Mexico has not really been on my radar, so it is good to read something about it. Anecdotally, I have one friend who is Mexican who recently moved from Austin back to Mexico. She seems to love it. No poverty where she is. At least not in the photos she posts on FB. My step-brother on the other hand is a Drill Push and has been working down in Mexico for a number of years now. He thinks it is the biggest SNAFU going. So the truth is probably somewhere in between.
As for organized crime I am just reading a book right now about the Camorra mafia in S. Italy around Naples, and their involvement in the illegal import and distribution of Chinese made goods through that port as well as their involvement in the textile and fashion industry. It is a very fascinating book. Not particularly well written, but full of information.
It highlights how legitimate businesses win cost advantages by dealing in parallel with organized crime, for example by bypassing customs and not paying duty on imported goods and/or by buying high quality fakes and look a like goods made in underground factories right in Italy either by unregulated Italian workers or increasingly by illegal Chinese workers living and working in Italy.
In many cases, some of the world's biggest fashion houses are sub-contracting out work to these factories, so they are not so much producing fakes as simply producing look a like labels in parallel with their legitimate orders. Main Street retailers are quite happy, apparently, to get their hands on high quality, look a like, brand name clothes at a steep discount. And the fashion houses are not that bothered, apparently, because they are selling to another clientele, upscale, while reaping the economies of scale that these underground factories produce by being able to sell into various sales channels at once from legitimate stores in suburban malls to African immigrants selling knock-offs on the street corners and piazzos to tourists in Rome & Milano.
Nothing gets wasted, but it points to several problems. One, it robs the state of tax revenue. Two, it financially supports criminal gangs that then are also involved in less savoury occupations like drugs, prostitution, money laundering, gun trafficking, illegal immigration, protection rackets, etc. Three, Chinese imports compete directly with Italian made fashion and textiles, so illegally produced goods as well as cheap imports are undermining legitimate businesses causing higher unemployment, lowering wages, and further robbing the state of tax revenue. And, finally, it shows that raising import duties on Chinese made goods would not solve the problem, if those goods are in any case passing through mafia controlled ports without any inspections or duty being paid. It is no different than the illegal trade in cigarettes or booze. The higher the taxes the more attractive it is to import or distribute bootleg contraband.
But back to Mexico. I see the problem as being that legitimate business can and is used by criminal gangs to laundering money and hide illegal transactions as goods passing over the border into the USA get mixed in with illegitimate merchandise. And obviously per the article you sent me that the violence directed towards anyone that interferes with these criminal gangs is extreme. A form of intimidation above and beyond what is needed to send a clear message to the politicians and their police chiefs.
That may not affect companies like VW directly, but certainly their suppliers if they are forced to pay protection money and/or divert capital away from production into less productive activities such as security. Not to mention the notorious sweatshops located in places like Juárez along the US border (see link: http://wikitravel.org/en/Juarez) where workers have very few rights and the level of violence is extreme. Many people think it is cheaper to produce in developing countries because wages are low, but in reality setting up a business or factory in a lesser developed country can be very expensive once you factor in back-up power supplies, crime, security, poor roads, bribes, red tape, etc. I call it BIC Syndrome - bureaucracy, incompetence and corruption.
On a macro level, Mexico is benefiting from an inflow of capital into emerging markets, and especially into energy and commodity markets. Many think that the beneficiaries of ultra-low interest rates and fiscal stimuli in the USA are actually emerging markets. Measures to stimulate the US economy may be producing more jobs abroad than at home. Plus near zero interest rates are sending investors into EMs in the search for yield or return. Some fear that there is a bubble growing in many EMs.
As for organized crime I am just reading a book right now about the Camorra mafia in S. Italy around Naples, and their involvement in the illegal import and distribution of Chinese made goods through that port as well as their involvement in the textile and fashion industry. It is a very fascinating book. Not particularly well written, but full of information.
It highlights how legitimate businesses win cost advantages by dealing in parallel with organized crime, for example by bypassing customs and not paying duty on imported goods and/or by buying high quality fakes and look a like goods made in underground factories right in Italy either by unregulated Italian workers or increasingly by illegal Chinese workers living and working in Italy.
