Five reasons why Mexico manufacturing will lead Latin America in 2016
While the industrial bases of its competitors languish, Mexico manufacturing leads the way.
While other Latin American countries are navigating the linger effects recession, Mexico is slowly and methodically outpacing her closest rivals, Brazil and Argentina, as the fastest growing industrialized country in Latin America. Mexico’s overall GNP growth for 2015 is estimated to be nearly 3%. This is in stark and positive contrast to the rest of Latin America, which is averaging an economic expansion of about .5%. Looking forward for the remainder of 2016, Mexico’s economic prospects look even better – the thriving country is expected to experience and expansion in excess of 3.2%. HSBC recently predicted that Mexico will be the 8th largest economy in the world by 2050. Factors related to Mexico manufacturing are the engine that is propelling this trend. Below five of them are listed:
1. Vehicle Manufacturing
Industries such as vehicle manufacturing en masse have typically been focused on China and other Asian countries. Yet Mexico is now the 7th largest manufacturer of passenger vehicles and light trucks in the world. As of late Mexico has transformed itself into the 4th largest automotive exporter. Recent expansion announcements by automotive giants like Nissan, General Motors, Ford, and Fiat Chrysler have only underscored the strength of Mexico manufacturing in this area of its robust productive sector.
This focus on the manufacture of cars and light trucks has attracted some heavy hitters, with planned investments often topping $1 billion. The influx of such substantial amounts of foreign direct investment has significantly supporting a rapid overall growth in Mexico manufacturing. Some experts estimate that, between globally known OEMs and parts suppliers, nearly $20 billion in new investment into the automotive industry has recently hit Mexican shores .
2. Other Sectors
Mexico manufacturing is growing in other leading sectors besides automotive. It is expected to continue growing in many of them. Information communications technology is expected to account for 13% of Mexico’s overall growth in the next four years. Additionally, electronic products and electrical machinery manufacturing are both steadily performing above average, further propelling Mexico’s overall productive sector growth rate.
3. Free Trade
Mexico leads the world in terms of free trade agreements. The manufacturing country boasts over forty such agreements with leading consumer markets around the world, most notably the US, but also with leading countries in Europe and Asia. This has brought in substantial Mexico manufacturing FDI from nations and companies looking for a production hub with duty-free access to multiple markets.
4. Infrastructure Investment
Mexico has not become the fastest growing Latin American manufacturing economy by accident. In addition to pro-manufacturing policy pursued by its predecessors, the current administration is accelerating the country’s drive to overhaul and improve its Mexico manufacturing infrastructure. In terms of transportation and supply chain facilitating infrastructure alone, Mexico plans to spend over $100 billion over the course of the next three years. Educational centers have been encouraged to stress courses of study to support expanded Mexico manufacturing, and specialized programs are being developed for universities to partner with commercial sector partners to produce an even more highly skilled Mexican workforce.
5. Proximity to major customers
Much has been written about Mexico’s fortunate geographic situation, in that its proximity to sizable consumer markets in the US and Latin America give it a commercial leg up on its economic rivals. Jet lagged C-suite decision makers are increasingly scrutinizing the costs related to maintaining a long, trans-oceanic supply chain between the Far East and North America, as well as the cost of maintaining huge floating and emergency inventories, and the obsolescence of product that sometimes occurs due to engineering change made while material inputs are in transit. As a result, there is an increasing realization of the value of nearshoring to Mexico. Mexico has already invested heavily into attracting such companies, but the mere fact that this country sits just south of the US border also impacts the shift occurring in manufacturing today. As regionalism becomes more and more popular, Mexico manufacturing increases its economic allure.