| INDUSTRY NEWS IN MEXICO OCTOBER Mexico Beats China as Cessna Shows Wages Converge With Shipping When Cessna Aircraft Co. sought a low-wage country in 2006 where it could manufacture airplane parts, its first instinct was to go to China. After struggling to find a way to ship supplies to the Asian country in less than a month, the Wichita, Kansas based producer of light airplanes discovered a better solution just across the U.S. border: Mexico. Shipping to and from Mexico is easier and faster because it's over land rather than by sea, Cessna Chief Executive Officer Jack Pelton says. It provides a way for Cessna to become more competitive as we deal with the challenge of the current economic situation. Now, Cessna is completing a fourth expansion, in the city of Chihuahua, Mexico, that will bring factory floor space to 10 times its initial size, Bloomberg Markets magazine reports in its October issue. Cessna has plenty of company. Last year when Benton Harbor, Michigan-based Whirlpool Corp. decided to cut production because of flagging consumer demand, it closed a plant in Evansville, Indiana, and shifted more work to Monterrey, Mexico. Polaris Industries Inc. said in May it picked Monterrey to build all-terrain vehicles and ship them to the southern U.S. The Medina, Minnesota-based company is closing a factory in Osceola, Wisconsin. Wage Gap Closes Singapore-based Flextronics International Ltd., which manufactures mobile phones, auto parts and medical products for other companies, is looking more at Mexico as the wage gap with China closes, says Chief Executive Officer Michael McNamara. After years of losing chunks of the U.S. market to China, Mexico has begun taking some of it back. Mexico's share of the products the U.S. imported for the first five months of the year rose more than a percentage point to 12.3 percent, while China's position dropped to 17.3 percent from 18.6 percent. Average Chinese manufacturing wages at just under $2 an hour are only 14 percent less than Mexican salaries as of this year, according to estimates by Mexico's Finance Ministry. Salaries south of the border were more than three times higher in 2002. From 2002 to 2008, the last full year of official wage data, Chinese manufacturing salaries in dollars jumped 2.6 times, while Mexican wages rose only 7.5 percent in dollars from 2002 to 2009. More Attractive Every year that goes by, we're going to see Mexico becoming more and more attractive as an alternative to China, Flextronics' CEO McNamara said during a conference call with analysts on July 22. He also said companies would move factories to Eastern Europe. Flextronics' revenue from Mexico has risen to 15 percent of total income at the end of the second quarter this year, up from 10 percent two years ago. Foreign companies are brushing aside concerns about drug- related violence. Since 2006, 28,000 people have been killed as narcotics cartels fight one another and police to grab a larger share of $39 billion in drug sales annually to the U.S. Companies are enticed by a peso that has weakened 21 percent against the dollar since 2008. U.S. manufacturers like the proximity of Mexico and the fact that the country has few labor strikes, shares time zones with the U.S. and has cultural similarities with the rest of North America, with most Mexican executives and middle managers able to speak English. Well Positioned Beginning with the North American Free Trade Agreement in 1994, Mexico has courted foreign investors with lower tariffs and legal protections. The country now has trade pacts with more than 30 nations, such as the members of the European Union, Colombia, Israel and Japan. Mexico is very well positioned to take advantage of U.S. growth, says Edgardo Sternberg, an emerging-market debt strategist at Boston-based Loomis Sayles & Co. which manages about $140 billion in assets. The U.S. economy expanded 3 percent in the second quarter from a year ago after contracting 4.1 percent during the same period last year. You're buying a relatively cheap currency in a country that's growing reasonably well and without any significant short-term problems, Sternberg says. Bond Investors Attracted Bond investors are attracted to Mexico's relatively strong finances. President Felipe Calderon has kept the budget deficit to 2.3 percent of the economy compared with more than 12 percent for the U.S., and international reserves have risen to a record $105.6 billion, Sternberg says. The price of Mexico's 5.625 percent dollar bond that matures in 2017 rose to a high of 113.24 cents on the dollar on Aug. 9 from 105.54 cents six months earlier. The yield dropped to 3.320 percent from 4.678 percent in the period. Mexico's dependence on its northern neighbor makes the country vulnerable if the U.S. recovery were to sputter, says Jonathan Heath, a Mexico City-based economist with the Center for Strategic and International Studies in