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Mexican Manufacturing Continues to Gain Strength

In 2013 Boston Consulting Group’s (BCG) ongoing series on the changing global economics of manufacturing predicted that widening cost advantages over China could soon add $20 – $60 billion in output to Mexico’s economy annually. U.S. manufacturers of components for everything from automobiles to computers would benefit by taking advantage of Mexico’s participation in the North American Free Trade Agreement. They also focused on Mexico’s clear advantage in proximity, with northern Mexico towns providing quick and easy access to Mexican manufacturers. BCG predicted that Mexico’s growing cost advantages would boost its exports and provide a substantial support network to U.S. companies.

At the same time, Stratfor Global Intelligence conducted a study to identify the “PC 16” – those 16 countries which had the greatest likelihood of achieving manufacturing success in a post-China era. It found that, as China’s wages continued to rise and the world worried about its political stability, manufacturers were searching for other countries to meet their production needs. Although some of the alternatives such as Nicaragua, Kenya, Vietnam, Bangladesh, Myanmar and Ethiopia are all fraught with similar political and civil unrest, Mexico alone has been able to move beyond its own difficulties and is now firmly focused on providing superior manufacturing services.

Since then, these predictions have more than proven to be true. Forbes recently concluded that Mexico’s manufacturing sector is growing strongly. They predicted that Mexico will continue to see solid growth because of its integration with, and dependence, on the U.S. market, and that the performance of the manufacturing sector will be a key driver of Mexico’s economic growth. Citing it’s more open economy, participation in the NAFTA agreement, and intense focus on exports, Forbes noted that trade has increased substantially between Mexico and the U.S.

Another major boost to the Mexican manufacturing opportunity came as China’s labor wages increased, and Mexico was able to become most cost-competitive. Mexico’s average manufacturing labor costs are now almost 20% lower than China’s. Products such as automotive & transportation, aeronautical, medical devices and home furnishings are contributing to an export boom. Even the apparel and textile industries are making gains. Exports of textiles increased 9% over the last two years, while apparel increased 3.5%. Although Forbes focused on cities in Southern Mexico, MFI with operations in North Mexico, potentially the largest contract manufacturer in the textile industry across different markets, has also seen a tremendous growth in textile manufacturing industry.

Forbes also reported that Mexican manufacturing output increased by 3.4% in the first nine months of 2014, as compared to losses by some of its South American neighbors like Brazil and Argentina. As the U.S. economy continues improving, demand for products manufactured in Mexico will only increase, and should easily be able to meet and even surpass BCG’s predictions. MFI’s turnkey manufacturing programs can help American companies take advantage of the booming economy just south of the border.