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Mexico is beating China

Admin | 08.03.2012

Mexico is more appealing than China as investment recipient. The Asian country started losing momentum, although Mexico must make adjustments.

Mexico is more appealing than China as investment recipient. The Asian country started losing momentum, although Mexico must make adjustments.

Falling in love. 40 years after the beginning of diplomatic relations between the two countries, China, which has a market of 3 billion dollars and 1.4 billion inhabitants, is Mexico’s second largest trading partner. Between 2000 and 2006, the total value of trade between the two countries, increased 719% (from $3.190 billion dollars to $26.126 billion dollars), but only 2% of Mexican exports has the Asian country as destination. The disappointment. China displaced Mexico to second place as exporter to the U.S. by doubling its exports between 2001 and 2004. The imbalance was accentuated by the China's entry in the World Trade Organization (WTO) in 2001. The disadvantage was for Mexico. One hand investment was aimed to China due to the low cost of labor and products manufactured there came to Mexico more easily. It thus affected light manufacturing, footwear, textile, computer, furniture and electronics. 69.5% of exports from Mexico to China consist of chemicals, 17% in pelts and leathers, 8% belong to the metal mechanical sector and 3% to the agri-food sector. Some of these sectors have grown, as in the case of leathers and pelts from Guanajuato, showing an annual increase of 9.7%. A second chance. There are products whose demand in China can stimulate the increase of exports: food and beverages, footwear, automotive, renewable energy, raw materials and tourism. Specifically products such as avocado, meat, mango, grape, tequila, mescal, and beer have great sales potential. Specialists said that Mexico has some advantages before the expansion of the Chinese market: there is a high degree of specialization of the manufacturing industry in the country, as well as geographic proximity with the United States. Some variables of improvement of competitiveness in exports to the Chinese market, according to Julio Zamora, strategist for Citibank, is the depreciation of the peso against the yuan, macroeconomic stability, the fact that in Mexico there is greater protection to intellectual property than in China, human capital, and the rise in transport costs resulting from the increase in the price of fuels. In addition, Mexico has potential to attract investment in the aerospace industry, equipment and medical prosthesis, medical services and software development. However, among the “against” factors experienced by the country to attract capital is having an anachronistic labor scenario and the presence of monopolies, both public and private, that make services more expensive.
Source: Mexican Business Web

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