trade | Geo-Mexico, the geography of 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):

Food speculation fuels a tortilla crisis in Mexico

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Oct 292011

The Ecologist Film Unit has produced an excellent 8-minute video on how financial speculation on corn (maize) has led to a dramatic rise in the price of corn tortillas, with potentially disastrous effects for the health and well-being of the many of Mexico’s poorest. Reporter Tom Levitt’s video, accompanied by text, presents a compelling case, one which would be an excellent starting-point for class discussions.

Two short quotes set the scene:

“For many Mexicans, particularly the estimated 40 million living on less than $5 a day (£3), tortillas account for almost half of their average daily calorie intake. As a whole, the country consumes 23 times more maize than rice.”

“In 2000 there was $6 billion invested in commodities, by 2011 it was $340 billion, of which $126 billion, according to data from Barclays Capital, is reported to be invested in food. The vast majority of this new investment has been by speculators with no interest in the agricultural sector or in actually taking delivery of the commodity.”

The result? Higher prices for corn, greater unpredictability in prices, and adverse changes to the diet of tens of thousands, as corn becomes more expensive than meager household budgets permit.

The video is a powerful indictment of the harm being done to ordinary people in many parts of the developing world by rich-world market speculators and investment banks. Watch it now, or read the full article:

Mexico’s poor suffer as food speculation fuels tortilla crisis

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 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)

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:

The cultivation of chiles in Mexico

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Apr 182011

In a previous post, we saw how chiles (Capsicum spp.) have been cultivated in Mexico for centuries (the oldest record of domestication dates back to 4100BC) and they made an important contribution to Mexico’s traditional cuisine being recognized by UNESCO as an “Intangible Cultural Heritage of Humanity.”In this post we take a closer look at where they are grown, how many are produced and how valuable the annual crop is for the domestic market and for export.

For an overview of different kinds of chiles, see these two articles by Karen Hursh Graber on MexConnect:

Area cultivated

The area cultivated for chiles has declined slightly over the last decade from 145,000 hectares to 141,000; about 85% of this area is irrigated. However, the volume of total production has risen by an average of 1.5%/yr, due to the application of improved techniques, knowledge and equipment, especially the increased use of greenhouses. Each year, a small percentage of the cultivated area is not harvested due to the adverse impacts of diseases, pests and climatic events.

Cultivation location, production volumes and value

Mexico’s total annual chile production is around 2 million tons [cf China’s 14.3 million tons]. By variety, about 30% of production is jalapeño chiles, followed by serrano (10.9%), poblano (9.7%) and morrón (8.1%). These four account for 60% of production:

jalapeño (619,000 tons in 2009): Chihuahua (42%), Sinaloa (12.9%), Jalisco (6.6%) and Michoacán (6.3%)
serrano (217,000 tons): Tamaulipas (38.7%) and Sinaloa (30.9%)
poblano (192,000 tons): spread between 16 states, led by Zacatecas (32.7%), Sinaloa (20.6%) and Guanajuato (13.2%)
morrón (162,000 tons): Sinaloa (96%)

: Production of chiles in Mexico, 2009. Source: SAGARPA 2010

The map shows total production volume on a state-by-state basis.

In summary, 2 out of every 3 green chiles grown in Mexico come from Chihuahua, Sinaloa, Zacatecas and San Luis Potosí.

Domestic market for chiles

The average consumption in Mexico is about 15 kg/person. For the period 2000-2010, domestic consumption oscillated around 1.5 million tons/yr. As international demand rises, there is a slightly reduced supply of chiles to the domestic market.

Trade in chiles (exports and imports)

International trade in chiles began shortly after Columbus introduced them to Europe as “peppers of the Indies”.

Today, as noted earlier, Mexico is the world’s leading exporter of green chiles, and ranks 6th for dried chiles. About 25% of Mexico’s chile production is exported. Over the last decade (2000-2009), exports have grown at a rate of about 15%/yr in volume, and 13% in value. In 2009, chile exports were worth 720 million dollars. Exports go to 52 countries, though a whopping 98% go to the USA, followed by the UK, Canada, Germany and Japan.

Mexico also imports some chiles each year. From 2000-2009, imports (almost entirely dried chiles) averaged 30,000 tons, at a cost of around 100 million dollars. China is Mexico’s main provider, followed by Peru, the USA and Spain.

Chile tourism
La Feria del Chile (The Chile Fair) in Queréndaro, Michoacán

Recipes with Chiles:

Main source (pdf file): Un panorama del cultivo del chile, SAGARPA: Servicio de Información Agroalimentaria y Pesquera, June 2010.
[accessed January 28, 2011]

Agriculture in Mexico is analyzed in chapter 15 of Geo-Mexico: the geography and dynamics of modern Mexico. 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…

The changing geography of drug trafficking routes in Mexico

Mexico's geography in the Press Comments Off

Feb 262011

Last year, we reproduced an earlier version of this Stratfor map in The geography of drug trafficking in Mexico. The recently released new version, shown below, shows several changes from the earlier version.

