Manufacturing In Mexico: The New China?
Manufacturing In Mexico is now the cheapest place to operate in the world, with India second, China third, and Brazil coming in fourth. In an astonishing switch, even Chinese companies are moving cellular phone, textile, television, and automobile operations to Mexico, according to a recent survey conducted by Alix Partners. One example that stands out is the ChangAn and Ford relationship that is now a manufacturer in Mexico. In a stunning “reverse globalization” process, proximity to U.S. markets continues to be the most compelling reason to locate manufacturing in Mexico. Plus, as wages, commodity prices, and energy costs rise in China, the drastic imbalance between the U.S. dollar and the Yuan, is compelling.
Four additional reasons manufacturing in Mexico becomes increasingly more attractive are listed below:
- U.S.-Mexican Connection: America still exports three times as much to Mexico as to China. In addition, Mexico receives 75% of direct foreign investment from the U.S., sending 85% ‘back’ in exports.
- Low-cost Advantage: Asia’s production costs, including China, have jumped 15-20% in four years, including labor. Significantly, unstoppable crude oil hikes make the trans-oceanic journey unable to offset previously cheaper but burgeoning cost increases.
- Creeping Currency Crisis: The U.S. dollar-Chinese Yuan imbalance does not exist with Mexico. In fact, the Mexican peso is far more reasonably aligned with the American dollar, thereby providing far greater financial stability.
- Favorable Trade Alliances: Between NAFTA and twelve free trade agreements with more than 40 countries, Mexico enjoys an equitable platform for further manufacturing in Mexico.
Finally, while Mexico is clearly giving China a ‘run for its money’, near-shoring or reverse globalization is not likely to displace China altogether as an economic force. Between giant capital coffers and enormous consumer market potential, China remains a hefty economic powerin the world today.