Mexican manufacturing grows as FDI surges
The Mexican manufacturing sector is swiftly becoming one of the most competitive industrial players in the world. As a result, the inflows of capital investment are reacting in kind.
Mexican Manufacturing Power
The industries in which Mexico participates in the manufacturing realm are diverse in scope. Some sectors, however, stand recognizably apart from the rest. Mexican manufacturing growth in recent years has made the most progress in especially “high value” markets like aerospace, automotive, and electronics, with automotive experiencing the most dynamic and dominant movement. Mexico currently ranks as the 7th largest automotive producer, 4th largest automotive exporter, and 2nd largest supplier of vehicles to the US. Industry forecasters are predicting a 50% increase over the next few years to bring Mexico’s automotive annual output to five million cars and light trucks.
Aerospace is another sizeable area in which Mexican manufacturing, and its growing expertise and sophistication, is making a global mark. In 2014 alone, the country exported approximately $1.9 billion in aerospace products to the US. This represents an increase of nearly four times the output registered in 2009. Medical devices and electronics are also well established in Mexico. Numerous industry leaders have extensive manufacturing operations in the country, some of the industry standouts include Electrolux, Flextronics, Foxconn, Lexmark, Cardinal Health, GE, and Johnson and Johnson.
Overall, Mexico is predicted, by some experts, to reach $60 billion in manufacturing exports by 2018. Companies like Quebec-based Bombardier Recreational Products Inc. (BRP) are taking this forecast seriously, and, accordingly, are ratcheting up their current investment levels in Mexico. BRP, for instance, recently opened another production center – this one in Querétaro worth $100 million and able to employ 1,100 workers. The other BRP facility in Mexico in Ciudad Juarez began the Mexican manufacturing of Can-Am brand ATVs in 2009.
Foreign Direct Investment
Foreign Direct Investment (FDI) has responded to Mexico’s recent infrastructure improvements and legal reforms in the area of streamlining business processes and procedures, and is driving much of this recent growth. Capital investment is pouring in from a wide variety of sources from all over the globe. Statistics from the Banco de Mexico, reveal that the Mexican economy has absorbed over $135 billion in FDI over the past five years, the large majority of which has entered the country during the last three years. Approximately 59% of this investment has been injected into the manufacturing sector. The biggest recipients have been the food & beverage, transportation equipment, electronics, and electric equipment markets, in particular. Automotive manufacturing received a boost of approximately 15% in just the last year.
Where are these funds coming from? While sources are all over the globe, the largest investors understandably come from nearby countries. The US has been the point of origin of a third of this investment for the past three years, while Canada has accounted for another 10%.
Foreign Direct Investment inflows are expected to rise even more as a result of the Mexican government’s recent decision to open up the energy sector to private investors, both domestically and internationally. This will require even more upgrades to the technology and infrastructure, but plans for these upgrades are already underway. In the medium to long-term, more competitive energy markets will result in a boost experienced by the Mexican manufacturing sector.