According to new data produced by Bank of America, labor rates in Mexico could be lower than China by as much as 20%. Now that is a dramatic increase considering that 10 years ago Mexican labor rates were 188 percent higher than China. Data suggests the increased rate in China is partial due to stagnant numbers of young workers and the increase in wages we have all heard about in the news.
However, in Mexico – there are plenty of young workers and due to stagnating wages while manufacturing work rushed into China over the past years, their labor rates have declined. Adding to their advantage, Mexico has a closer proximity, common time zones and lowering the overall cost of doing business.
New investment into Mexico has began to flow in recent years as its exports become more and more diversified. Recently, Bombardier, an aircraft manufacturer, will build its latest corporate Learjet 85 in Mexico. In addition, Siemens has built high-voltage manufacturing plants and assembles equipment there.
Another declining numbers is Mexico’s export rate. In the past, 90 percent of Mexico’s production was exported to the United States. Now, that number is closer to 80 percent as manufactures use Mexico as the corridor to Latin America and many more markets.
Mexico has also pushed for reforms. Pena Nieto’s regime has already pushed and passed major labor and education reforms. He has also proposed a very aggressive plan to increase competitiveness of the phone industry that is making its way through Mexico’s legislation.
Recent forecasts from the International Labor Organization, suggest that Mexico’s economically active population will grow by 20 percent from 2010 to 2020, compared to a much lower 2.9% increase in China over the same period.
Growing optimism about Mexico’s reforms has affected the strength of the peso. The Peso has gained more than 4 percent this year prompting the central bank to reduce its interest rate to a historic low, in a bid to of the currenty and peso denominated debt.
Leading the charge for competitiveness are lower transportation costs and projected productivity gains in manufacturing, Bank of America said…which can, in turn, help adjust for the currency’s rapid rise, which tends to hurt exporters.
From a PCB Supplier’s perspective, we are keeping a close eye on Mexico. Recent projects in Brazil with Nokia and Intel show us there is a continued international cooperative. As long as there are products to be assembled, manufactures and OEMs do not care, for the most part, where the product is made…so long as it is made competitively with quality. As noted with Nokia, we built the boards in China, assembled them in America and shipped them to Brazil.
There might be a few trips to Costa Rica and or San Paulo as we continue to see our business grow and develop. No arguments from anyone here because we enjoy the tropical climates and our good friends in neighboring countries. All the more excuse to go travel and see the world while building products at the same time! Wherever possible, we manufacture and build any and all products in the USA. However, if Mexico presents an opportunity, we will take it. We don’t see any PCB Fabricators popping up right now but we do see the assembly opportunity beginning to take shape.
Statement: This post is only the personal view of the author and does not represent the opinions of ALLPCB.com.