Drug routes in Mexico. Copyright Stratfor. Click map for enlarged version.

The main changes are that the new map:

does not show the territories controlled by each of the major drug cartels. As we have noted previously, the boundaries between cartel territories are hotly disputed and in a constant state of flux.
shows more marijuana traffic originating from Jalisco and Michoacán states.
labels the importing of ephedra from Asia as coming “from China”
adds a new route for ephedra trafficking from Central America through Guatemala and along Mexico’s Pacific Coast towards Acapulco.
strengthens the arrows showing a much larger movement of “all drug traffic” northwards from central Mexico through Chihuahua state and towards the border city of Ciudad Juárez, with branches of this flow extending not just to the Pacific Coast (as in the old map) but also to the Gulf Coast.

What do these changes mean?

First, it is apparent that the overall pattern of drug trafficking routes is more complex than originally thought. Shifting alliances between trafficking groups means that the “map” is being constantly redrawn to reflect the changing relative strengths of the different cartels and drug gangs.

These shifts in routes, and in the zones at the margins of each cartel’s territory mean that the focus of drug-related violence in Mexico is not limited to fixed locations, but that virtually anywhere in the country could find itself “in the wrong place at the wrong time” at some point in the future.

This is quite different to the pattern of drug-related violence 30 or 40 years ago, when most of the problems were concentrated in a relatively small number of generally isolated areas where the drugs were actually grown.

To read more posts about the geography of narcotic drugs in Mexico, use the “drugs” tag in the navigation bar on the left hand side of each page.

Other relevant link

Stratfor report: Mexico and the cartel wars in 2010

Geo-Mexico: the geography and dynamics of modern Mexico discusses drug trafficking in several chapters. A text box in chapter 20 looks at the drug trafficking business and efforts to control it. Buy your copy today to have a handy reference guide to all major aspects of Mexico’s geography!

Tomato production in Mexico

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Feb 192011

Tomatoes are one of the many native Mexican plants that have become essential ingredients in the cuisine of many countries. Mexico is the 10th largest tomato producer in the world, after China, USA, India, Turkey, Egypt, Italy, Iran, Brazil and Spain (FAO 2008).

Mexico produces both red tomatoes (tomate or jitomate, depending on the region) which have high yields and account for about 75% of total tomato production, and green tomatoes (tomate verde) which have a lower yield and account for the remaining 25% of production.

The statistics in this post apply to the production and export of red tomatoes only.

The main varieties of red tomatoes in Mexico are:

vine-ripe large rounds
cherry tomatoes
Roma tomatoes, which now account for 54% of all tomato plantings in Mexico, as demand for them has increased at the expense of other kinds
greenhouse tomatoes (the collective name for several other varieties)

Greenhouses

The single most significant trend in tomato growing in Mexico is the increasing volume of production coming from greenhouse (including shade house) cultivation. Greenhouse cultivation still represents only a small portion of total tomato production in Mexico, but results in greatly improved yields.

Mexico has around 3,200 hectares of horticultural greenhouses in total. An earlier post analyzed the essential characteristics and advantages of the production of horticultural products in greenhouses.

The major advantages for tomato production are:

helps to raise yields
enables producers to move away from seasonal production and grow tomatoes virtually the entire year
ensures a higher quality and consistency of product
facilitates better food safety
helps to ensure that production and packing plants meet or exceed international standards

Rising yields

Yields are rising. Open field yields have risen from 23 metric tons/ha in 1990 to 28 mt/ha in 2000 and to 39 mt/ha in 2010. The highest open field yields are about 45 mt/h in Baja California and Sinaloa, due in part to their efficient pest and disease control protocols.

Greenhouse cultivation of tomatoes gets much higher yields, but also requires more capital investment and more expensive inputs of labor, fertilizers and pesticides. Open field cultivation of tomatoes in Sinaloa and Baja California costs between $3,800 and $6,000/ha. Greenhouse and shade house production of tomatoes can cost up to $22,000/ha. (All figures in US dollars.) The costs associated with many imported inputs (agrochemicals, seeds and fertilizers) are high; they are also dependent on the peso/dollar exchange rate.

Greenhouse yields in Mexico are generally about 150-200 mt/ha. Tomato growers in the USA and Canada using greenhouses achieve yields of up to 450mt/ha, so Mexican producers still have plenty of room for continued improvement.

The largest area of greenhouse tomato cultivation is in Spain (20,000 hectares). By comparison, the USA has only around 350 ha of greenhouse tomatoes, Canada has 650 ha and Mexico 730 ha.

Area cultivated and volume of production

The total area (greenhouse and open field) devoted to tomato cultivation in Mexico has decreased in recent years, from 85,000 ha in 1990 to about 60,000 in 2010.

