Mexico's free trade agreements make it an ideal export base
January 12, 2015
Automotive manufacturing in Mexico has been booming, thanks largely to cheaper labor and proximity to the United States, but the country's bountiful free trade agreements have also lent a hand. With 44 FTAs and $19 billion in new investments, Mexico is now the eighth largest producer of vehicles in the world.
Mexico initially spurred increased foreign investment with the implementation of NAFTA, which created the largest free trade zone in the world. Vehicle production in Mexico has tripled since the agreement's passage, and Mexico vehemently sought out trade deals with other countries to continue its market expansion. They now have agreements with more than 40 countries, and European and Asian manufacturers have been flocking to Mexico alongside American companies as the automotive manufacturing industry booms.
Vehicle production jumped 7.2 percent in the first five months of 2014 alone, and 80 percent of the cars built in Mexico are exported to other countries. This jump in production reflects the recent move of many major automotive companies like Nissan, Honda, Volkswagen and Mazda. Even traditionally German manufacturers like BMW, Audi and Mercedes favor Mexico for their global and financial positioning, as Mexico is the only country in the world that can export duty-free goods to U.S.
One Mexican city has capitalized so much on the automotive manufacturing boom that they've seen the rise of a middle class and subsequent expansion of housing and education opportunities. Saltillo, also known as "Little Detroit" is dedicated almost entirely to the industry and is home to seventeen universities, eleven research centers, and twenty-three technical schools, making it home to some of the highest-skilled labor in the country.
Auto manufacturing in Mexico has been increasing exponentially, and it seems as though this is just the beginning for this export powerhouse. The country's steadily improving economy and unique foreign investment strategy slate it for manufacturing growth for many years to come.
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