Washington. Manufacturing is the only engine that is working now for the Mexican economy, he says. Mexico's other economic drivers -- oil, tourism, remittances and consumer purchases -- are struggling and may not recover soon, Heath says. Oil exports have dropped by almost half since 2006, to 1.11 million barrels a day in June, keeping the country from cashing in on higher prices. Foreign tourists spent $6.49 billion in the first five months of 2010, an 11 percent decline from $7.29 billion in the same period in 2008, partly because of drug violence. Intel in Mexico Santa Clara, California-based Intel Corp. says the increase in gang violence hasn't kept it from investing in Mexico. We haven't found that to be a limiter for us at all at Intel, says Scott Overson, chief of Intel's operations in Mexico. The company plans to spend 2.3 billion pesos ($180 million) to expand a research center in Guadalajara, Mexico, Overson says. The design center in Mexico is a shining example within Intel of a great investment, he says. The center, which began with 33 employees, has grown to 440 and will almost double to 750 after the new facility is built. The group in Mexico had completed 40 research projects as of July, Overson says. Exports are driving the economy, which the Mexican central bank predicts will expand by 5 percent this year. That would be the highest annual growth in a decade. Last year, the Mexican economy fell 6.5 percent when U.S. demand dried up. Exports Increased Exports jumped 35 percent during the first half of this year to $141.3 billion from a year ago -- just 5.7 percent off 2008's record export pace. The U.S. buys more than 80 percent of Mexico's exports. The Mexican currency has remained weak after plunging as much as 36 percent following the collapse of Lehman Brothers Holdings Inc. in 2008. The peso has gained back 3.7 percent against the dollar this year as bond investors have returned to the market. The currency is still competitive for exporters because it's down 21 percent from August 2008. Mexican factories are creating jobs, which will help consumer spending rise, says Jimena Zuniga, a New York-based Latin American economist with Barclays Plc. Since May 2009, jobs registered with Mexico's mandatory social security system rose by 612,123 to 14.5 million, almost making up the jobs lost since the end of 2007. Auto Industry The auto industry is an example of how Mexico has gained favor as a manufacturing base for North America, Zuniga says. Chrysler Group LLC, Ford Motor Co. and General Motors Co. have increased production in Mexico as they curtailed output and shuttered factories in the U.S. In the first six months of 2010, Mexico exported 887,872 vehicles, outpacing the 836,202 during the same period in 2008 and posting an 83 percent increase since 2009. In the U.S., annual vehicle sales were as high as 15.4 million in January 2008 compared with 10.8 million in January 2010. The country also has found success attracting production of bulky goods -- such as cars, washing machines and airplane parts -- that aren't shipped easily from Asia, says Alejandro Mungaray, economic development minister for the state of Baja California. General Electric Co. and Whirlpool make refrigerators in Mexico for export to the U.S. Wichita-based Hawker Beechcraft Corp. produces aerospace light sheet metal in Chihuahua. BlackBerry Production Improving education has helped Mexican workers assemble BlackBerries for Waterloo, Canada-based Research in Motion Ltd. and enabled the country to attract Intel's research center, Mungaray says. The number of Mexicans 15 years and older that have completed at least the ninth grade jumped to 54 percent in 2005 from 36 percent in 1990 and 9 percent in 1970, according to the Mexican government. Above all, we have the human capital with more than 40 years experience in world-class manufacturing, Mungaray says. Beyond wages, Mexico has few strikes, which is proving crucial as China struggles with labor unrest, says Luis Aguirre, chief of Mexico operations for San Jose, California-based Sanmina-SCI Corp., which manufactures electronics, auto parts, aerospace parts and medical equipment for other companies. Mexico has had six strikes so far this year, according to the Labor Ministry. There have been no strikes at export factories. A big advantage is that Mexico has labor peace, Aguirre says. We don't have the threats or problems of strikes that China is having right now. While drug violence may dominate the headlines, Mexico is quietly reclaiming its place as a location where U.S. companies are finding low wages, less-expensive shipping costs and reasonable tariffs -- at an address a lot closer to home than China. Source Bloomberg |
 |
| .. M E X I C O |
 |
 |
 |
 |
 |
 |
