Lately I have started to be more and more interested about Mexico due to its current situation as a strongly developing country with great future potential and a great location to the USA's markets... Among many other reasons. Therefore I'm slowly trying to gain better understanding of Mexico's situation and as an investor of course about Mexican companies as investment targets. I will have to start learning Spanish to get a better inside view and also really be able to consider the possibility if I could move there in a few years. Which I'd be happy to do if I'm able find a job for myself. Moving outside Europe to a totally new place would be an amazing life experience.
Now listing short pieces from a text I recently read in the pages of the International Monetary Fund concerning Mexico.
The Comeback
FINANCE & DEVELOPMENT, March 2013, Vol. 50, No. 1
Herman Kamil and Jeremy Zook
•Over the past seven years, Mexican manufacturing exports rose from about 11 percent of the U.S. import market to an all-time high of 14.4 percent—at first elbowing out such competitors as Japan and Canada, but in recent years gaining market share at the expense of China. Between 2005 and 2010, both Mexico and China gained market share in the United States. Since 2010, however, Mexico’s gains in the U.S. import market coincided with a decline in China’s market participation.
•Mexico’s rebound has been driven primarily by exports of electronics, telecommunications, and transportation equipment.
•Only a handful of industries lost market share, including electrical equipment (still a major sector, accounting for 14 percent of Mexican exports) and apparel.
•Mexico’s comeback in the U.S. market reflects both its improved competitiveness and developments that are making Chinese exports relatively more expensive. Most important among these developments are a narrowing gap in labor costs between Mexico and China, increased productivity gains in Mexico, and rising transoceanic shipping costs.
•In addition, strong productivity increases underpinned by significant investment in the manufacturing sector in Mexico have helped lower the cost of labor per unit of output and increase the competitiveness of manufacturing production.
•Mexico has also benefited mightily from being close to the United States. The price of oil increased from $25 a barrel in the early 2000s to more than $100 in February 2013, which substantially raised transoceanic freight costs. This proximity has given Mexico a competitive edge over China, particularly when it comes to trendy time-sensitive goods and heavy and bulky items.
•According to the 2011 U.S. Manufacturing-Outsourcing Cost Index (AlixPartners, 2011), goods produced in Mexico had the lowest landed costs (that is, their price at a California port) for U.S. importers in 2010 of all key low-cost outsourcing countries.
•Mexico’s strong commitment to the protection of proprietary technologies has also helped it attract foreign direct investment, with its beneficial impact on efficiency. Mexico has a strong reputation for protecting international intellectual property, patent, and trademark rights and is a party to several international treaties, including the World Intellectual Property Organization Copyright Treaty.
•Mexico’s trade agreement network is one of the world’s largest; it has free trade or preferential trade agreements with 44 countries and has shown a strong commitment to avoiding the use of trade restrictions and ensuring unrestricted access to markets and intermediate inputs to companies operating in Mexico. Moreover, Mexico has signed international standards and quality agreements that facilitate the participation of local manufacturing companies in global supply chains, particularly in the automotive and aerospace industries.
•A number of the factors that have contributed to Mexico’s increased competitiveness and its recovery of U.S. market share are likely to be long lasting—or structural, as economists say. These include the locational advantage, improved unit labor costs from enhanced manufacturing productivity and increased labor participation, and trade openness that appear to have underpinned Mexico’s improved competitiveness in the U.S. market in recent years.
•Manufacturing in Mexico was hit hard by China’s rise on the global stage at the beginning of the past decade; but today, as some of China’s cost advantage has eroded, Mexico’s manufacturing sector is among the best positioned to benefit from the changing global landscape.
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Inflation is taxation without legislation. ~Milton Friedman