In many cases, some of the world's biggest fashion houses are sub-contracting out work to these factories, so they are not so much producing fakes as simply producing look a like labels in parallel with their legitimate orders. Main Street retailers are quite happy, apparently, to get their hands on high quality, look a like, brand name clothes at a steep discount. And the fashion houses are not that bothered, apparently, because they are selling to another clientele, upscale, while reaping the economies of scale that these underground factories produce by being able to sell into various sales channels at once from legitimate stores in suburban malls to African immigrants selling knock-offs on the street corners and piazzos to tourists in Rome & Milano.
Nothing gets wasted, but it points to several problems. One, it robs the state of tax revenue. Two, it financially supports criminal gangs that then are also involved in less savoury occupations like drugs, prostitution, money laundering, gun trafficking, illegal immigration, protection rackets, etc. Three, Chinese imports compete directly with Italian made fashion and textiles, so illegally produced goods as well as cheap imports are undermining legitimate businesses causing higher unemployment, lowering wages, and further robbing the state of tax revenue. And, finally, it shows that raising import duties on Chinese made goods would not solve the problem, if those goods are in any case passing through mafia controlled ports without any inspections or duty being paid. It is no different than the illegal trade in cigarettes or booze. The higher the taxes the more attractive it is to import or distribute bootleg contraband.
But back to Mexico. I see the problem as being that legitimate business can and is used by criminal gangs to laundering money and hide illegal transactions as goods passing over the border into the USA get mixed in with illegitimate merchandise. And obviously per the article you sent me that the violence directed towards anyone that interferes with these criminal gangs is extreme. A form of intimidation above and beyond what is needed to send a clear message to the politicians and their police chiefs.
That may not affect companies like VW directly, but certainly their suppliers if they are forced to pay protection money and/or divert capital away from production into less productive activities such as security. Not to mention the notorious sweatshops located in places like Juárez along the US border (see link: http://wikitravel.org/en/Juarez) where workers have very few rights and the level of violence is extreme. Many people think it is cheaper to produce in developing countries because wages are low, but in reality setting up a business or factory in a lesser developed country can be very expensive once you factor in back-up power supplies, crime, security, poor roads, bribes, red tape, etc. I call it BIC Syndrome - bureaucracy, incompetence and corruption.
On a macro level, Mexico is benefiting from an inflow of capital into emerging markets, and especially into energy and commodity markets. Many think that the beneficiaries of ultra-low interest rates and fiscal stimuli in the USA are actually emerging markets. Measures to stimulate the US economy may be producing more jobs abroad than at home. Plus near zero interest rates are sending investors into EMs in the search for yield or return. Some fear that there is a bubble growing in many EMs.
However, Mexico, as well as many other emerging markets, is, and will continue, to benefit from a rebalancing of the global economy. The better multinationals get at controlling risks while operating in such markets the more production they will offshore in search of cost advantages. I think that is the reality. The days of we think, they work, are over. Increasingly, they can do the work and the thinking. While many western companies seem quite willing to show them how by trading away their core competences tomorrow in places like China in exchange for short-term cost savings today. Quite short-sighted, but it is what it is.
Plus many EM governments have learned from past mistakes and are not only more business friendly, but better managed from a macro-economic point of view. Obvious exceptions are countries like Venezeula that seem to be headed in the opposite direction either out of ideology or because they are run by kleptocrats and their cronies.
Needless to say this growth in EMs will put pressure on mature economies in the OECD where not only are wages higher, but a lot of wealth creation is diverted from production to social programs due to an aging population and high expectations of what the government can and should deliver with regards to healthcare, pensions and benefits. Whatever their social merit much of this spending is a drain on future economic growth.
Thinking back to the Asian Crisis and the IMF bailouts, the irony is not lost on me that 'the west' was unable to take its own advice during the global recession and financial crisis. The USA, and others, is still living in denial of some of the tough choices it is going to have to make in the not too distant future (see link: http://www.economicpolicyjournal.com/2010/10/bernanke-tells-truth-united-states-is.html).