| Your Mexico Recruiting Partner HR Consulting Mexico provides Recruiting Support to American and European Companies with Operations in Mexico who are looking for Bilingual & Bicultural Executives San Antonio TX Mexico City 1 - 210 - 807 - 4273 +52 (55) 8421-8740 _______________________________________________________________________________________________ |
| INDUSTRY NEWS IN MEXICO OCTOBER Mexico Beats China as Cessna Shows Wages Converge With Shipping When Cessna Aircraft Co. sought a low-wage country in 2006 where it could manufacture airplane parts, its first instinct was to go to China. After struggling to find a way to ship supplies to the Asian country in less than a month, the Wichita, Kansas based producer of light airplanes discovered a better solution just across the U.S. border: Mexico. Shipping to and from Mexico is easier and faster because it's over land rather than by sea, Cessna Chief Executive Officer Jack Pelton says.It provides a way for Cessna to become more competitive as we deal with the challenge of the current economic situation. Now, Cessna is completing a fourth expansion, in the city of Chihuahua, Mexico, that will bring factory floor space to 10 times its initial size, Bloomberg Markets magazine reports in its October issue. Cessna has plenty of company. Last year when Benton Harbor, Michigan-based Whirlpool Corp. decided to cut production because of flagging consumer demand, it closed a plant in Evansville, Indiana, and shifted more work to Monterrey, Mexico. Polaris Industries Inc. said in May it picked Monterrey to build all-terrain vehicles and ship them to the southern U.S. The Medina, Minnesota-based company is closing a factory in Osceola, Wisconsin. Wage Gap Closes Singapore-based Flextronics International Ltd., which manufactures mobile phones, auto parts and medical products for other companies, is looking more at Mexico as the wage gap with China closes, says Chief Executive Officer Michael McNamara. After years of losing chunks of the U.S. market to China, Mexico has begun taking some of it back. Mexico's share of the products the U.S. imported for the first five months of the year rose more than a percentage point to 12.3 percent, while China's position dropped to 17.3 percent from 18.6 percent. Average Chinese manufacturing wages at just under $2 an hour are only 14 percent less than Mexican salaries as of this year, according to estimates by Mexico's Finance Ministry. Salaries south of the border were more than three times higher in 2002. From 2002 to 2008, the last full year of official wage data, Chinese manufacturing salaries in dollars jumped 2.6 times, while Mexican wages rose only 7.5 percent in dollars from 2002 to 2009. More Attractive Every year that goes by, we're going to see Mexico becoming more and more attractive as an alternative to China, Flextronics' CEO McNamara said during a conference call with analysts on July 22. He also said companies would move factories to Eastern Europe. Flextronics' revenue from Mexico has risen to 15 percent of total income at the end of the second quarter this year, up from 10 percent two years ago. Foreign companies are brushing aside concerns about drug- related violence. Since 2006, 28,000 people have been killed as narcotics cartels fight one another and police to grab a larger share of $39 billion in drug sales annually to the U.S. Companies are enticed by a peso that has weakened 21 percent against the dollar since 2008. U.S. manufacturers like the proximity of Mexico and the fact that the country has few labor strikes, shares time zones with the U.S. and has cultural similarities with the rest of North America, with most Mexican executives and middle managers able to speak English. Well Positioned Beginning with the North American Free Trade Agreement in 1994, Mexico has courted foreign investors with lower tariffs and legal protections. The country now has trade pacts with more than 30 nations, such as the members of the European Union, Colombia, Israel and Japan. Mexico is very well positioned to take advantage of U.S. growth, says Edgardo Sternberg, an emerging-market debt strategist at Boston-based Loomis Sayles & Co. which manages about $140 billion in assets. The U.S. economy expanded 3 percent in the second quarter from a year ago after contracting 4.1 percent during the same period last year. You're buying a relatively cheap currency in a country that's growing reasonably well and without any significant short- term problems, Sternberg says. Bond Investors Attracted Bond investors are attracted to Mexico's relatively strong finances. President Felipe Calderon has kept the budget deficit to 2.3 percent of the economy compared with more than 12 percent for the U.S., and international reserves have risen to a record $105.6 billion, Sternberg says. The price of Mexico's 5.625 percent dollar bond that matures in 2017 rose to a high of 113.24 cents on the dollar on Aug. 9 from 105.54 cents six months earlier. The yield dropped to 3.320 percent from 4.678 percent in the period. Mexico's dependence on its