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Mexico Emerges As Major Manufacturing Center For U.S. Market

06 December, 2015

Although China may be keeping a tenuous hold on its position as the world’s largest manufacturing hub,Mexico is much better positioned geographically to service the North American market and has emerged in recent years as the top manufacturing destination for U.S. products,reported Seeking Alpha.

“Global automakers announced $12.7 billion in Mexican investments over the last three years,according to the Center for Automative Research in Ann Arbor,Michigan.”

Mexico also has a population that consists largely of young,working people,according to data from the World Bank,which shows that approximately 66 percent of Mexicans are between the ages of 15 and 64. In addition,Mexico’s recent status as a major global destination for manufacturing has made consumer-defensive-focused ETFs one of the most attractive recent investment choices.

According to data provided by Ernst & Young,Mexico has experienced foreign investment in manufacturing that created more than 100,000 jobs over the past five years. According to a report from UNESCO that is supported by documentation by Bloomberg,the Mexican government is also making strategic moves to manage its growth moving forward,with approximately 4.0 engineering students for every 1,000 people. To put this in perspective,the United States has only 3.6 engineering students per 1,000 people. In addition,Mexico has reportedly doubled the number of two-year and four-year colleges within its borders and its education system now produces even greater numbers of engineers than Germany or Brazil.

“As manufacturing starts to shift to Mexico,and Mexico works toward its 150 million projected population,consumer consumption will be one of the largest and fastest-growing drivers of the economy,” writes Nicholas Mushaike for Seeking Alpha. “Currently I like ETFs that are skewed toward the consumer defensive sector.”

Consumer defensives are defined as companies that are engaged in the manufacturing of food,beverages,household and personal products,packing,tobacco and services like education and training. Also,as a growing number of companies continue to build plants in Mexico,a large number of supporting companies that sell raw materials to the manufacturers are ready to follow and open additional plants.

Factors that give Mexico an advantage for companies that target the U.S. market include stable wage growth,sustained gains in productivity,steady currency exchange rates,close proximity to the U.S.,a steady supply of labor and supportive policies by local and national government.

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