current force of 1901 municipal police will also fail their next control exams. Given his current budget, he has no hope of renovating his police force with younger, healthier, law-abiding officers. The assault on the tortilla industry is generally not felt in the tourist areas of the city.

In 2010 UNESCO included the traditional Mexican cuisine of Michoacán in its list of the Intangible Cultural Heritage of Humanity, in large part based on the multiple uses and cultural centrality of corn in Mexican traditional cooking. This decision was very publicly celebrated by the tortilla industry. Unhappily, today, the tortillerias of Guerrero are struggling to survive the extortion rackets of the local drug cartels.

Main source:

Oscar Balderas. Drug Cartels Are Taking Over the Tortilla Business in Mexico. VICE News, , 16 March 2016; article re-published in Business Insider.

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Mexico’s vehicle industry

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Dec 272014
 

Mexico is one of the world’s “Top Ten” countries for vehicle production and for vehicle exports. In 2014, it has overtaken Brazil to become the world’s 7th largest vehicle producer and fourth largest exporter. 80% of Mexico’s production of around 3.3 million vehicles in 2014 were made for export. The trade surplus generated by the automotive sector exceeded 47 billion dollars in 2014.

auto-exports-forbes

Mexico’s vehicle exports in 2014. Credit: Forbes, México.

The industry attracts large amounts of Foreign Direct Investment (FDI). Vehicle assembly plants provide around 65,000 jobs, with a further 85,000 employed in distributorships nationwide and a whopping 450,000 employed in the autoparts sector.

The autoparts sector along produces items worth $80 billion/year, but Mexico also has to import components made elsewhere worth a further $35 billion. Clearly, this offers some opportunities for additional investment aimed at import substitution. Most of the opportunities are likely to be for Tier 2 companies. It is customary to divide the autoparts sector into three distinct parts: OEM, Tier 1 and Tier 2. OEM (Original equipment manufacturer) refers to companies that make a final product for the consumer marketplace (eg Volkswagen). Tier 1 companies are direct suppliers of components to OEMs, and Tier 2 companies are the key suppliers of parts or raw materials to Tier 1 suppliers.

Total production in 2014 topped the 3 million barrier, and the Mexican Automotive Industry Association (AMIA) believes production could reach 4 million units by 2015 and 5 million by 2020.According to  AMIA, the best selling models on the domestic market are the Aveo (GM), Jetta (VW), Versa and Tsuru (both Nissan).

There are about 30 vehicle assembly plants in Mexico, manufacturing many brands of cars and trucks (see map). In addition, there are 1200 firms specializing in making parts for vehicles.

Vehicle manufacturing firms that have announced or confirmed major new investments during 2014 include:

  • Chrysler – 1.25 billion dollars to expand its assembly plant in Saltillo and manufacture a new line of Tigershark engines.
  • Nissan – to open its second plant in Aguascalientes.
  • Mazda – an additional 120 million dollars for its plant in Salamanca (Guanajuato), where it will manufacture several Mazda models as well as one Toyota model.
  • GM – investments worth 690 million dollars, divided  between its plants in Silao (Guanajuato), San Luis Potosí and Toluca (State of México).
  • Audi – about to open a 1.3-billion-dollar plant in San Jose Chiapa, near Puebla.
  • VW – 700 million dollars investment to adapt production lines in Puebla to produce its redesigned Golf hatchback.
  • Kia – plans to build a $1 billion vehicle assembly plant at Pesquería in the state of Nuevo Leon (scheduled to open in 2016) to produce up to 300,000 vehicles a year. The new plant is expected to generate a further 1.5 billion dollars in investment from firms seeking to join Kia’s supply chain.

This map is an updated version of the map we included in Where are Mexico’s vehicle assembly plants located? (2011).

Vehicle assembly plants in Mexico, 2014

Vehicle assembly plants in Mexico, 2014. Credit: Tony Burton/Geo-Mexico; all rights reserved.

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-Ramos Arizpe in northern Mexico. However, the fastest growing cluster is in the central state of Guanajuato.

Virtual visit to the Chrysler plant in Saltillo (video, no commentary):

For a series of discussion questions related to this map and the vehicle assembly industry, see our earlier post – Where are Mexico’s vehicle assembly plants located?

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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.

financial flows

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.

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.

Good-Year campaign to recycle tires

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.

Can Mexico’s industry compete with China?

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Feb 262010
 

In recent years, Mexico has faced increased competition in world markets from China and other Asian countries. Mexico’s contribution to US imports peaked at about 12% in 2003 but has since fallen to around 10%. Chinese imports to the USA overtook Mexican imports in 2003 and now account for 15% of the total market.