Actually, when I read the article about Mexico that you sent me, I am quite worried about Canada's own automobile industry where unionized workers' costs are high and productivity is relatively low. Seeing a video about Ford's newest factory in Brazil shows how out of touch with reality many unions are (see link: http://apps.detnews.com/apps/multimedia/player/index.php?id=1189). Especially when you think that China and India are the largest car markets in the world now making US/Canada production largely an after-thought for the big car manufacturers. Why spend time and money to fight yesterday's war with the UAW?
Which is why central bank manipulation of exchange rates, like China for example, is and is not such an issue. There is no doubt that currency manipulation is a form of protectionism, and an unfair competitive advantage, but the issue is also whether production would simply shift to another low wage country if the yuan, for example, appreciated. Is the USA better off, per se, if Chinese production relocates to Vietnam, Bangledesh, Brazil or Mexico? The better question to ask is what policies are undermining American/Canadian competitiveness, if high wage, high cost countries such as Germany and Switzerland still CAN compete globally? Although, I will admit that currency appreciation is still a problem even if it is not the only problem these exporters face due to Chinese currency manipulation.
Well, in any case, many things to think about. As I said, Mexico has not really been on my radar screen, although, at least superficially, it seems to be benefiting from many of the trends affecting other emerging markets at the moment. Thanks for your email. Great to hear from you. All the best.
AOK - Here's the Mexico article I sent him, mostly summary stats but some good context too.
--------------------------------------------------------------------------
Mexico Boom Biggest in Americas as Drug Criminals Lose to NAFTA
Mexico Boom Biggest in Americas as Drug Criminals Lose to NAFTA
By Tal Barak Harif and Jonathan J. Levin - Oct 4, 2010
Mexico’s stocks, bonds and currency are beating the U.S. and Brazil for the
first time since 2002, data compiled by Bloomberg show.
For all of the killings of elected officials at war with the criminal drug
gangs, there is no stopping the Mexican investment boom thanks to the
16-year-old trade agreement that is buoying Latin America ’s second-largest
economy.
Mexico’s stocks, bonds and currency are beating the U.S. and Brazil for the
first time since 2002, data compiled by Bloomberg show. Dollar debt issued
by Mexico is returning 16 percent in 2010, more than the 14 percent for
Brazil bonds and 8.8 percent for U.S. Treasuries, according to JPMorgan
Chase & Co. and Bank of America Corp.
The IPC stock index is up 5.3 percent, compared with a 2.8 percent advance
for the Standard & Poor’s 500 and 2.4 percent gain for the Bovespa. The peso
rallied 4.5 percent against the dollar this year, surpassing the Brazilian
real’s 3.2 percent increase.
“The reality is that you will continue to see companies making long-term
investments,” said Guillermo Osses, who helps oversee $50 billion in
emerging-market assets at Newport Beach, California-based Pacific Investment
Management Co., the world’s biggest bond fund manager. “We still have
significant exposure in Mexico .”
The North American Free Trade Agreement that took effect in 1994 continues
to lure investors even as Mexico confronts its worst-ever drug violence. The
treaty signed with the U.S. and Canada caused overseas sales to quadruple.
In the first seven months of this year, Mexico ’s share of U.S. exports rose
while China ’s fell, according to the U.S. Commerce Department. Gross
domestic product expanded 7.6 percent in the second quarter, the most since
1998, boosted by U.S. demand for everything from refrigerators to cars.
Growing Partnership
“Since 1995, the advantage that Mexico has as a partner with the U.S. in
Nafta has been growing,” said Sergio Luna, the head economist at Citigroup
Inc.’s Banamex unit in Mexico City .
Investors poured $2 billion into Mexican equities in the 12 months to July,
reversing a $470 million net withdrawal in the year-earlier period,
according to EPFR Global, a research firm in Cambridge , Massachusetts .
The IPC index will climb 6.5 percent in the next year, compared with 15
percent for the Bovespa, according to Bank of America forecasts on Sept. 16.
The S&P 500 will gain 4.3 percent by the end of this year, according to the
average estimate of 11 strategists surveyed by Bloomberg.
The violence is negative “from a human perspective,” said Pimco’s Osses.
“But from an investor perspective it’s not that big of a problem.”
