News, Insights and Best Practices for Manufacturing in Mexico

Mexico's energy sector to improve through offshoring

03 Nov 2014

Category: Labor & Economics, Manufacturing in Mexico, Politics & Regulations

Mexico is quickly working to become the center of all manufacturing and industrial activity for North American organizations. The country is continuing to pass legislation allowing outside companies to come in and take advantage of the country's resources and have a profoundly positive impact on the Mexican economy.

According to a Reuters report, in October, positive sentiment in the Mexican manufacturing sector reached a nine-month high. According to the HSBC Manufacturing Purchasing Managers Index, any reading lower than 50 is a sign of contraction, while anything above that threshold indicates expansion.

In September, the index was 52.6. After making seasonal variation adjustments, that number rose to 53.3 for October. This growth is due in large part to an influx of new orders - which increased for the second consecutive month - and faster output on the part of the manufacturing companies operating in the country for the third month in a row, Reuters wrote. In addition, the economy in Mexico is expected to experience a growth of 2.5 percent as the country continues to export as much as 80 percent of its manufacturing products to the United States.

Mexico's energy sector to see rapid growth
In addition to manufacturing activity on the upswing in Mexico, the country's energy industry is expected to improve significantly as well. According to Business Standard, the Mexican government implemented legislation and made amendments to the constitution allowing outside companies to come in and reshape the natural gas, oil and electricity sectors.

"Opening the energy sector completes the agenda of economic integration that began when [the North American Free Trade Agreement] was approved in 1994," Martin Feldstein wrote for Business Standard. "That agreement transformed Mexico from a very closed economy with few manufacturing exports into an economy that is now closely linked with the United States. The expansion of Mexican oil and gas production will consolidate those links and contribute to North American energy independence."

The privatization of the Mexican energy sector will have benefits in a number of areas. First off, it will remove the involvement of trade unions and bureaucrats in the management of these services. Secondly, the move will bring down manufacturing costs in terms of the energy needed to operate a plant or factory by as much as 20 percent.

All told, offshoring will provide people living in Mexico more opportunities to work, allow them to earn a higher wage and improve their standard of living.

According to Foreign Affairs Magazine, offshoring could essentially become the third industrial revolution. Already the world has seen the growth of both the manufacturing and services industry. The way that information flows freely between countries and the ability to better the quality of life, education and work opportunities in as yet undeveloped nations, is the current economic era that is being established around the globe.

The more that success is realized, expect these activities to occur far more frequently as companies work to add more money to their bottom lines while improving the lives of others in the process.


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