According to Mexico’s central bank, Mexico’s lost market share between 2001 and 2005 was worth $27 billion, equivalent to 15% of all non-petroleum exports. Some multinationals closed their assembly facilities in Mexico and moved them to China.

What are China’s advantages?

The two most important ones are wage rates and the much larger local market. The average hourly wage for manufacturing in China is $0.66, compared to $2.13 in Mexico. China also offers more incentives for foreign investment. The companies that have moved are manufacturers of textiles, electronic items and auto-parts; these footloose industries do not have complex and expensive plants (unlike steelworks and chemical plants for example) and can therefore relocate relatively easily. While most have relocated in China, some have preferred South Korea or India.

What are Mexico’s comparative advantages over China?

Mexico’s major advantage is proximity to the US market. Shipping a standard 40-foot container from Mexico to the USA costs less than half the cost from China. Mexico also has a more educated workforce, with about one-quarter of the population having completed secondary education, compared to less than 17% in China. The productivity of Mexico’s workforce is slightly higher than in China, and the country also retains a slight edge over China in terms of its legal system. In an effort to stem the outflow of jobs, the Mexican government has opened several high-tech industrial parks, such as Silicon Border in Mexicali, and these appear to be having some success.

[Excerpt from chapter 20 of Geo-Mexico: the geography and dynamics of modern Mexico.]

Dec 242017
 

Some parts of Mexico have been working on Christmas for most of the year… For example, the manufacturing of beautiful handmade Christmas tree decorations is the main industry today in the former gold and silver mining town of Tlalpujahua in the state of Michoacán. The production of Christmas ornaments in Tlapujahua has a great series of photos by Arturo Toraya of Notimex, showing some of the steps involved.

ornaments-2

As the accompanying text explains, “Making baubles for Christmas trees is the main source of jobs in the town, which is now one of the top five producers in the world. Due to their quality, 90 percent of the total production is exported to the U.S. and Canada. There are 200 family workshops in the town with seven-hour shifts, and each worker can make up to 550 baubles per day. Each workshop decorates about 500 per day. Red, blue, green and yellow are the top selling colors in Mexico, while black, brown and grey are more popular in the U.S.”

The village of Tzintzuntzan, on the shores of Lake Pátzcuaro, also in Michoacán, is another settlement where Christmas seems to be a year-round source of inspiration. The village handicraft market is a cornucopia of straw work in every conceivable color, design and size, which make ideal Christmas decorations or gifts.

Happy Christmas from Geo-Mexico! – ¡Feliz Navidad!

Craft market in Tzintzuntzan, Michoacan

Craft market in Tzintzuntzan, Michoacan

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Is Jalisco the most “Mexican” state?

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Jan 092017
 

Tapatíos (residents of Guadalajara) and Jaliscienses (residents of Jalisco) often brag that they live in the most “Mexican” area of the country. Are these boasts truthful? This is not an easy question to answer. It involves looking at a broad range of evidence.

Jalisco’s climate and natural ecosystems are very diverse like the country as a whole. It is the only state with all of the country’s five principal natural ecosystems (tropical evergreen forest, tropical deciduous and thorn forest, temperate forest, grassland and mesquite-grassland, and arid and semi-arid scrubland) [Geo-Mexico, page 31]. Furthermore, Jalisco has Lake Chapala, the country’s largest natural lake as well as the Colima Volcano, one of the most active in the country. Certainly from a physical geography perspective Jalisco appears the most representative of Mexico as a whole. (For other natural wonders of Jalisco see John Pint’s website: http://ranchopint.com).

Map of Jalisco state

Map of Jalisco. Copyright 2010 Tony Burton. All rights reserved.

Jalisco’s socio-economic characteristics are also representative of Mexico. Its population has an average growth rate and is distributed among a very large city, secondary and smaller cities, extensive farming communities and isolated indigenous areas. While its adjusted per person income is just below the national average, its human development index (composed of infant mortality rate, adult literacy, school enrollment ratio, and adjusted average personal income) is slightly above. Jalisco is similar to Mexico regarding the main economic sectors of agriculture, industry and services, including tourism.

From a tourism perspective, Jalisco includes everything Mexico has to offer: fantastic beach resorts, urban cultural and artistic attractions, natural wonders, significant indigenous areas and impressive archeological sites. On the other hand, Jalisco is not representative in that it is the leading agricultural state (first in production of corn, beef, pork, poultry, milk and eggs). It is also more predominantly Catholic and politically more conservative than Mexico as a whole. Aside from these two exceptions, Jalisco is quite representative from a socio-economic perspective.

