Today, Mexico exports more manufactured products than the rest of Latin America put together.
And this:
Partly as a result, the sum of Mexico’s imports and exports as a percentage of its gross domestic product, a strong indicator of openness, rose to 58.6 per cent in 2010. In the case of China, it was 47.9 per cent, and just 18.5 per cent in the case of Brazil. HSBC in Mexico City estimated recently that the figure for Mexico could increase to as much as 69 per cent this year.
And this:
In 2009, Mexico overtook South Korea and China to became the world’s leading producer of flatscreen television sets. The bulkier the item, the more Mexico makes sense. According to Global Trade Atlas, the country is also the leading manufacturer of two-door refrigerators.
Cars made in Mexico are now being exported to China. Here is more (FT).
What about wages in mexico?
In PPP terms, better than unemployment in California.
Informative, and surprising.
Thanks!
Is this saying:
# of manufactured products leaving Mexico > # of manufactured products leaving South America?
If so, this statistic might be an unfair measure for a few reasons:
1. Mexico gets to count products sold to any country, while South America only gets to count products sold to countries outside of South America
2. Mexico is next to America and several large American companies use Mexico as a manufacturing base
3. Many South America countries are trying to make the leap from agriculture economies (which don’t count in this statistic in the first place) to service economies. None of the entertainment, travel, sports, etc. that are provided by South American countries counts. Granted, Mexico provides these too, but I want to see the wider picture before a zoom in.
No?
No, you got it wrong.
The total for Latin America is the sum of all exports of each individual country. It never said that they considered Latin America as an individual exporter.
Mexico has always been close to the US, yet it was long ignored as a manufacturing base by the US. The fact that they preferred to use China for this, despite distance and other institutional problems, indicates how screwed up Latin America was. The fact that Mexico is increasingly able to profit from its proximity to increase local production, even if only for reexport is good news for them and for us. It’s one marker of at least some progress.
Mexico has always been close to the US, yet it was long ignored as a manufacturing base by the US
Mostly true, although historically Mexico was not as close as it is now to most residents of the US — the massive population (and income) growth in Texas, the southwest and the Gulf States has probably made it a lot more attractive to locate manufacturing in Mexico than when most of the population (and the vast majority of the money) were clustered in the northeast.
Isn’t raw $ of export products is a bit misleading due to companies sending stuff to Mexico, having it assembled there, and then “exporting” it to the US? The incredibly high imports+exports number gets at this. Wikipedia actually posts Mexico’s net exports as negative in 2010.
http://en.wikipedia.org/wiki/List_of_countries_by_net_exports
I do like Mexico’s prospects, but I think this is a somewhat important qualifier.
You are describing manufacturing in a country with it’s own currency. The only way a manufacturer can survive is to import components from the target market, do whatever value added, then sell it back. As little inventory as possible. Currency risk is far greater than any possible profit margin. Primary resource development is different of course.
Anyone who thinks the US dollar will maintain it’s position as the reserve currency as it shrinks in relation to other markets should talk to some of these manufacturers. If your destination market is not the US, dealing in US dollars only adds another unnecessary level of risk, a risk potential far greater than any possible profit margin.
‘Currency risk is far greater than any possible profit margin.’
Unless I just happen to own the entire supply chain, even if it stretches over three countries.
So let’s see how that might work -
1. Bosch (a company which uses likely uses the euro for its main accounting, but let’s ignore that for right now – why complicate the example with real world complexity) produces air bag chips in a fairly small and fairly specialized American facility
2. Bosch ships these chips to a Mexican assembly plant, where the chips are integrated into air bag modules designed to be installed in a specific automaker’s U.S., Mexican, and Canadian models.
3. These modules are installed in automobiles manufactured in a Canadian plant, intended to be sold throughout the entire NAFTA zone, and paid using a contract involving currency rates and blanket orders.
Bosch’s currency ‘risk’ is completely internal, and a plaything of the company’s accounting department, to ensure the lowest possible tax rate (Romney would understand how this game is played – his tax acocuntants undoubtedly use the same legal possibilities to use tax arbitraged).
Welcome to how real global companies work, even in local markets, like NAFTA. (And yes, for Bosch, NAFTA is just another local market, just like China, or South Africa, or Russia, or Portugal, or India, or Brasilia….)
‘Today, Mexico exports more manufactured products than the rest of Latin America put together.’
Well, NAFTA certainly played a role, didn’t it? It wouldn’t surprise me in the least if Canada exports more manufactured products than all Latin America put together, either.
And this is an interesting tidbit, after whole 30 seconds of googling -
‘In 2007, top Canadian imports from Mexico included electrical machinery, vehicles and machinery representing more than 68% of total imports. Total amount in exports from Mexico to Canada accounted for US$6.5 billion during that year.
Top 10 Mexican Exports to Canada – 2007 (with % of share in total)
1. Electrical Machinery: 32.49%
2. Vehicles, Not Railway: 23.04%
3. Machinery: 13.39%
4. Mineral Fuel, Oil: 4.5%
5. Furniture And Bedding: 4.44%
6. Optic & Medical Instruments: 3.58%
7. Vegetables: 2.11%
8. Tobacco: 1.62%
9. Edible Fruit And Nuts: 1.37%
10. Iron/Steel Products: 1.23%
On the other hand, approximately 75 percent of Canada’s exports to Mexico are manufactured products, including motor vehicles and parts, electrical machinery, electronic equipment, and general machinery. There is also a high demand of agriculture products, food and beverages. Total amount in exports from Canada to Mexico accounted for US$7.96 billion during 2007.’
http://wiki.answers.com/Q/What_items_does_Mexico_trade_with_Canada
So, the top exports between Mexico and Canada was electrical machinery? Sounds like a lot of interesting double counting (anyone cynical enough to suggest some of it might be motivated by tax avoidance/subsidy exploitation?) in the statistics. Or else that companies simply have distributed their manufacturing throughout a free trade zone.
Eurostat is very familiar with this subject – it might be time for some of the still national statistics agencies in NAFTA to work out some sort of way to deliver reliable statistics which actually reflect reality? But it wouldn’t surprise me in the least if some American manufactured, Canadian assembled, and Mexican installed auto part isn’t counted as an export 3 times, while counting it as an import at every point of the corporate supply chain – thus taking advantage of various tax aspects. Or reversed – someone else can spend the hours of wading through the weeds to determine exactly how the statistics are flawed. (INTRASTAT? – well, yes, I’m a bit interested there.)
Tyler, could you please post the full titles of FT links instead of just writing “more (FT)”? Call it price discrimination.
Does the data include cocaine, meth, etc., which are manufactured products, maybe not manufactured in Mexico…
For manufactured goods, it is the value add that matters, not the value of the exports.
For manufactured drugs, Mexico provides the value add of innovative transport and distribution into the US.
After reading the FT article, I found this:
Luis de la Calle (an economist and trade expert who helped negotiate Nafta for Mexico) argues that demographics are behind this, I say, he’s lying. Using the numbers cited by the author – “According to HSBC, Mexican wages were 391 per cent higher than those of China a decade ago. Today, they are just 29 per cent more.”- so, the truth behind this is that someone has been loosing purchasing power!!
more than half Mexico’s 112m population is under 29, so there will be an abundance of cheap labour until at least 2028. “Right now, you have to look at Mexico and conclude that it has the best demographics in the world,” says Mr de la Calle.
So cynical!!
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