Mexico becoming major manufacturing center

March 04, 2014

Mexico currently accounts for about 18 percent of auto production in North America, according to the Los Angeles Times, but that number is expected to rise to 25 percent by 2020. Mexico is quickly becoming a major player in the auto market. Many car companies are expanding to Mexico.

Mexico currently employs 580,000 people in the auto industry, a 46 percent increase since 2009. In the same time period, the U.S. employment for auto workers has grown by only 16 percent.

Other items are being produced in Mexico as well, such as aerospace products and electronics. In the future, Mexico will see the graduation of many new highly qualified workers who have been through trade schools, colleges and universities. Many will have advanced degrees in engineering and technology sectors. They will be able to produce electronics and other high-end equipment like computers, making Mexico a likely place for high-tech manufacturing, according to the Times.

General Electric and Honeywell are both taking advantage of these new developments by manufacturing their new wind turbines there. Other companies like Bombardier are building engines and aircraft components in Mexico.

The auto industry will lead to growth in other industries
Right now, because of the mixture of low wages and high quality output, the auto industry is the leader for Mexican manufacturing, according to the Times. This benefits Mexico considerably because it proves that very hard-to-build products can be made there at a highly industrious pace.

"The auto industry is critical, because it is among the most sophisticated of manufacturing technologies," Harley Shaiken, a UC Berkeley labor professor said to the LA Times. "If you can build a Honda Fit, then almost all other manufacturing is vulnerable."

Mexico also benefits from NAFTA, which offers virtually tariff-free shipping between the U.S. and Mexico.

"Mexico is hot, hot, hot right now," said James Rubenstein, an auto industry analyst and geography professor at Miami University in Oxford, Ohio. "While trade agreements are a controversial issue in the U.S., Mexico has embraced it fully, and it is now very easy to export out of Mexico."

Although labor is slightly more expensive in Mexico instead of China, the payoffs are better because of the easy shipping. Additionally, according Rubenstein, the quality of Mexican products is superior.

Mexico is becoming a global power
According  to an article by Bloomberg Businessweek, Mexico is fast becoming a global manufacturing powerhouse. The wages, which will likely be lower than in China in the future, along with energy costs and NAFTA are cited as the major reasons behind Mexico's economic surge.

Energy costs are unique in Mexico because they are tied to U.S. prices, and are therefore lower than in China, according to Bloomberg.

Finally, industry clusters in Mexico are growing, according to Bloomberg. Workers are becoming more and more skilled in certain industries, which makes the country increasingly attractive to companies that want particular skill sets. Auto manufacturing is leading the charge, but other industries are following along.

Companies seeking to build in Mexico but weary of the laws and the bureaucracy may wish to hire a Mexico shelter company.

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