Photo credit: Bolsa Mexicana de Valores by mykewithwai
Mexico’s Instituto Nacional de Estadística y Geografía (INEGI), translated as the National Institute of Statistics and Geography, has recently stated to the public that the country’s economy, due to a rise in agricultural sector activity, grew by 3.9 percent in 2012.
The growth in the economy corresponded to projections made by the Mexican government a year ago, and was roughly the same as the growth the country experienced in 2011. INEGI stated that part of the growth was fueled by agricultural activity, which grew 7.2 percent in 2012’s last quarter. A higher production of corn, beans, sugarcane and wheat was responsible for the sector’s growth.
In a move to promote higher rates of growth and to attract investment in high-tech industries, the new Federal Government under President Enrique Peña Nieto is working to pass reforms in the energy and telecommunications sectors. The objective is to increase the rates of formal employment in the country where unemployment and underemployment can be problematic.
However, there are industries other than agriculture, which are contributing significantly to Mexico’s strengthening economy. The first industry is that of automotive manufacturing, with the Volkswagen plant in Puebla alone employing over 18,000 and producing approximately 2,500 vehicles per day mainly for export. Other international auto companies with plants in Mexico include Nissan and Lexus.
The electronics industry is another area where strong growth has been seen and is expected to continue. Mexico is the sixth largest producer of electronics after China, the United States, Japan, South Korea and Taiwan. Electronics currently are responsible for 30% of the country’s exports.
Mexico’s highly skilled workforce is also contributing to the country’s economic growth; foreign companies who may have at first gone to China or India due to the low wages there are choosing to invest in Mexico as the workers are solidly educated and are also capable of innovation. Automotive companies base their research and development headquarters in Mexico, and companies in the aerospace industry are also establishing manufacturing plants in order to access the highly skilled Mexican workforce. According to the WTO and the OECD, the Mexican workforce is the hardest working in the world when it comes to hours worked per year and profitably in terms of man-hour.
Mexico’s economy is growing while others might not be doing as well for several different reasons. Along with the skilled labor force, Mexico enjoys a good location for companies that want to export. Due to the high cost of fuel, a company that might have thought of locating to Asia may very well find that manufacturing in Mexico will produce big savings on transportation costs. From Mexico, both North and South American markets are easily accessed.
Finally, a significant factor in Mexico’s economic growth is the fact that it has 12 free trade agreements with 44 countries, including Japan, the United States and Canada (NAFTA), and the European Union among others. Mexico has also shown interest in MERCOSUR and negotiations for free trade agreements are currently underway with South Korea, Peru, and Singapore. The present government is also hoping to arrange a free trade agreement with Australia.
Opportunities for investors exist in Mexico; lower wages, a highly skilled workforce, and business-friendly free trade agreements will most likely ensure that the country’s economy will continue to expand.