Not long ago, Mexican factories couldn’t compete with the “China price,” the ridiculously low cost of production in the Asian nation.
But two years ago, with rock-bottom wages soaring in China, the average cost of factory labor in the two nations became roughly the same. This is a boon to Mexico, and its industrial parks are swelling.
In this recent New York Times article, the Times notes that American trade with Mexico has grown by nearly 30 percent since 2010, to $507 billion annually, and foreign direct investment in Mexico last year hit a record $35 billion. Over the past few years, manufactured goods from Mexico have claimed a larger share of the American import market, reaching a high of about 14 percent, according to the International Monetary Fund, while China’s share has declined.
The Times article notes there are a lot of examples of clients who were in Mexico, went to China, and now want to come back, setting up production facilities in Mexico. While the non-hard-cost factors of doing business in Mexico can still create stumbling blocks, the overall result can only benefit Mexico!