Mexico’s ability to maintain positive growth trends in its export manufacturing sector are contingent upon its ability to successfully meet sizable challenges.
According to information published in a recent edition of the country’s preeminent industrial trade publication, Mexico Now, maquiladora industry growth registered positive in 2014. Final numbers indicate a positive expansion of six percent over the course of the calendar year. In comments that appeared in Mexico Now, Emilio Cadena, president of National Maquiladora and Export Manufacturing Association, (also known by the acronym INDEX), explained that maquiladora industry growth was registered in terms of job creation, and wage and productivity gains. In order to put things into their proper perspective, the Mexican economy, as a whole, generated a total of approximately seven hundred thousand new jobs in the private sector’s formal economy. Of those newly created positions, one hundred and fifty thousand materialized as a result of maquiladora industry growth. The fact that a bit over twenty percent of the new formal sector jobs created over the course of a full calendar year were created in the export manufacturing sector is an indication of the importance of the role that maquiladora industry growth plays as a leading contributor to the country’s overall economic health and well-being.
Job creation, wages productivity and local content
In the Mexico Now article, the president of INDEX explained that, in addition to experiencing job gains, maquiladora industry growth was also measured in terms of wage gains. Emilio Cadena asserted that, in 2014 maquiladora industry growth occurred in what are considered to be “better paying areas,” and that, as such, average wage gains were experienced by the industry as a whole.
In addition to the areas of job creation and wages, maquiladora growth industry in 2014 also saw a growth in productivity. Year over year 2013-2014 numbers indicate that over a twelve month period maquiladora industry growth was characterized by an increase in exports per employee by a factor of twenty percent. This twenty percent gain in export productivity per employee is attributable, in part, to the growing incorporation of “local content” into the final goods that are shipped beyond Mexico’s borders. The automotive sector, as Mexico’s most vertically integrated industry, is leading the way in efforts to boost local content by integrating more Mexican national industry suppliers into the country’s main industrial supply chains. Company’s such as the Japanese automaker Nissan, for instance, are paving the way for wholly-owned Mexican suppliers to play a more prominent role in maquiladora industry growth.
In the present year, Nissan plans to boost the percentage of locally made components that are incorporated into its vehicles by thirteen percent. Although the company has recently been maintaining the incorporation of an average of seventy-percent of local content in its Mexican made vehicles, it intends to boost this figure by strengthening its local Tier 1, Tier 2 and Tier 3 supply base. The numbers that it is seeking to hit are eighty-four percent local content by 2016, and ninety-eight percent within the two years following. Although Mexico’s burgeoning automotive sector leads the nation’s industry in efforts to incorporate local content, opportunities for replicating auto’s success exist in Mexico’s aerospace, capital goods and transportation industries, particularly with respect to heavy trucks and rail transportation related manufactures.
Significant challenges still exist
Although maquiladora industry growth was positive in 2014, a continued positive trend is contingent upon Mexico’s ability to face important challenges successfully. One challenge, according to Cadena, is related to getting the implementation of Mexico’s energy reform regime right. The president of INDEX believes that, if executed correctly, the nation’s ability to add attractive energy prices to its competitive labor rate structure as an offering to foreign investors will result in maquiladora industry growth well into the future. Another issue that must be dealt with successfully, in his estimation, is related to Mexican security. Despite the fact that homicides in Mexico have been declining at a steady rate for the past three years, and Mexico has registered lower levels of violence than its main Latin American competitor, Brazil, Mexico must continue its efforts to reverse the negative perceptions that were created as a result of the government’s movement against the drug cartel’s that began in 2008.
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