After a difficult few years, Mexico is gaining traction. Mexico is expected to see an average annual GDP growth of 4.4 percent over the next five years, according to a Latin Trade analysis of projections from the International Monetary Fund. That compares with 4.2 percent annual growth in Brazil.
The gap with China on Labor costs is now so narrow that many manufacturers are relocating to Mexico, taking advantage of its proximity to the U.S. market. "Chinese tabor is going up in price," said John Price, the founder of Americas Market Intelligence, a market research firm with offices in the United States and Mexico. "Just as important is that oil is going up in price. That makes near-shoring a more Logical option."
In 1993, Chinese Labor was one-third that of the cost of Mexican Labor. It was only half as expensive in 2000. By next year, Labor in China may be only 15 percent cheaper, predicts Frontier Strategy Group (FSG), an advisory firm with headquarters in Washington, D.C.
Transporting goods via trucks and trains is also far less expensive than shipping by sea from China. And orders can be filled in half the time that is generally required when sourcing from China, FSG calculates. That time differential can be crucial when manufacturers want to get a new product quickly to the market.
Last, but not Least, Mexico's membership in the North American Free Trade Agreement (NAFTA) means that import duties are cheaper, the...