Mexico is a trendy pick for the new it country. It has an open economy, a lot of trade agreements and easy access to the US market.
People seem happy that Mexican labor is now competitive with Chinese labor for manufactured exports.
There are two definite problems with this celebration.
First, Mexico is a middle income, OECD country ($9,400 per capita income in 2011 according to the World Bank). China is a poorer country (about $4,900 according to the same source). It is not good news for Mexico that its wages are competitive with Chinese wages. Mexico should have a more highly skilled and highly paid labor force than China.
Second, there is much less to Mexico’s manufacturing boom that it appears on the surface. In 2011 Mexico’s 5 largest exports were crude petroleum oil, passenger motor vehicles, flat panel screen TV’s, mobile telephones, and vehicles for the transportation of goods.
Sounds pretty good until you look and see that in 2011, Mexico’s top five imports were gasoline, parts for flat panel screen TV’s, parts for mobile telephones, and parts for passenger motor vehicles. (source is here)
So they export a commodity and import the finished product made from the commodity and they do final assembly of consumer goods.
In other words, they import the parts and export the finished product. Not too much value added there guys.
Sure, jobs at near Chinese level wages for Mexican manufacturing workers are better that no jobs for Mexican workers, but Mexico should be embarrassed about their low wages and low value added exports, not proud.
Mexico should be importing goods from China, not competing for final assembly manufacturing business against China!