With the current increase in Chinese salaries and the deepening of trade tensions, many factories along the border could benefit, according to an article from Sign On San Diego.
The rise of Chinese goods and trade friction mounts between Washington and Beijing appears to make Mexico one of the beneficiaries, which could result with a spillover effect on the San Diego economy.
So far this year, the industrial production in Mexico is up 3 percent over last year and their exports to the United States have grown almost 2 percent, including a $1.7 billion heightening in machinery exports and $1.3 billion in electrical equipment, appliances and components.
Even though in a healthy economy those increases would be considered anemic, they represent a sign of growth in the current precarious environment. The economic analyst for the Fabricators and Manufacturers Associations, Chris Kuehl, mentions that the numbers suggest that Mexico is becoming more competitive with China.
"Part of the reason for that surge in trade activity is that since 2005 the cost of manufactured goods from China has risen by 40 percent," Kuehl commented in a report.
"Wages in China have risen rapidly over the past five to six years and now they are almost the same as the wage rates in Mexico," Kuehl said.
Since 2005, wages have escalated 218 percent in China but only 25 percent in Mexico. Kuehl mentioned that over the next decade, Mexican wages are projected to raise only a third as much as Chinese wages.
As well, the high pricing of fuel made more expensive to transport goods back and forth across the ocean. Kuehl mentioned it is 80 percent cheaper to send goods across the border than to ship them all the way from China.
Alejandra Mier y Teran, head of the Otay Mesa Chamber of Commerce, said she has heard that three or four factories that had previously moved from Mexico to China are now returning to Mexico. In one side, because of the rising costs but also because of political uncertainty, as U.S. politicians try to pressure China into revising its currency and breaking down trade barriers.
In the meantime, she said, the manufacturing industry in Mexico seems to have rebounded from the depths it hit in 2009, when the industrial production decreased by around 10 percent.
"We're seeing a lot more activity along the border," she said, citing as an example Costco's assembly and distribution activities in Otay Mesa and Prime Wheels' 1,000-worker maquiladora in Tijuana. "And when factories open in Tijuana, that means more jobs for customs brokers, distributors and suppliers on this side of the border."
A proof of the business potential for local suppliers came last week as Japan-based Kyocera, with factories in San Diego and Tijuana, met with business executives in the South Bay to discuss its plans for bolstering its supply chains on both sides of the border.
As part of the Mexport Supplier's Forum, an array of talks launched by the Otay chamber, Kyocera outlined its necessities for such items as electronics components, tools, instruments, clean room supplies, paper, packaging, computers, copiers and uniforms.
Mier y Teran stated that in general, companies are a much less hesitant about doing business along the border than they were at the depth of the recession.
"The companies that survived this terrible recession are now feeling a bit more secure and are in a better position to grow," she mentioned. "As a result, we're hearing a lot more companies requesting information about doing business in the region."
Article taken from Sign On San Diego News.
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