northern neighbor makes the country vulnerable if the U.S. recovery were to sputter, says Jonathan Heath, a Mexico City-based economist with the Center for Strategic and International Studies in Washington. Manufacturing is the only engine that is working now for the Mexican economy, he says. Mexico's other economic drivers -- oil, tourism, remittances and consumer purchases -- are struggling and may not recover soon, Heath says. Oil exports have dropped by almost half since 2006, to 1.11 million barrels a day in June, keeping the country from cashing in on higher prices. Foreign tourists spent $6.49 billion in the first five months of 2010, an 11 percent decline from $7.29 billion in the same period in 2008, partly because of drug violence. Intel in Mexico Santa Clara, California-based Intel Corp. says the increase in gang violence hasn't kept it from investing in Mexico. We haven't found that to be a limiter for us at all at Intel, says Scott Overson, chief of Intel's operations in Mexico. The company plans to spend 2.3 billion pesos ($180 million) to expand a research center in Guadalajara, Mexico, Overson says. The design center in Mexico is a shining example within Intel of a great investment, he says. The center, which began with 33 employees, has grown to 440 and will almost double to 750 after the new facility is built. The group in Mexico had completed 40 research projects as of July, Overson says. Exports are driving the economy, which the Mexican central bank predicts will expand by 5 percent this year. That would be the highest annual growth in a decade. Last year, the Mexican economy fell 6.5 percent when U.S. demand dried up. Exports Increased Exports jumped 35 percent during the first half of this year to $141.3 billion from a year ago -- just 5.7 percent off 2008's record export pace. The U.S. buys more than 80 percent of Mexico's exports. The Mexican currency has remained weak after plunging as much as 36 percent following the collapse of Lehman Brothers Holdings Inc. in 2008. The peso has gained back 3.7 percent against the dollar this year as bond investors have returned to the market. The currency is still competitive for exporters because it's down 21 percent from August 2008. Mexican factories are creating jobs, which will help consumer spending rise, says Jimena Zuniga, a New York-based Latin American economist with Barclays Plc. Since May 2009, jobs registered with Mexico's mandatory social security system rose by 612,123 to 14.5 million, almost making up the jobs lost since the end of 2007 Auto Industry The auto industry is an example of how Mexico has gained favor as a manufacturing base for North America, Zuniga says. Chrysler Group LLC, Ford Motor Co. and General Motors Co. have increased production in Mexico as they curtailed output and shuttered factories in the U.S. In the first six months of 2010, Mexico exported 887,872 vehicles, outpacing the 836,202 during the same period in 2008 and posting an 83 percent increase since 2009. In the U.S., annual vehicle sales were as high as 15.4 million in January 2008 compared with 10.8 million in January 2010. The country also has found success attracting production of bulky goods -- such as cars, washing machines and airplane parts -- that aren't shipped easily from Asia, says Alejandro Mungaray, economic development minister for the state of Baja California. General Electric Co. and Whirlpool make refrigerators in Mexico for export to the U.S. Wichita-based Hawker Beechcraft Corp. produces aerospace light sheet metal in Chihuahua. BlackBerry Production Improving education has helped Mexican workers assemble BlackBerries for Waterloo, Canada-based Research in Motion Ltd. and enabled the country to attract Intel's research center, Mungaray says. The number of Mexicans 15 years and older that have completed at least the ninth grade jumped to 54 percent in 2005 from 36 percent in 1990 and 9 percent in 1970, according to the Mexican government. Above all, we have the human capital with more than 40 years experience in world-class manufacturing, Mungaray says. Beyond wages, Mexico has few strikes, which is proving crucial as China struggles with labor unrest, says Luis Aguirre, chief of Mexico operations for San Jose, California-based Sanmina-SCI Corp., which manufactures electronics, auto parts, aerospace parts and medical equipment for other companies. Mexico has had six strikes so far this year, according to the Labor Ministry. There have been no strikes at export factories. A big advantage is that Mexico has labor peace, Aguirre says. We don't have the threats or problems of strikes that China is having right now. While drug violence may dominate the headlines, Mexico is quietly reclaiming its place as a location where U.S. companies are finding low wages, less-expensive shipping costs and reasonable tariffs -- at an address a lot closer to home than China. Source Bloomberg |
