The Coronavirus May Ultimately Boost Mexican Manufacturing

According to a Forbes Magazine analyst, Mexican manufacturing may gain added prominence as a result of the global pandemic.

Although much remains to be seen regarding the effects of the coronavirus on the Chinese economy, Zenet Raposa of Forbes Magazine believes that the current global health crisis will end the country’s leadership in manufacturing.  According to Raposa, the new COVID-19 coronavirus may be the blow that brings China’s nearly 30-year role as the “world’s workshop” to a conclusion and ushers in a rise in prominence of Mexican manufacturing.

Is the time of Chinese manufacturing dominance over?

Many argue that Chinese manufacturing had already been losing ground in recent times due to escalating labor and transportation costs, as well as issues dealing with the protection of intellectual property. China had been gradually diminishing its prowess as the only global player for providing the world with the widgets that it needs over the course of the last several years. Despite this fact, the world had not yet found an effective replacement for many of the activities that China had developed so well before the advent of the pandemic.

Raposa believes that the current coronavirus pandemic may prove to be China’s “swan song,” referring to the metaphorical phrase for a final gesture, effort, or performance given just before death or retirement. In the face of the decline in Chinese manufacturing leadership, which country might assume its position?  No other nation has the logistics configuration of China. Only a few countries have favorable tax rates that China has for manufacturing firms. It is improbable that Brazil will benefit from China’s decline. Although India has a welcoming environment for manufacturers, its infrastructure for logistics is terrible. Mexican manufacturing, on the contrary, may increasingly proper as a result of the implementation of the newly signed United States – Mexico -Canada (USMCA) Trade Treaty.

Will Mexican manufacturing surpass the Chinese industry?

Chances are high that the crisis presently taking place in China will last longer than many would like to anticipate. This state of affairs will undoubtedly open a wide window of opportunity for Mexican manufacturing.  Currently, many are asking, is it now Mexico’s turn? The response to this question is clearly “yes.”

According to Zenet Raposa, of the “160 executives that participated in Foley & Lardner LLP’s 2020 International Trade Trends in Mexico survey, which was published this past February 25^th, a significant number of respondents from the automotive and technology manufacturing sectors expressed that they intend to move business to Mexico from other countries (such as China).  Their plan to make such transitions are projected to take place within the next one to five years.”

In further support of the assertion that it is the turn of Mexican manufacturing to take its place on the world stage, Sebastian Miralles, managing partner of Tempest Capital in Mexico City, has recently stated that “Our firm’s estimates of the potential value of foreign direct investment that will be redirected to Mexico from China, as well as the United States and Europe, will range from US $14 billion to $19 billion a year.  After a period of acceleration of this trend, the multiplier effect of FDI in manufacturing on Gross Domestic Product (GDP) could lead to Mexican economic growth rates of as high as 4.7% per year.

Mexico is the logical alternative to China in the age of the coronavirus

For Zenet Raposa there is no doubt that “Mexico is the best place to take advantage of the anticipated long-term political and economic friction that exists between the United States and China. It is the only low-cost border country with a free trade agreement with the United States, the United States – Canada – Mexico trade accord.”

He also notes that, over the last several decades,  Mexican manufacturing has been the source of “trucks, cars, electronics, televisions, and computers.”  While shipping a container from Mexico to New York takes a total of five days, the same shipment from Shanghai, China will arrive in an extended time of 40 days. Additionally, “Mexican manufacturing is the source of complex items such as airplane engine and micro semiconductors. The country ranks eighth in the world in the number of engineers that it graduates per year and is host to a plethora of well-known and prestigious well-known multinational companies.”

Moving to Mexico from China is the most logical choice for companies that are wishing to reduce uncertainty and to secure their international supply chain in times of global turbulence.

Photo by Julius Silver from Pexels