Mexico is becoming more attractive compared to China for many US companies, according to a report by management consulting firm Boston Consulting Group.
Bloomberg has listed four reasons why Mexico is beginning to be seen as a superior manufacturing base, putting this down to productivity, participation in free trade agreements, cheap energy, and the presence of industrial clusters.
The article notes that wages adjusted for productivity in Mexico will be almost 30 per cent lower than China’s by 2015. Energy is also currently much cheaper, with gas prices 50 to 170 per cent lower, due to Mexico’s energy prices being tied to the US’s, which is currently undergoing a shale gas boom.
Also of note is Mexico’s prevalent industry clusters, especially in automotive and appliances, and the country’s participation in 44 free trade agreements, compared to China’s 18.
Deloitte’s Global Manufacturing Competitiveness Index for 2013 (released last November) placed Mexico only at number 12 worldwide, with China ranked first.
Mexico’s industrial base, which makes up more than a third of its GDP overall, has been credited with helping boost its overall economic performance improvement.
“Part of Mexico’s healthy recovery since mid 2009 likely reflects the improved competitiveness of Mexico’s manufacturing sector – which has outperformed its U.S. counterparts by nearly 6 percentage points since the mid-2009 trough,” noted Reuters in February.