News, Insights and Best Practices for Manufacturing in Mexico

Mexico continues to position itself for growth through reforms

09 Jul 2014

Category: Labor & Economics

Mexico is leveraging the slowly accruing advantages of its political reforms to enter a new phase of growth. However, this will not happen overnight. According to Hispanically Speaking News, Mexico's economy is in a state of recovery after a bad first quarter. It remains poised for solid growth compared with other developing countries like Turkey, thanks in part to its ties to the U.S. and its major export market.

The Financial System Stability Council, a Mexican governmental body that looks at Mexico's financial solvency, predicts that Mexico will recover from its slow growth gradually.

Mexico's economy grew only 1.1 percent in 2013, and only 1.8 percent in the first quarter of 2014, according to Hispanically Speaking. The Mexican government expects to grow a total of 2.7 percent by the end of the year.

This slow growth could be a good thing for businesses seeking to grow in a country that could benefit from the support that extra manufacturing jobs would bring to the economy. Mexico would also provide a safe haven from growing wages such as China is experiencing. Companies expanding to Mexico can expect a long period of time when labor is inexpensive, and the government provides many incentives to firms seeking to grow there. For example, a maquiladora in Mexico is a special manufacturing site for companies that want to export most of their goods. At these places, taxes are less severe, and there are government benefits to encourage trade. Additionally, Mexico is already home to many companies that build products for other manufacturers, such as custom parts and materials, allowing for a reduced supply chain.

Reforms in Mexico will eventually cause the economy to grow
Mexico is pushing forward with many new reforms that will ultimately stimulate growth in the country. It has already opened up the oil and natural gas industry to foreign companies. This will make a huge impact once firms start to buy up drilling and fracking leases.

Mexico has also begun other reforms that will promote major changes as well. It is beginning to make environmental laws to cut down on fuel emissions. In 2012, the country passed a climate law that will require companies to reduce carbon dioxide emissions by 30 percent, according to Responding to Climate Change.

"The great promise of a better future for humanity; it is the ability to grow and create wealth without damaging our environment or our natural heritage," Mexican President Enrique Peña Nieto said.

President Nieto's belief that limiting climate change can co-exist with economic development is one he shares with former Mexican President Felipe Calderon, who believes it is possible to grow economically and develop a responsible environmental program at the same time, RTCC reported.

However, this energy reform will take time. Coal consumption has continued to increase, as well as the use of natural gas, according to RTCC. It remains to be seen how the country will reduce its dependence on fossil fuels.

US companies continue to have faith in Mexico
Companies in the U.S. continue expanding to Mexico. PPG Industries, a chemicals maker, has recently decided to buy Consorcio Comex, a company that makes paint, according to Reuters. This purchase will ensure that PPG has a foot in the Mexican industry, and it will benefit from the many opportunities that emerging economies provide.

"The acquisition is very complementary to PPG as it adds a leading architectural coatings business in Mexico and Central America, a region where PPG has negligible architectural coatings presence," said PPG spokesman Mark Silvey.

Companies seeking to build a factory in Mexico may want to contact a Mexico shelter company, which makes the transition to Mexico easy by streamlining the process and eliminating red tape.


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