Saturday, December 01, 2012

Made in Mexico ( Hecho en Mexico)

Hecho en Mexico ( Made in Mexico ) is the title of a musical documentary film released on 30 November. It takes the viewers through an odyssey of Mexican music featuring performances by rockers, rappers, folk artists and pop stars and narrates the diverse and colorful history, culture, poetry, philosophy, ethnicity and tradition of Mexico. 
According to the projections of Economist ( 24 November issue) Made in Mexico  products are going to overtake Made in China in the US market by 2018. Mexico will become the top supplier to US accounting for 16 % of the US imports as against 15.8 % projected for China.  In 2012, Mexican share stands at 12.3% while that of China is 17%. The Mexican  ascendancy has become possible thanks to the bridging of the wage gap with China. The average manufacturing wage of China has risen to 1.6 dollars per hour in 2011 ( from 0.3 dollars in 2000) while the Mexican wage was 2.1 dollars an hour in 2011, increasing from 1.5 dollars in 2000. The minimum wage in Shanghai is now more than that of Mexico city and Monterrey. This new wage situation combined with the increased cost of freight due to high oil prices have given a competitive edge to Mexico, from whose border towns goods reach US cities in a matter of hours or days while it takes several weeks from China. The businesses which had fled to China in the past have now started returning to Mexico. 
Today Mexico is the fourth largest exporter of vehicles. With several new plants being set up, the production capacity is set to go up to four million vehicles. The country has become the world's largest exporter of flat-screen TVs, Blackberries and fridge-freezers. A number of foreign companies including Chinese are putting up plants in Mexico to supply to the US market 
As member of NAFTA, Mexico has free access to the markets of US and Canada while China's access is being limited by growing protectionism. Besides, Mexican products have access to the markets of 42 countries with whom it has signed FTAs.
The Mexican industry and economy are going to benefit from the opening up of the energy sector, expected in the near future. Mexico, which is among the top ten oil producers in the world with 2.5 million barrels per day of production, is set to increase exports with new investment in exploration and production. Last month,Pemex, the Mexican oil company announced discovery ( the largest in the last ten years) of a new field with reserves of 500 million barrels. The shale gas/oil revolution, which has transformed the US energy situation, is also likely to spread to Mexico, which has large shale reserves. 
It is creditable that the Mexican economy has withstood the global financial crisis without any major damage, despite the proximity and exposure to the epicenter of the crisis. This is attributed to the prudent macroeconomic management of the Mexican policymakers who have learnt  lessons from the previous crises. The inflation has been kept under control and it is estimated at 4.6% in 2012. International reserves exceed $160 billion, a record.  Interest rates and External Debt are relatively low. Though the growth has been modest in recent years, it is expected to pick up. 

Encouraged by the new trajectory of the economy and industry some Mexicans even talk about overtaking Brazil, the largest economy of Latin America.They highlight the fact that their boom in manufacturing is more sustainable than the commodity boom of Brazil driven by China. In trade, Mexico is, of course, way ahead of Brazil with 700 billion dollars in comparison to the Brazilian trade which stood at 484 billion dollars in 2011. While Mexico is gaining edge in manufacturing, Brazil suffers from  high cost of production, interest rates, wages and antiquated labour laws as well as strong currency and is losing its competitive edge in industry. Recently, the Brazilians had to wriggle out of a bilateral automobile accord after the huge increase in import of cars made in Mexico. While the Brazilians are protectionist, the Mexicans have become more outward-looking. Earlier this year, they signed up as member of yet another grouping called as the Pacific Alliance ( with Chile, Peru and Colombia). 
Although Mexico has been ruled by the centre-right party PAN for the last ten years, Inclusive Development has been the priority of the governments. The Calderon administration has brought 50 million Mexicans (unaffiliated with any health insurance) under the Seguro Popular programme. The number was just 15 million six years back. His administration has built 21,000 kilometers of new roads and bridges. Unfortunately, Calderon got bogged down in the futile war against the drug gangs. While, the drug war and mindless violence of the drug cartels have given a bad image, it is believed that the violence has started declining. In any case, the fundamental cause for the drug trafficking and gun violence comes from US, the consumer of drugs and supplier of guns.
The manufacturing and export boom of Mexico is coinciding with a good news. On 1 December, Mexico is getting a 46-year old dynamic and energetic new President in Enrique Pena Nieto who won a comfortable victory in the July elections. He promises to take Mexico to greater heights and prosperity. His party PRI shares some common agenda with PAN, the party of the outgoing President Calderon. The two parties collaborated in passing the labour reform legislation recently. In a gesture of goodwill, he has included PAN as well as the leftist PRD members in his cabinet. 
While Pena Nieto is a fresh face, his party PRI had ruled Mexico for 71  years uninterrupted till 2000 as a one-party dictatorship. Having been out of power in the last ten years, the party has learnt lessons to adapt to the new realities of Mexican democracy. Conscious of the criticism that his administration will be old wine in a new bottle, Pena Nieto has a low key and sober inauguration today without the usual Latino pomp and show.
The Mexicans are, understandably, upbeat and optimistic about the future. They have started dreaming ( like the Brazilians and Indians) that their time too has come. 

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