June 16 2014 image description
by: jmhumire 0 Comments

The Hidden Costs of Doing Business in Mexico

China’s low-cost production of manufactured goods led to a sharp drop in global prices mainly benefiting developed countries and its demand for commodities benefited primary producers in the developing world.  Some developing countries like Mexico, with similar labor-intensive production, found themselves in direct competition with China, while also losing out on foreign direct investment.

As China’s manufacturing costs rise some companies are now giving Mexico a second look.  This month The New York Times ran a story raising the prospect of a rush to locate U.S. investments south of the border.  The rush may be premature given Mexico’s underperforming economy and the deeper structural challenges to further progress.

Statistically, Mexico’s primary attraction rests on a trend seemingly gaining momentum as U.S.–Mexico trade has grown by 30 percent, or $507 billion annually, and U.S. foreign direct investment rising to $35 billion.  For many, Mexico is seen as a major link in a new global supply chain.