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NAFTA: Key Driver for Mexico’s Manufacturing Sector

NAFTAThe impact of the North American Free Trade Agreement (NAFTA) on Mexico’s economic and social transformation cannot be understated, a recent article in the Washington Times explains. The earliest effects of NAFTA came in the form of a massive increase in low-skill labor factories near the U.S. border. However, manufacturing in Mexico has evolved, so has its economic climate.

As Christopher Wilson, an associate at the Mexico Institute of the Washington-based Woodrow Wilson International Center for Scholars explains, “What we’re seeing now is a growth of industry in Mexico that requires more engineers. To put a name on it, specifically, we’re talking about automobiles and aerospace.” The growing economy is also affecting the types of workers found in Mexico. “Mexico is now graduating more engineers than Germany every year,” Wilson notes.

Helping to fuel the expansion is a 40 percent increase in Mexico’s GDP since NAFTA. This has prompted the growth of Mexico’s middle class, prompting an emphasis on investment in education and Mexico’s children. This has helped key Mexico’s plummeting poverty rate, down to 47 percent after reaching 80 percent 50 years ago. Other indicators also reflect this new economic reality: 98 percent of Mexican homes have electricity and every year more than 4 million people are enrolled at studies at the university level. This had led to more jobs: in the early part of 2012, Mexico’s population of 112 million had a 5 percent unemployment rate with a per capita salary that ranked it 81 out of 195 nations.

NAFTA has helped pave the way for the new economy in Mexico. Unites States investment in Mexico now reaches more than $90 billion annually, up from $15 billion in the pre-NAFTA days, with Chinese, Japanese and European firms also exploring investments in Mexican manufacturing. In addition to possessing a labor market with negligible union restrictions and a $6 dollar-an-hour average worker pay, Mexico also has a prime location for the ever-important United States and Canadian markets. This has prompted the production of over 2 million new cars and trucks in Mexico during 2011 from 25 different vehicle-assembly factories owned by foreign companies, such as Nissan, Honda, Ford and General Motors. Overall, the growth of Mexico’s share in high-tech manufacturing industries, such as medical devices, aerospace and automotive, has helped change the economic dynamics of a country and allowed it to increase employment and reduce poverty in a way that may have seemed impossible just a few decades ago.

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