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Mexico, U.S. To Benefit As Manufacturing Leaves Asia

Megan O'Neil |
April 10, 2013 | 2:45 p.m. PDT

Staff Reporter

Mexico remains the number one exporter of beer (A Mexican beer factory/Wikimedia Commons)
Mexico remains the number one exporter of beer (A Mexican beer factory/Wikimedia Commons)

Already heavily intertwined, the U.S. and Mexican economies stand to become even more integrated as creeping costs in China drive some manufacturing back to North America, according to U.S. commerce officials.

“A lot of companies are reshoring, or bringing production back to our continent,” said Robert Queen, a U.S. Department of Commerce official and director of the El Paso Export Assistance Center. “It is like our continents are competing with each other now – U.S., Canada [and] Mexico is competing with Asia.”

The comments came during a workshop Tuesday at the Asia/Pacific Business Outlook, an annual conference hosted by the USC Marshall School of Business that attracts trade officers, business executives and investors.   

Mexico has long been an international manufacturing powerhouse, with manufacturing accounting for about 20 percent of the country’s $1.1 trillion GDP. It is the number one exporter of beer, and the fourth largest exporter of automobiles. Its factories are the world’s top producers of refrigerators and flat screen televisions.

SEE ALSO: The Future Of Mexico: Enrique Peña Nieto

The Mexican economy lost jobs starting in the 1990s as manufacturing in Asia exploded. But climbing labor costs in China and the strengthening of the yuan means exporting goods from that country has become more expensive. Add to it rolling electricity outages in China and transportation costs across the Pacific Ocean and Mexico is once again a favorite with U.S. companies.   

“If you are manufacturing a product that is sensitive to high transportation costs and lead times, China is a train wreck,” Queen said.
Investors planted $20 billion in Mexico in 2011, seven times the annual average in the 1980s. Volkswagen, General Electric and Bombardier are a few of the many multinational corporations with significant operations there. After expanding nearly 4 percent last year, the Mexican economy is projected to grow 3.5 percent in 2013.

The figures are also welcome news to its northerly neighbor. The United States receives 80 percent of Mexico’s exports. Meanwhile, 50 percent of Mexico’s imports come from the United States, according to Dorothy Lutter, the senior most U.S. commerce official serving in the U.S. Embassy in Mexico City.

Each day, $1.25 billion worth of goods cross the U.S.-Mexico border, she said.

“You are looking at an annual bilateral trade about a half a trillion dollars,” Lutter said. “This is not the small little country to the south anymore.”

SEE ALSO: Drug Cannon Found Near U.S.-Mexico Border

To be sure, there are plenty of hurdles that could trip up Mexico’s economy growth spurt. Corruption is rampant from the lowest to the highest strata of business and political life, Lutter said. The country’s K-12 education system is deeply troubled. And drug trade-related violence has produced 70,000 fatalities since 2000.

Still, Mexican lawmakers, including first-year President Enrique Peña Nieto, has set in motion critical reforms that will only strengthen the country’s economic prospects, Lutter said.

“The fact that they are growing this year at an estimated 3.5 percent is a credit to their economic model,” Lutter said. “If they didn’t have the violence, it would be really interesting to think where they could be. I think they are growing despite what is their major, big issue down there. We see a lot of opportunity for U.S. companies.”

Find more Neon Tommy coverage on the Mexican economy here.

Reach Reporter Megan O'Neil here. Follow her here.



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