Perhaps cultural aspects are the most important in determining the most “Mexican” of the 32 states. Here Jalisco really stands out. It is the birthplace of such stereotypical Mexican cultural characteristics as charrería (Mexican horsemanship), jarabe tapatío (Mexican hat dance), mariachi music, and tequila, the national drink.

In conclusion, the available evidence appears to support the boasts of some Tapatíos and Jaliscienses that they live in the “most Mexican” area of the country.

Many aspects of Mexico’s culture feature in Geo-Mexico: the geography and dynamics of modern Mexico, a handy reference guide to all aspects of Mexico’s geography. If you have enjoyed this post, consider gifting a copy of Geo-Mexico to someone you know.

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Alexander von Humboldt’s visit to Mexico, 1803-1804

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Sep 292016
 

Alexander von Humboldt‘s visit to Mexico began in Acapulco on March 22, 1803, and lasted for almost a year. (He left Mexico via Veracruz for the USA on March 7, 1804.) In his year in Mexico, Humboldt had been incredibly busy. He had measured, recorded, observed and written about anything and everything, with remarkable industry and accuracy. He had climbed mountains, burned his boots on active volcanoes, descended into mines, recorded geographical coordinates, and collected numerous specimens and antiquities. Humboldt’s Political Essay on the Kingdom of New Spain was the first systematic scientific description of the New World. It appeared in 1811, and marked the birth of modern geography in Mexico. His figures and ideas were used and quoted by writers for many many years.

Humboldt had also drawn a large number of maps, drawings and sketches and it can rightly be claimed that the modern era of Mexican map-making began with Alexander von Humboldt, and was then developed further later in the 19th century by cartographers such as Antonio García Cubas.

Humboldt's route in Mexico

Humboldt’s route in Mexico. Click to enlarge

Alexander von Humboldt (Self-portrait c1814)

Alexander von Humboldt (Self-portrait c1814)

The map above shows the route followed by Humboldt during his time in Mexico. The map comes from the book La obra de Alexander von Humboldt en México by Rayfred Lionel Stevens-Middleton  (Mexico D.F.: Instituto Panamericano de Geografía e Historía, 1956). This hard-to-find work is a comprehensive account of Humboldt’s time in Mexico and of his significance for the development of what the author refers to as “modern geography”.

The map of Humboldt’s route in Mexico includes his various side trips such as those to Jorullo Volcano and Santa María Regla.

Humboldt was keen to see Jorullo Volcano, since it was a rare example of a brand new volcano, one of only a handful of volcanoes that have emerged on land anywhere in the world in historic times. Jorullo first erupted on 29 September 1759 and activity continued for 15 years until 1774. Two centuries later, and about 80 km (50 miles) away, Paricutín Volcano burst into action for the first time, in a farmer’s field in 1943.

Santa María Regla, in the state of Hidalgo, about an hour’s drive north of Mexico City, is the best known location in Mexico for basalt columns. The columns, up to 40 meters tall,  are attractively located on the side of a canyon, with a waterfall tumbling over some of them:

Despite only seeing a relatively small part of the country (New Spain as it then was), Humboldt was able to make some generalizations about geography in general, and Mexican geography in particular, that have stood the test of time remarkably well. For example, he was the first to describe the vertical differentiation of climatic and vegetation zones in Mexico. Writing in 1811, he proposed the terms tierra caliente, tierra templada, and tierra fría, terms still widely used by non-specialists today:

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Note: this post was first published on May 7, 2012.

Video of the Sea of Cortés (Gulf of California)

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Aug 232016
 

This PostandFly video explores the islands of San Jose, San Francisco and Espiritu Santo. The Sea of Cortés (Gulf of California) is the body of water that separates the Baja California Peninsula from the Mexican mainland. The Sea of Cortés is thought to be one of the most diverse seas on the planet, and is home to more than 5,000 species of micro-invertebrates. A large part of the Sea of Cortés is a UNESCO World Heritage Site.

Several rivers feed the Sea of Cortés, including the Colorado, Fuerte and Yaqui. The Sea of Cortés has more than 300 estuaries and other wetlands on its shores, of which the delta of the Colorado River is especially important. The vast reduction in the Colorado’s flow has negatively impacted wetlands and fisheries.

Previous Geo-Mexico posts on this area of Mexico include: