Latin America’s second-largest economy has emerged as a powerful
exporter
At Siemens’ high-voltage equipment plant about two hours’ drive from Mexico City,
workers move about the polished floor, assembling and testing parts of circuit
breakers for use in electrical substations.
Until a few months ago, the 160 parts for these
enormous devices, with protruding poles that give them the appearance of stage
props from a set of Frankenstein’s workshop, were assembled in India or China.
But today, the assembly is carried out in Mexico.
By March next year, most of those 160 parts, which currently come from Germany
and Asia, will be produced there too. The company has also chosen Mexico as the
location for a new surge-arrester project instead of investing to expand
production in China.
“We are moving towards local hubs,” explains Claude
Steffen Raab, general manager of the German company’s high-voltage division in
Mexico. “The idea is to respond more quickly to each of our markets.”
The shift in production at Siemens is part of a
little publicised manufacturing revolution in
Mexico taking place across a range of industries
from cars and aircraft to refrigerators and computers. For the first time in a
decade, Latin America’s second-largest economy has become a credible competitor
to China.
During the first half of this year, Mexico
accounted for 14.2 per cent of manufactured imports into the US, the world’s
largest importer. In 2005, Mexico’s share was just 11 per cent. Surprisingly,
China, which gained huge chunks of the US import market for many years,
has started to lose ground. From a high
of 29.3 per cent of the total at the end of 2009, it has now shrunk to 26.4 per
cent.
While winning a bigger slice of the US market,
Mexico has diversified its customers. A decade ago, about 90 per cent of the
country’s exports went to the US. Last year, that figure fell to less than 80
per cent. Suddenly, it seems, Mexico has become the preferred centre of
manufacturing for multinational companies looking to supply the Americas and,
increasingly, beyond. Today, Mexico exports more manufactured products than the
rest of Latin America put together.
The result of this turnround can often seem
counter-intuitive. Chrysler, for example, is using Mexico as a base to supply some of its Fiat 500s to the Chinese market. During last year’s inauguration of the US
company’s $500m investment in Mexico, Felipe Calderón, the country’s president,
told the nation: “I think it is the first time that a Mexican vehicle, at least
in recent times, is to be exported to China ... we always thought it was going
to be the other way around.”
But the US car manufacturer is not alone. Audi, the German carmaker, is deciding whether to use a factory in Mexico to
manufacture the kits for Q5 cars that are assembled in China to supply the
domestic market.
Mexico’s new-found competitiveness has
become so clear that Marco Oviedo of Barclays concludes: “After lagging Chinese
manufacturing exports for a decade, Mexico has taken the lead post-2008-09. We
believe this change is likely to be structural and persistent.”
Go back to the beginning of the century and none of
this seemed possible. Back then, as China burst on to the global stage
following its accession to the World Trade Organisation in 2001, Mexico seemed
to be in serious trouble.
For much of the rest of Latin America, China was a
voracious customer of agricultural and mineral commodities. By contrast, Mexico
saw China as an unstoppable competitor that produced exactly the same sorts of
cheap manufactured goods at a tiny fraction of the cost.
But several important shifts have taken place since
then that have improved Mexico’s comparative advantages, giving it a new and
dynamic role as a global manufacturer. The first is that Mexico has embraced
trade and openness like few other countries in the world.
Its free trade agreements with 44
countries – more than twice as many as China and four times more than Brazil –
have given companies based in Mexico the ability to source parts and inputs
from a wide range of nations, often without paying duty.
Partly as a result, the sum of Mexico’s imports and
exports as a percentage of its gross domestic product, a strong indicator of
openness, rose to 58.6 per cent in 2010. In the case of China, it was 47.9 per
cent, and just 18.5 per cent in the case of Brazil. HSBC in Mexico City
estimated recently that the figure for Mexico could increase to as much as 69
per cent this year.
There is also an increased confidence inspired by
agreements, particularly the 1994 North American Free Trade Agreement, which
binds Mexico with the US and Canada. “Nafta creates a rule of law, which is not
perceived to be a particularly Mexican concept ... it forces you to do what is
right, and to do it for ever, ” says Luis de la Calle, an economist and trade
expert who helped negotiate Nafta for Mexico.
