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China’s Loss,Mexico’s Gain: Major Suppliers Invest in Mexico

13 September, 2012

Many businesses are now making the move from stationing their factories in China to having their factories in Mexico instead.  One of the companies is Meco Corporation,who produces barbecue grills and folding chairs. The president of the corporation,Harrell Ward,was quoted as saying “We ran the numbers and made the decision to move our equipment down to Mexico,with the decision really based on trying to give our customers more stable pricing.” The manufacturer is going to invest $10 million in an industrial plant based in northern Mexico. Saltillo,a city with a population of 725,000,will be the new home of Meco’s factory.   

Rising labor rates in China and the cost of shipping over the Pacific have been responsible for many similar investments,with Mexico posting a larger increase in U.S. market than China for every month except December in 2010,and ending 2010 with approximately 12% of the U.S. import market. That’s the largest share of the market Mexico has ever had. Mexico’s manufacturing exports have increased at an astounding rate,going up 29.5% for a total of $246 billion in 2010. The biggest percentage of that is automobile exports,which increased 53% in 2010 to $65 billion. 

In addition to these growth rates,foreign direct investment is also increasing,with government estimates putting it at up to $19 billion in 2011.  

All of these advancements make Mexico an excellent place for businesses to set up manufacturing plants,but there’s even more good news: Mexican factories also buy more components that have been made in the United States than Chinese factories do,by a rate of almost twice as much. This evens global imbalances by creating more demand for American-made goods. All things considered,businesses should definitely look to Mexico for their next expansion. 

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