Tomato production in Mexico for the 2010/11 season is forecast to reach 2.2 million metric tons.

Seasonality

There are two major seasons:

1. In the winter season (October-May), growers in Sinaloa are the main producers and exporters of fresh tomatoes. Michoacán, Jalisco, and Baja California Sur also produce significant amounts in the winter season. Sinaloa growers have adopted very modern cultivation methods, selecting varieties with an improved and extended shelf life, employing highly efficient drip irrigation, and using plastic mulch to maintain their high yields. Sinaloa has 15,000 hectares devoted to tomatoes, of which 1,340 hectares are using greenhouses or shade houses.

2. During the summer season (May-October), growers in Baja California are the main producers and exporters of fresh tomatoes, along with growers in Michoacán, Jalisco, and Morelos.

Mexico Exports: Tomatoes

Domestic consumption and the export market

The final consumption figure for the domestic market depends largely on the volume of tomato exports (primarily to the USA), since domestic consumption is essentially restricted to those tomatoes that do not enter the export flow. Volumes of exports, and price/ton depend on numerous factors beyond the control of farmers in Mexico, including, for example, the seasonal weather in Florida which will help determine the volume of tomatoes produced in the USA.

The USA imports tomatoes from both Canada and Mexico. Mexico’s share of USA tomato imports has risen rapidly since 2000 on account of their lower costs. Mexican tomatoes are less expensive for USA buyers than their Dutch or Canadian counterparts, due to Mexico’s cheaper labor rates, lower transport costs, and their modern cultivation and packing systems.

Mexico’s 1.1 million tons a year of tomato exports are worth 1.1 billion dollars. Mexico does import some tomatoes, but the annual value of imports rarely exceeds 65 million dollars.

Potential risks faced by Mexico’s tomato growers

extreme heat may make tomatoes ripen earlier than usual, as happened in Sinaloa in December 2009
the switch from open field tomato production to protected production (in greenhouses or shade houses) requires an expensive investment in infrastructure and technology.
international prices each year are a major determinant of how many hectares of tomatoes are planted the following year

Note on the first GM tomato

The first GM tomato to be commercially cultivated was the Flavor Saver from the Calgene company, planted in 1995 in Mexico, California and Florida. It was marketed as the MacGregor tomato. It was primarily developed because it did not spoil as quickly as previous varieties of tomato. MacGregor tomatoes last at least 18 days without spoiling, from the time they are picked. Conveniently, consumers also preferred their taste to then-existing varieties. Developing the first GM tomato cost Calgene 25 million dollars and took 5 years.

Main source:

Flores, D and Ford, M. Tomato Annual: area planted down but production up. USDA Foreign Agricultural Service GAIN (Global Agricultural Information Network) Report, January 2010

Agriculture Secretariat refuses Monsanto request for field trials of GM corn

Mexico's geography in the Press 1 Response »

Jan 212011

Mexico’s Agriculture Secretariat (SAGARPA) has refused permission for transnational seed firm Monsanto to undertake larger-scale field trials of its GM corn in Sinaloa, and is opposing similar projects involving transgenic corn in Sonora and Tamaulipas. Monsanto is appealing SAGARPA’s initial decision. The other firms hoping to hold second-stage trials besides Monsanto are Dow Agrosciences (a unit of Dow Chemical Co.) and Pioneer Hi-Bred International (currently owned by DuPont).

What would Yum Kaax, the Mayan god of corn, think about GM corn?

As we noted in “The debate over GM corn in Mexico“, Mexico does not yet permit the commercialization of any genetically-modified corn, but Monsanto is betting on a relaxation of current rules as Mexico currently has to import large volumes of corn each year in order to satisfy domestic demand. Mexico’s corn imports are expected to rise from 10 to 15 million metric tons by 2020. Corn prices are also likely to rise since an increasing portion of the annual US corn crop is destined for biofuel production rather than human consumption.

Monsanto argues that Mexico cannot guarantee its future food security unless it embraces the new agro-technology, and is threatening to withdraw 200 million dollars in planned investments over the next five years. A dozen agricultural organizations in the northern Mexico states of Sinaloa, Sonora, Chihuahua and Tamaulipas, have come out in support of Monsanto’s efforts to introduce transgenic corn, arguing that it is the best way for them to increase productivity and therefore becomes more competitive. The growers’ organizations claim that introducing GM crops has given their commercial competitors a competitive advantage in the marketplace.

The Agriculture Secretariat’s position reflects the concerns of farmers in other regions and ecologists who fear that the introduction of GM corn will displace or eradicate some of Mexico’s existing (non-GM) varieties. Protecting existing varieties of corn is the major motive behind the declaration by the governments of the Federal District and the state of Tlaxcala that their jurisdictions are “GM-free zones”.

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!

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