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Mexico’s Manufacturing Cost Competitiveness: A Rising Global Star

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Nowadays, foreign investment in factories in Mexico is taking off again, even in industries in which China has been dominant. For instance, Mexican exports of electronics more than tripled, to $78 billion, from 2006 to 2013.

A significant shift in cost competitiveness is behind Mexico’s manufacturing revival. A decade ago, average direct manufacturing costs in China were estimated to be 6 percentage points cheaper than Mexico’s, according to the BCG Global Manufacturing Cost-Competitiveness Index. Now, Mexico is estimated to be 4 percentage points cheaper.

In China, labor costs soared and productivity wasn’t able to keep up. In Mexico, the 67% rise in average Mexican manufacturing wages from 2004 to 2014 was almost entirely offset by productivity gains in the modern industrial sector and an 11% depreciation of the peso against the U.S. dollar.

Source: https://www.bcgperspectives.com/

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