As if to prove the point, Mr de la Calle devised an
unorthodox index based on how many alphabetical letters appear about a given
country in the US Trade Representative’s annual report on barriers to US
exports and investment, divided by US exports to that same country. Last year,
from a list of 22 countries, Mexico beat Canada to the top place of
best-behaved countries. Pakistan was the worst offender and China was 10th
worst.
. . .
Of course, Mexico is not without its problems.
While the country is making strides in its attempts to diversify, it is still
heavily beholden to the ups and downs in the US.
But perhaps the most alarming concern of foreign
investors and the general population alike is the deterioration in security.
The murder rate has almost tripled to about 22 per
100,000 inhabitants from just over eight when Mr Calderón declared an all-out
offensive against the country’s drug cartels at the end of 2006. The war, which has claimed at
least 55,000 lives over the past six years, has dominated headlines about
Mexico as the press reports on a seemingly endless flow of horror stories
involving beheadings, kidnappings and massacres.
This year, it also prompted the US state department
to issue a travel advisory telling
US citizens to put off “non-essential travel” to many areas of Mexico, and
warning that nearly half of the country’s 31 states are so dangerous that
travellers should avoid them if possible.
So far, the violence has had little impact on
multinationals, which generally operate in safe industrial parks around the
country. But there are no guarantees that organised crime will not start to try
to extort large foreign companies in the future – and in the same way it has
been doing with smaller, domestic companies.
Until that happens, foreign companies continue to
eye Mexico – in part because China has not turned out to be quite the
manufacturing nirvana that it once appeared. While executives long complained
of Chinese red tape and the threat to intellectual property there, they were
willing to balance those risks against cheap labour and transport.
But rising wages and higher fuel prices have made
it increasingly expensive to export from China to the US market. This is all to
Mexico’s advantage. In 2009, Mexico overtook South Korea and China to became
the world’s leading producer of flatscreen television sets. The bulkier the
item, the more Mexico makes sense. According to Global Trade Atlas, the country
is also the leading manufacturer of two-door refrigerators.
Thanks to a 2,000-mile border with the US, and
extensive rail and road links, it is not only cheap but fast and easy to ship
goods north. Shipments from China to the US typically take between 20 days and
two months. From Mexico, they take a week at most and usually just two days.
For many industries operating in today’s
cost-conscious environment, “Made in Mexico” is becoming a serious
consideration in their attempts to shorten supply chains, which potentially
allows them to cut costs because quicker delivery times mean that they can
minimise the amount of money invested in inventories. As Bruno Ferrari,
Mexico’s economy minister, told the Financial Times recently: “The proximity
that Mexico offers industry allows companies to reduce their financing costs.”
Rising labour costs in China have presented Mexico
with an additional opportunity. According to HSBC, Mexican wages were 391 per
cent higher than those of China a decade ago. Today, they are just 29 per cent
more. Experts predict that Chinese wages will even overtake those of Mexico
within five years.
Mr de la Calle argues that demographics are behind
this. While China is experiencing a squeeze in its working-age population.
By contrast, more than half Mexico’s 112m
population is under 29, so there will be an abundance of cheap labour until at
least 2028. “Right now, you have to look at Mexico and conclude that it has the
best demographics in the world,” says Mr de la Calle.
At the same time, Mexico’s plentiful working
population is becoming more skilled. According to Unesco, the number of
engineers, architects and others in disciplines related to manufacturing
graduating from Mexican universities has risen from almost 0.4 per 1,000 people
in 1999 to more than 0.8 today. To set that in a regional context, the number
for the US over the same period has remained roughly flat at 0.6 per 1,000.
Fuente: Thomson, A. (s.f.). Mexico: China’s unlikely challenger. Recuperado el 01 de Octubre de 2012, de ft.com: http://www.ft.com/intl/cms/s/0/9f789abe-023a-11e2-b41f-00144feabdc0.html#axzz27J7zgu6R
