According to a report by Investor’s Business Daily,Mexico now offers much greater value in terms of wage advantage than China,which has driven its economic growth in recent months. In fact,according the Boston Consulting Group,Mexico’s wage advantage will hit an impressive $1.75 by as early as 2015,an impressive margin that will serve to attract even more foreign direct investment.
“Fast-rising Chinese labor costs are prompting companies to reshore production back to Mexico and the U.S.,where transportation and other logistical costs are lower,” writes Investor’s Business Daily. “Mexico is going to be a big winner in reshoring.”
In addition,Mexico’s economy has outpaced Brazil in 2012,growing by 4.6 percent during the first quarter,compared to Brazil at .8 percent. Furthermore,Mexico is expected to top Brazil’s economy by 2022,according to respected Nomura analysts,with manufacturing growing to new record numbers. This includes auto production,which rose 13 percent between January and July of 2012 compared to the same period of 2011,producing a record number of 1.65 million vehicles.
To put all of this in perspective,as recently,as 2005,China’s productivity-adjusted manufacturing wage advantage over Mexico was $1.22 per hour,which Mexico had narrowed to only .34 cents by 2005,pretty impressive for a short five year period!
Mexico is also benefiting from the 1994 NAFTA pact,which includes agreements with the U.S. and Canada. In addition,Mexico’s close relationship with the U.S. has helped to bolster its economy,while Brazil’s dependence on China has proved to be a burden as the demand for commodities decreases.
Finally,President-elect,Enrique Peña Nieto,who will take office in December,is expected to play a pivotal role in helping Mexico to sustain its momentum. He has promised to champion pro-market reforms and to allow more private investment in Mexico’s state-run oil industry.