According to a new report released by the Boston Consulting Group,Mexico is quickly outpacing China as the manufacturing base of choice for many of the world’s top corporations. As this trend continues,lower labor and energy costs will continue to boost Mexico’s manufacturing exports,adding between $20 and $60 billion in output to Mexico’s economy each year by 2017.
“Mexican manufacturing has a significant advantage in energy costs,” writes Bloomberg Businessweek. “And industry clusters,especially in autos and appliances,are growing.”
Natural gas prices in Mexico real estate are linked closely with the U.S.,which helps keep costs down,and exports of natural gas from the U.S. to Mexico rose 19 percent to hit a record high in 2012. In fact,the current shale gas boom in the United States is proving to be a serious advantage for manufacturers in Mexico,and the current plans for new pipelines will more than double the nation’s import capacity,paving the way for even faster growth in this sector as they are completed. Also of note,the North American Free Trade Agreement (NAFTA),makes it much easier for U.S. companies to export gas into Mexico.
In fact,Mexico holds more free trade agreements than any other nation in the world,covering 44 countries,including Canada and the U.S.,which remains the world’s largest market. By comparison,China only holds 18 free trade agreements and the U.S. holds only 20.
Over the years,Mexico has cultivated proficiency in a number of specialized industries,including automobiles and all sorts of appliances. Today,89 out of the top 100 auto parts manufacturers have set up operations in Mexico,while more than 70 of the world’s biggest appliance manufacturers can be found here.
“Within five years,higher manufacturing exports due to a widening cost advantage over China and other major economies could add $20 billion to $60 billion in output to Mexico’s economy annually,” writes Yahoo! Finance. “By 2015,BCG projects,average total manufacturing costs in Mexico are likely to be around six percent lower than in China and around 20 to 30 percent lower than in Japan,Germany,Italy and Belgium.”
An added bonus? Since Mexican factories use about four times more American-made pieces than Chinese factories,the growing manufacturing boom in Latin America’s second largest economy is also expected to benefit U.S. suppliers.