China’s average manufacturing wages, when adjusted for productivity, are above those in Mexico now, according to a study conducted by the Boston Consulting Group (:BCG). BCG forecasts that by 2015, the fully loaded cost of hiring Chinese workers will be 25% higher than the cost of hiring Mexican workers.
Further, Mexico’s proximity to the US means that the companies can ship the goods to the customers much faster and at a lower cost. Moreover, the goods coming from Mexico can enter the US duty-free due to NAFTA.
Mexico also has an edge over China in the demographics area. While China’s population is beginning to age (median age-33.2 years), Mexico has a largely young population (median age-26.0 years). The difference will worsen in coming years due to China’s one-child policy.
As a result, many US manufactures are now shifting production to Mexico from China. Last year, Mexico’s manufactured exports were more than the rest of Latin America combined. (Forget Brazil, Mexico ETF is Hot)
However, Mexico has its own problems. The country suffers from a high crime rate and poor infrastructure. The President-elect has stated that he will continue the current government’s strategy against organized crime.
Do you think that Mexico can become the next global manufacturing superpower?
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