Manufacturing In Mexico Trumps China These Days
Manufacturing In Mexico seems to be establishing the preeminent label of “Made In Mexico” these days, signifying a challenge to previous Chinese dominance. According to a recent report out by RBC Capital Markets, Mexico’s share of U.S. imports for 2010 hit 12.5%, the largest in a decade, and now second only to Canada. It seems the totality of a typical manufacturer in Mexico, when added together and in combination with several other factors, is now greater than the sum of its parts. While China had been known for cheap labor and greater production capacity, a shift has occurred in both national and global conditions.
Two compelling reasons stand out for this shift promoting manufacturing in Mexico. One reason is that as China’s labor force has been experiencing significant wage ‘inflation’ (as compared to its 300% cheaper rates a decade earlier), Mexico’s wages have stagnated, thereby neutralizing the earlier Chinese advantage. Second, because of continued high oil prices, manufacturing in Mexico holds a clear advantage with dramatically cheaper transportation costs. Additional factors fueling Mexico’s market share is their reliably skilled labor pool and NAFTA, which offers protection for companies doing business there.