News, Insights and Best Practices for Manufacturing in Mexico

Transformations in Mexico may benefit Latin American economies

23 Sep 2013

Category: Labor & Economics, Politics & Regulations, Taxes & Finance

Countries in a certain region tend to be linked economically with one another, and this is never more true than with Mexico and its neighbors. Mexico is a country in the middle; while it is a North American nation, it remains a big player in Latin America. With its key role in competitive manufacturing, U.S. businesses often chose to offshore their production process to the country. Many of those companies are also using Mexico as a gateway to expanding into Latin America. 

And Mexico is in the middle of sweeping industrial reforms, that, according to Nearshore Americas, promises to significantly influence all of the other countries in the region.

Partnerships benefit from reformations
Nearshore Americas reported Mexican President Enrique Peña Nieto's alterations to the country's energy market may boost the region's economy. Mexico's oil output has declined in recent decades due to low competition and a government monopoly on the market. The Mexican energy industry affects the rest of Latin America. In fact, Brazil is in the middle of trying to create an oil boom, which may be helped along once Mexico's industry is open to additional investment. 

If Mexico's energy reforms pass and private foreign companies are able to work with Pemex to tap into the nation's oil supply, Mexico may become a top oil producer, boosting the entire region's economy and encouraging investors to enter into other Latin American markets as well. The additional competition in the energy market may also inspire more U.S. businesses to expand to Mexico, as transportation costs may drop due to cheaper resource prices. The country is also in the midst of infrastructure improvements, which will make logistics easier between the U.S. and Mexico. Nearshore Americas reported more than 6 million U.S. jobs are dependent on U.S.-Mexico relations and trade.

Many times, U.S. feels the benefit of Mexico's successes, but it isn't the only economy that may see the advantages - countries like Brazil and Venezuela may as well. Mexico continues to be seen as a bridge between the U.S. and other Latin American countries. While these nations may not have the expertise in manufacturing like Mexico, the energy reforms may inspire investment in industry within those countries.

Peña Nieto has seen opposition, however. According to The Los Angeles Times, the Mexican President recently voiced his concern over exterior challenges, such as the economic struggles of Mexico's neighbors. While these remain a worry, Peña Nieto said Mexico has the opportunity to accelerate itself as a global leader in the energy market, which will benefit both regions.


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