News, Insights and Best Practices for Manufacturing in Mexico

The impact of Mexican manufacturing on the middle class

18 Nov 2015

Category: Manufacturing in Mexico

In recent years, manufacturing in Mexico has exploded, heightening the country's position as a global economy. According to a May 2015 report compiled by Deloitte, "Competitiveness: Catching the Next Wave Mexico," the country's manufacturing sector accounts for almost 50 percent of the total foreign direct investment in Mexico and 80 percent of its total trade. Additionally, manufacturing in Mexico accounts for 32 percent of the nation's economic output, which is more than double the 15 percent figure in 1993 before the country began participation in the North American Free Trade Agreement.

The growth of Mexico's manufacturing sector has benefited the country in many ways. For one, Mexico has become fully integrated into the supply chain of many U.S. manufacturers. As Deloitte pointed out, the U.S. receives 80 percent of Mexico's exports and accounts for 50 percent of Mexico's imports. Further, manufacturing growth has had a tremendous impact on the country's economy as a whole. Deloitte cited data from Oxford Economic that projects Mexico's economy is expected to grow by 3.1 percent in 2015, which is only 0.2 percentage points higher than expected economic growth in the U.S.

"Manufacturing growth has had a tremendous impact on the country's economy as a whole."

One of the most interesting products of Mexico's manufacturing boom, though, is its impact on the country's middle class.

Manufacturing in Mexico: A seed for growth
As manufacturers move south of the border, they continue to add jobs to Mexico's economy, which has spurned rapid growth of the country's middle class. Take the auto manufacturing industry, for example. According to The Global and Mail, auto industry jobs in Mexico have strengthened the country's middle class, resulting in 75 percent of families owning their homes and a major spike in university enrollment.

The middle class is Mexico's fastest-growing sector. According to Euromonitor International, the middle class is comprised of 14.6 million households, which is 47 percent of all households in the country. More importantly, Euromonitor International noted the middle class is expected to grow by an additional 3.8 million households by 2030.

Yet these results are far more than just a product of companies bringing new jobs to the country. Instead, manufacturing in Mexico has had an impact on the country's GDP and economy, encouraging the government to liberalize trade, open its energy sector for private investment and improve its infrastructure to create a more positive business environment.

Additionally, industries including aerospace and medical device manufacturing require more specialized skills and high-quality labor. As a result, the sector has nudged the Mexican government to make investment in education a top priority, which has had a positive impact on the country's citizens and played a major part in growing its middle class.

The middle class and home ownership are rising in Mexico. The middle class and home ownership are rising in Mexico.

What does a middle class mean for manufacturers in Mexico?
The growth of Mexico's middle class has reciprocal benefits for both the country and companies expanding south of the border. SFGate noted as Mexico's middle class has grown, income has increased about one-third over the past 20 years and educational attainment has increased 50 percent. This means Mexico's citizens are better qualified and have enhanced spending power. As a result, manufacturers in Mexico are in a position to benefit from a thriving economy and a class of people who have the capacity to supply their businesses with goods and labor, and even purchase the products they produce in the country. Additionally, as infrastructure improves in the country to meet middle-class needs and demands, manufacturers will benefit from the improved business standards.

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