Photo credit: chinese_new_year003 by Mark Eslick
Mexico’s economy is growing; in 2012 economic growth was 3.9 percent, and it is expected to continue growing. Foreign companies are seeing that Mexico is a great place to conduct business for several reasons, and although there is no free trade agreement between Mexico and China as of yet, there are plenty of opportunities for Chinese companies in Mexico.
It’s well known that the Japanese vehicle manufacturing industry is firmly established in Mexico; German automakers Volkswagen have been operating in the country as well for decades and almost all car makers in Mexico are planning on expanding their production facilities or building new plants in the very near future. Car parts manufacturers are also expanding, with many foreign companies looking to expand their presence in Latin America. Therefore, there is a large, highly specialized work force with years of experience in car production; Chinese car companies who are wishing to access the North and South American markets should seriously consider factories in Mexico.
Related to the vehicle manufacturing industry is the aerospace industry; Mexico’s highly skilled work force is what has attracted businesses like Bombardier to set up shop in the Spanish-speaking North American country.
What’s also interesting for Chinese companies is that in Mexico, while the wages might not be as low as they are in China, chances are that in the near future wages will go up all over Asia. This, teamed with the high cost of transport, makes Mexico the smarter option when it comes to manufacturing.
Hi-tech companies may also want to invest in Mexico; many people in the workforce are highly educated, have engineering degrees and many are completely fluent in English. During the years that the manufacturing jobs went to Asia, Mexico did suffer somewhat economically, but instead of relying on labor-intensive, low-paying industries like textiles, young Mexicans focused on technology and working efficiently. The result now is that innovation in information technology and cloud-based computing is coming from Mexico. Chinese companies would be able to access some of the finest minds in high-tech industries.
As mentioned above, while there isn’t a free trade agreement between the two countries, Chinese companies manufacturing in Mexico would be able to take advantage of many of Mexico’s trade agreements with other countries. In fact, Mexico has free trade agreements with 44 countries, including the United States, Canada, and the European Union.
Finally, as also mentioned above, China would be able to access all markets in the Americas if production facilities were established in Mexico. Because of the high cost of fuel, transporting items by sea such as vehicles will be incredibly costly, but due to Mexico’s central location, the cost of transport from Asia is completely eliminated, which is good news for a company’s bottom line.
There are many opportunities for Chinese companies in Mexico. Along with the automotive, aerospace and IT industries, it’s very possible that the government will be opening up the telecommunication and energy sectors, breaking the decades-long monopolies that have, some say, held back Mexico’s economic growth. China is known to be experts in the field of telecoms and could either establish cell phone networks or consult new national companies. Furthermore, China could be an ideal investor to update infrastructure in the energy industry.