The Surprising Economy of Mexico, A Snapshot
With a strategic location, economic growth rate, ability to attract advanced manufacturing, excellent supply chains, fiscal stimulus, and a talented, young workforce, Mexico is one of the best places to do business for productive investment. This is the opinion of Luis Videgaray, MIT graduate, Mexico’s Finance minister and the brains behind current economic reforms. The reforms may take years to kick in fully, but there are some surprising highlights.
Mexico is becoming a powerhouse of manufacturing. The country is on track to become the United States’ No. 1 source of imported cars by the end of next year, overtaking Japan and Canada. Because Mexico is a major auto manufacturer, 89 of the world’s top 100 auto parts makers have production in the country. In the past year Kia, BMW, Audi and Mercedes-Benz either started or announced investments of 1 billion dollars plus each in new plants.
The electronics industry of Mexico has grown enormously within the last decade. Mexico has the sixth largest electronics industry in the world
There are almost half a million (451,000) students enrolled in electronics engineering programs with an additional 114,000 electronics engineers entering the Mexican workforce each year
Due to its geographic location, Mexico is flying high in the aerospace sector. Many multi-national companies have established here convinced of the talent and capabilities of the people and logistics and infrastructure development. Today, this sector is made up of 287 companies and R+D centres and generates more that 32,600 high quality jobs. Mexico is the meeting point of the world’s two main aerospace manufacturing corridors, both in North America. The country’s access to the Asian and European markets make it the aerospace logistics and manufacturing center of the Americas. Mexico has consolidated its position as a global leader in the aerospace sector. The country’s exports amounted 5 billion dollars in 2012, and recorded an annual average growth between 2006 and 2013 that exceeded 16%.
As well, Cisco, PepsiCo, Nestle, Pirelli, Vesta, and Pemex have made commitments to invest close to $10 billion in new operations in Mexico (+ 7.3 Billion to be invested in existing operations). Mexico’s record 2013 exports of $280.4 billion to the U.S. and imports of $226.1 billion from the U.S., point to a growing trade alliance that benefits both countries. Automobile manufacturing, auto parts, and aerospace were the driving sectors for exports to the U.S.
Meet the MINTs. Coined by British economist Jim O’Neill, the term refers to Mexico, Indonesia, Nigeria and Turkey. These countries share the prediction of large surges of wealth, number of millionaires and rapid economic growth over the next decade. David Rees from Capital Economics believes Mexico should swing from being Latin Americas worst performer, to its best.
According to Euromonitor International, 2014 saw dynamic growth in the luxury goods, across a broad spectrum, in Mexico. Global luxury brands are moving in to the larger cities and opening their own stores. Jaguar Mexico says they will sell 20% more top of the line cars in Mexico this year. Only the US, Canada and Brazil have purchased more private jets than Mexico in the past five years
Mexico has many established luxury hospitality brands on both coastlines and in interior cities. But the number of luxury rooms is far fewer than other countries worldwide. In the past few years, top brands have entered the market and several others are slated to expand as well. With its spectacular geography, warm people and rich culture, analysts believe Mexico is poised for expansion in the luxury tourism segment.
The significance of tourism and it’s economic impact overall, is best represented by how many people visited Mexico last year over the previous year. Mexico received a record 24 million international visitors in 2014, or 2.6 percent more than the 23.4 million tourists it received in 2013, according to Tourism Minister Claudia Ruiz Massieu.
As a sector, tourism generated $12.7 billion in foreign exchange inflows, according to a report by JP Morgan Chase, a 10.5 percent increased versus 2011. 13% of Mexico’s gross domestic product is generated by the Mexico tourism economy. Already the nation’s fifth-biggest source of revenue, Tourism is anticipated to take on more economic importance by the end of 2018 as international visits rise and new infrastructure is built.
The arrival of international visitors by air to Mexico in the first three months of 2015 grew by 8.0 percent over 2014.
Bill Gates recently purchased the Four Seasons Punta Mita in the state of Nayarit for 200 million with Saudi Billionaire Prince Alwaleed Bin Talal. Michael Larson, chief investment officer, said in a statement: “We are a significant investor in Mexico and hold a long-term positive view on the country and its economy. This is an outstanding property asset.”
Over the past five years investors in the Mexican stock market have enjoyed three times the returns of the much-hyped Brazilian equities. After financial experts’ 2013 broad projections of Mexico as a top choice for personal investing for the next few years, Goldman Sachs and Nomura now predict that the Mexican economy will enter the top 10 largest economies in the world by 2020.
Standard & Poor’s recently boosted Mexico’s credit rating to an A3 from Baa. S&P trumpeted Mexico’s energy reforms as a “watershed moment” for the country. According to the International Monetary Fund, the Mexican banking system is strong, in which private banks are profitable and well-capitalized. The financial and banking sector is increasingly seeing foreign company participation or mergers of foreign and Mexican companies.
Few modern Mexican presidents can claim to have championed as many deep reforms and succeeded. Peña Nieto has pushed a dozen reform bills through Congress, five of which required amendments to the constitution. Forbes Magazine states he’s accomplished more in his first year in office than his three most recent predecessors combined.
Image credits: University of Mexico City, ProMexico, Aston Martin, One&Only Hotels