News, Insights and Best Practices for Manufacturing in Mexico

Mexico expands, diversifies exports, and continues to dominate the auto industry

20 Aug 2014

Category: Automotive Manufacturing, Politics & Regulations

Mexico's expansion may be catching the eye of countries as diverse as Russia and New Zealand as it expands. One area of growth is in the auto industry, where Mexico has become the fourth largest automotive manufacturer in the world. This expansion is due in part to the tremendous expansion of the North American gas and oil industry, along with Mexico's decision to open its doors to foreign energy investors.

Mexico grows interested in forming connections with Russia
Mexican exports may reach as far as Russia, according to ITAR TASS. Recently, the Mexican ambassador to Russia, Ruben Beltran, spoke to Mexico's position as a leading exporter not only of meats and produce, but also of technology and manufactured goods.

"Mexico's economic potential is in exports. Mexico is one of the world's largest exporters of pork and beef," said Beltran. "We should not forget that manufactured goods form the basis of Mexican exports. Mexico is no longer a country where most exports are oil and farm produce. Today, manufactured goods account for 80 percent of exports."

Mexico plans to take advantage of Russia's decision to ban imports of U.S. and European goods if Russia proves to be a willing partner. This is part of Mexico's goal of expanding around the world.

Mexican automotive industry a major part of its national growth strategy
One manufacturing segment where Mexico could begin exporting goods to Russia is the automotive sector. The automotive industry in Mexico is growing at a fast clip. According to Forbes, it's the fourth largest manufacturer of cars in the word. U.S. companies like Chrysler have moved there to take advantage of the inexpensive but efficient and well-trained labor, along with the many trade agreements existing around the world. These agreements enable companies to ship parts or even entire cars across the three North American countries without paying tariffs because of the North American Free Trade Agreement (NAFTA).  Foreign companies like Audi, Nissan and BMW are also moving to Mexico, which is becoming a global hub not only for building cars but for building the parts that go into cars as well.

"Investors see Mexico as an export platform with access to the United States," Eric Farnsworth, vice president of the Council of the Americas, told Forbes.

This industry benefits the U.S. because companies have begun performing what has been called an integrated production, according to the article. Because of NAFTA, companies can build some parts in the U.S. and some parts in Mexico, and then finish assembling the car wherever it will be sold. This is finally an option because not only is it completely tariff-free to ship goods across North American borders, but because Mexico is well established as a place for building cars and parts. It has a long history of manufacturing stretching back to when the first U.S. companies moved their production there. Mexican officials welcome foreign business, and have created schools and training programs to help Mexican automotive experts become better at working on a wide range of vehicles, both foreign and domestic.

"Because of integrated supply chains, up to 40 percent of the content of the products Mexico exports comes from the U.S." said Farnsworth to Forbes.

The benefits of opening up the oil industry
Much of Mexico's recent growth has to do with the country's decision to open its energy sector to foreign companies, which will begin moving there soon. Foreign Affairs calls this energy reform revolutionary.

Not least of the revolution was Mexican President Enrique Peña Nieto's ability to get many of the country's lawmakers to agree despite being of different political parties. This talent may allow Mexico to continue its expansionary policies that are allowing the country to grow its manufacturing and export industries.

 

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