While manufacturing in some of Latin America’s largest economies is faltering, Mexico continues to make progress.
While the focus of some has been on other Latin American countries and their economic development, Mexico has consistently and steadily bolstered its position among the nations of Latin America as the strongest growing manufacturing power among those nations. In fact, last year, HSBC predicted that Mexican manufacturing growth will play a significant role in making the country’s economy the 8th largest in the world by 2050. What is driving this growth?
Mexican Manufacturing Growth Data
According to the Boston Consulting Group, Mexico’s manufacturing growth and strength is substantive and poised to be long-term. BCG notes that manufacturing could add between $20 billion and $60 billion to Mexico’s economy through 2018. Most of the nation’s manufactured products are exported to countries around the globe, especially to the United States. It’s a fact that Mexico now exports about $1 billion worth of goods each and every day. Export values in dollars have increased as the peso has weakened over the past couple years. July saw a sharp increase in manufacturing PMI (Purchasing Manager’s Index), and, accordingly, Mexico’s Ministry of Finance estimates the economy will grow between 3.2% and 4.2% by the end of 2015. As of this past July, Mexico’s
manufacturing PMI stands at 52.9.
Mexican Manufacturing Growth Sectors
While Mexican manufacturing is growing in several key markets, the automotive sector is clearly the engine most responsible for driving Mexico’s progress. Predicted to grow by less than 4% in 2015, this sector has already experienced an expanded growth of 11.1% between January and April of 2015. The growth of automotive OEMs has subsequently led to a significant expansion in the supply chain supporting it. For instance, during the first four months of 2015, the production of fabricated metal increased by 8.8%, while rubber and plastics product production saw a rise of 4.5%.
A recent report by the MAPI Foundation confirms this trend and predicts Mexico manufacturing growth will continue to lead the region through 2016. Additionally, the MAPI report predicts the automotive sector will generate the most growth, and add significantly to Mexico’s manufacturing GDP, but lists other industries to watch as well. Other areas of growth for Mexico’s manufacturing for export industry include:
- Information Communication Technology, which is expected to account for 13% of the rise between 2017 and 2020.
- Electronic Products, which continue to perform above average.
- Electrical Machinery, which has been a vibrant market in Mexico for many years.
Outlook for the Future
Interestingly enough, while Mexico, Brazil, and Argentina make up 80% of the manufacturing output for Latin America, Mexican manufacturing growth is not only the regional leader, but it is also the only country among the three not shrugging off a recent recession. Experts predict that manufacturing output will actually decline for Mexico’s two greatest regional rivals next year, while Mexico’s output will more than compensate. This will ensure a net increase in production for the region.
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