Industry & Mining
From The Report: Mexico 2014
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At 17% of GDP, manufacturing is a pillar of the Mexican economy. More than at any point in the past 15 years, Mexican industry is today able to compete with China as a low-cost manufacturing alternative and with other high-income markets as a viable location for outsourcing sophisticated manufacturing. This is perhaps the most promising time for Mexican manufacturing since NAFTA was implemented 20 years ago. The story of the moment is Mexico’s surpassing China in labour cost competitiveness, a phenomenon that is hard to precisely quantify but whose consequences should be easy to see in the coming years. Moreover, reform in the energy sector has the potential to reduce costs in the long term, thus addressing one of the manufacturing industry’s greatest challenges. This chapter includes interviews with Ernesto M Hernández, President and Managing Director, General Motors de México; Louise Goeser, CEO, Siemens Mesoamérica; and Xavier García de Quevedo Topete, President, Minera México.

Articles from this Chapter

Overview

Labour party: Low costs and proximity to key markets provide a solid basis for growth
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More than at any point in the last 15 years, Mexican industry is today able to compete with China as a low-cost manufacturing alternative, and with high-income markets as a viable location for outsourcing sophisticated manufacturing. If Mexico is to revitalise its economy after nearly flat growth in 2013, manufacturing, a pillar of the economy at 17% of GDP, will have to provide some of the lift. History US companies, particularly in the automotive and food industries, have taken advantage of low-cost Mexican labour for more than half a century. Their investments and Mexico’s shared border with the world’s biggest market, the US, gave rise…

Interview

OBG talks to Ernesto Mariano Hernández, President and Managing Director, General Motors de México
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Interview:Ernesto Mariano Hernández What are the advantages and disadvantages of the auto market’s reliance on the US? ERNESTO MARIANO HERNÁNDEZ: The ratification of the North American Free Trade Agreement (NAFTA) marked an important turning point in manufacturing and exports, where Mexico became an attractive location for car manufacturers to establish themselves and, subsequently, supply a portion of NAFTA demand. The US has been, is and will remain Mexico’s best trading partner,…

Interview

OBG talks to Louise Goeser, CEO, Siemens Mesoamérica
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Interview:Louise Goeser How significant will energy reform be to industry, and is there a drop in energy costs on the horizon? LOUISE GOESER: While oil and gas have been at the forefront of energy reform, one of the key needs in Mexico is to become more competitive in the cost of electricity. Despite the country’s competitive advantages: one of the biggest impediments to growth has been the high cost of energy, which is the key ingredient to production. Mexico can no longer afford to pass…

Analysis

Driving forward: The automotive sector is set to remain a vital economic contributor
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With a track record dating back to Ford’s first assembly plant in 1925, Mexico’s automotive manufacturing has emerged as a key driver of industrial growth. It accounted for one-sixth of economic growth in the first quarter of 2013, according to PwC México estimates. The world’s eighth-largest producer and fourth-biggest exporter of vehicles, Mexico is a key supplier to the US and Canadian markets. Eager to diversify beyond its North American Free Trade Agreement (NAFTA) partners, however, multinational brands and their suppliers are tapping the country’s array of FTAs, covering 44 countries and accounting for more than 35m vehicle sales…

Analysis

Open the taps: Reforms that lead to cheaper gas will be a boon to petrochemicals
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The petrochemical industry stands to be one of the biggest beneficiaries of Mexico’s energy reform, as the measures are expected to liberalise the market for natural gas, on which Mexican petrochemical plants depend. Today, the industry is hamstrung by an inadequate supply of natural gas, which has sapped its competitiveness and fuelled Mexico’s trade deficit in plastics. Scorecard As petrochemicals go, Mexico scores well for raw advantages. Thanks to its location and free trade agreements, it has access to many markets throughout the Americas that would be prime targets for exports of petrochemical products. The technology that the industry…

Analysis

Flying high: Further investment is expected in the burgeoning aerospace industry
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Over much of the past decade, Mexico has been one of the most attractive targets for foreign direct investment (FDI) in aerospace. Since 2006 the industry has grown at an average annual rate of 18%, and exports have tripled from $2bn to an estimated $6.1bn in 2013. FDI has focused on the traditional northern industrial giants, including Baja California, which hosts 58 aerospace firms, and, to an even greater extent, on the central state of Querétaro. According to foreign investment tracker FDI Markets, Querétaro led Mexican states with 24 greenfield aerospace investments between 2003 and the end of 2013. These amounted to a total capital expenditure…

Analysis

Look upwards: As more countries compete on cost, high-end segments beckon
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The North American Free Trade Agreement (NAFTA) jumpstarted Mexico’s textiles and garments industries in 1994, when suddenly raw materials like cotton were allowed to flow freely from, and finished goods into, the US market. By 2000, Mexico had become the largest exporter of clothing to the US. It did not hold this position for long, however. In 2001, China joined the World Trade Organisation (WTO) and soon became a magnet for foreign direct investment (FDI) in the textile industry and a newly competitive exporter. Mexico tried to protect its textile and garment industries by passing anti-dumping tariffs on Chinese clothing that were sometimes…

Analysis

Rethinking royalties: New taxes on mining stir debate
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Mexico is the world’s largest producer of silver and a top-10 producer of a number of minerals including copper, lead and zinc. Gold, which comprises about one-quarter of Mexican mining production, is the industry’s most important segment. The industry produced about $23bn in 2013 and attracts a significant amount of investment, about 70% of it from abroad. In 2011, total investment was $5.6bn, and in 2012 the figure climbed to more than $7.5bn. Then & Now The industry has been booming since 1990, when mining was opened to foreign investment. For most of the almost 25 years since, Mexico has had one of the world’s most competitive…

Interview

OBG talks to Xavier García de Quevedo Topete, President, Minera México
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Interview:Xavier García de Quevedo Topete How much will increasing the royalty tax to 7.5% impact foreign investment? XAVIER GARCÍA DE QUEVEDO TOPETE: Two years ago, Mexico ranked as the best location for exploration in terms of the investment risk for mining, but the new royalty will constrain competitiveness on a global scale. On top of that, the fall in prices of silver, gold and copper – some of Mexico’s primary mining products – has led many miners to rationalise spending on…