It's Mexico's moment right now

Mexico has become a manufacturing titan and lesser-known areas of the country such as Guadalajara’s technology hub are driving the economy. Trade and globalisation are key ingredients to the nation’s secret recipe as it seeks to take the next step up.

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The world's biggest firms move to Mexico 3:21

Growth

  • Mexico's economy (GDP) is projected to grow by 2.6% in 2016 and 2.9% in 2017 according to the IMF's World Economic
  • Outlook Update (January 2016)

“It is definitely Mexico’s moment right now,” says Mario Veraldo, Managing Director of Maersk Line’s Middle America Cluster.

“The country is part of the global supply chain and connectivity between Mexico and Asia is critical for that to work. By being on time every time, Maersk Line is enabling that supply chain, where Asia and Mexico will be key for the next couple of years,” he adds.

Twenty years after joining the North American Free Trade Agreement (NAFTA), Mexico has penned more than 45 free trade agreements, making it one of the world’s most open economies. Exports have grown five-fold, the country is one of the world’s top 15 manufacturing economies and a top-5 automotive producer with major global brands present. As nearshoring sees production moving closer to consumption, proximity to the US is adding to the positive trend.

Free trade, big vessels

“Mexico has changed radically in terms of its economic structure over the past 20-25 years. It is now an open economy looking outwards rather than inwards,” says Eduardo Garcia, an independent economist in Mexico City and founder of Sentido Común, a Mexican financial news website.

We bring materials in from all over the world to our assembly production. This makes our logistics very complex, and we need good partners like Damco so we can have our materials on time and cost, so we can offer the same thing to our customers.

ROBERTO BRISEÑO, SUPPLY CHAIN DIRECTOR AT BDT

The Maersk Group is closely linked to the development. Investments such as the continuous introduction of bigger vessels and the APM Terminals’ port endeavour in Lázaro Cárdenas underline the Group’s commitment to a nation that is keen on trade.

In 2015, Maersk Line’s business in Mexico rose by 20% reaching a total of 250,000 containers (FFE).

Trading on technology

Few places embody the impact of trade more than Guadalajara, the focal point of Mexico’s technology hub. The export value of technology products and services from the area reached USD 21 billion in 2014, and it is trade that helps drive the business of both small players and global brands such as IBM, HP and Microsoft.

“We do business with all the big companies providing them with supply chain solutions. We bring in raw ­materials for our customers, they produce internally in Mexico and then they re-export the finished goods to the rest of the world,” says Arlés Espino, Strategic Sales Manager at Damco in Guadalajara.

Mexico panorama
Mexico is one of the most open large economies for the world. According to the World Bank, exports plus imports are equivalent to 66% of GDP, compared with 26% for Brazil and 42% for China. A BCG survey finds that 77% of Mexicans take a positive view of the future. Only 6% are very pessimistic.

Mexico has changed radically in terms of its economic structure over the past 20-25 years. It is now an open economy looking outwards rather than inwards.

Eduardo Garcia

EDUARDO GARCIA, INDEPENDENT ECONOMIST IN MEXICO CITY

15,000 people work in the IT industry specifically, and more than 100,000 people in the electronics industry, making Xboxes and other consumer electronics, of which much is destined for US consumers. The smooth flow of materials is key for these companies, including BDT, a data storage company:

“We bring material in from all over the world to our assembly production. This makes our logistics very complex, and we need good partners like Damco so we can have our materials on time and cost, so we can offer the same thing to our customers,” says Roberto Briseño, Supply Chain Director at BDT.

The big enabler

Dubbed a Mexican 'Silicon Valley', observers note that Guadalajara, while heavy on the manufacturing of electronics, still has some catching up to do when it comes to innovation.

“There is a slight opening of the entrepreneurial potential in Mexico,” says Eduardo Garcia.

“I see young guys coming up with Apps for mobile devices and ideas for things on the internet, but we still lack a culture of entrepreneurship in Mexico. However, It is something that is emerging and I hope to see more of it over the next few years.”

Maersk Line’s Mario Veraldo also sees the growing production capacity, the rise of a consumer market of 120 million people and an ability to step up in the value chain as elements that will keep Mexico interesting for years to come, not least as trade with other Latin American counties is expected to increase.

“Over the next couple of years it will become clear how important Mexico’s economy is for all of Latin America because of how much products it attracts and how much it sends out. And I think Maersk Line will continue to be a big enabler for that to happen,” he says.