Rising wages combined with slowing growth in China have given Mexico a chance to emerge as a major player on the international stage. According to Boston Consulting Group, Mexico is already a less expensive place to make an array of products for the U.S. market and China’s average manufacturing wage topped Mexico’s this year, especially after accounting for different levels of productivity.
“Mexican workers typically produce more per hour than Chinese workers,” writes the Wall Street Journal. “And its proximity to the U.S. means companies can ship faster and often at a lower cost to American consumers.”
It’s really simple logistics; factories located on Mexico real estate along the U.S. border can supply U.S. and Canadian markets much more easily and more affordably than manufacturers in Asia. This is proving to be especially true for products that require customized design or rely upon fashion trends.
“As Chinese wages continue to rise,Mexico looks the best-placed to benefit,” writes the Wall Street Journal. “Mexico, which exports more than all the rest of Latin America combined, was the least expensive place outside the U.S. to manufacture for the U.S. market, according to a December 2011 survey by consulting firm Alix Partners.”
For example, although Dell products sold at big-box retailers are made by Foxconn in China, shoppers who opt to purchase a customized product on the company’s website get a product that is assembled in a plant near Ciudad Juarez in Mexico. The plant encompasses 1,200 acres and produces as many as 35,000 laptop and desktop computers every day, with trucks getting merchandise to the U.S. in just a few hours.
Proximity is also the reason that auto production in Mexico has hit record numbers in recent years, with car manufacturers Nissan Motor Co. and Volkswagen announcing plans to build multibillion-dollar factories here. All of this means a greater profit for the U.S. economy as well, since American companies earn 37 cents for every dollar that Mexico exports, in part because Mexican companies are heavily reliant on U.S.-made components. This relationship is reciprocal, as Mexico’s economy is also tied to the U.S. In so many ways, what is good for one is also good for the other.