‘Tragic Dimensions’
Yields on Mexico ’s benchmark 10 percent bonds due in 2024 dropped to an
all-time low 6.36 percent on Aug. 20, following a record three-month-long
decline in consumer prices through June.
The peso is forecast to climb 2.3 percent by the end of next year, compared
with a 0.6 percent drop for the real, according to the median estimate of
analysts surveyed by Bloomberg.
The peso fell 0.6 percent versus the dollar by 1:25 p.m. today in New York ,
while yields on Mexico ’s 10 percent bond due in 2024 fell four basis
points, or 0.04 percentage point, to 6.46 percent. The IPC index of stocks
gained for a third day, rising 0.2 percent.
“Drug-related violence in Mexico has increased, and even spilled over to
areas in the country previously thought to be immune,” said Stefan Hofer, an
emerging-markets equity strategist at Bank Julius Baer & Co. in Zurich,
which oversees about $160 billion worldwide. “While the security situation
is an important issue to watch, and has many tragic dimensions,
international investors have not been dissuaded from investing in Mexico .”
Eleven Mexican mayors have been killed since the start of the year, adding
to gang violence that killed more than 28,000 people since President Felipe
Calderon took office in 2006.
Mass Murder
Gunmen kidnapped Edelmiro Cavazos, the mayor of Santiago in Nuevo Leon
state, on Aug. 15. He was found bound and shot on the side of a mountain
road on Aug. 18. Marco Antonio Leal, the mayor of Hidalgo in the border
state of Tamaulipas, was assassinated while driving on Aug. 29. Alexander
Lopez, mayor of El Naranjo in San Luis Potosi state, was shot as he sat at
his desk on Sept. 8.
Gustavo Sanchez, the interim mayor of Tancitaro in Michoacan state, was
found on a country road on Sept. 27. His corpse showed signs that he had
been stoned to death, state officials said.
Seventy-two murdered migrants were discovered at a ranch in Tamaulipas on
Aug. 25. Two days later in the same state, a car bomb exploded outside the
offices of Grupo Televisa SA, the world’s largest Spanish-language
broadcaster.
Mexico’s push to draw tourists, the country’s third-biggest source of dollar
inflows after oil and remittances, is getting more difficult as the violence
persists. Eight Mexicans were killed in an attack on Aug. 31 at a bar in the
resort city of Cancun .
College-Age Tourists
Hotels in Acapulco and Cancun had a smaller-than-normal influx of
college-age customers in March, according to tour operators. The number of
spring breakers handled by travel service StudentCity dropped 45 percent
from last year in Acapulco and 30 percent in Cancun , Christina Ferraro, an
event organizer for the company, said in March.
Mexico’s international tourism revenue fell 15 percent last year, the first
decline in a decade, as swine flu drove down spending by travelers to $11.3
billion. While spending by visitors rose 6.8 percent in the first six months
of the year to $6.5 billion from the same period in 2009, the amount is
still down 11 percent from the first six months of 2008.
“If tourism is affected, it’s not so much from the drug violence but from
issues here in the U.S. , such as the economic crisis,” said Francisco
Alzuru, who helps manage about $200 million in emerging-market assets at
Hansberger Global Investors in Fort Lauderdale , Florida . “The impact of
the swine flu was a major one.”
Biggest Threat
Fifty-seven percent of business executives say the drug war is the biggest
threat to the economy in Mexico , Latin America’s second-largest after
Brazil , according to a July survey published by Deloitte Touche Tohmatsu,
up from 49 percent in March and 22 percent in December 2009. Finance
Minister Ernesto Cordero said Sept. 1 that violence from organized crime is
shaving 1.2 percentage points off economic output a year.
“The federal government reiterates that it will continue working for the
security of its citizens with all the state resources at its reach,”
Calderon said in an e-mailed statement on Sept. 8.
Expanding Economy
The International Monetary Fund forecasts Mexico ’s economy will expand 4.5
percent this year after shrinking 6.5 percent in 2009, the biggest rebound
among the world’s largest nations after Russia . Sales at retailers in the
U.S., Mexico’s largest trading partner, climbed in August for a second
consecutive month, allaying concern the world’s largest economy will stumble
in the second half.
Mexican production of cars and light trucks rose 53 percent in August from
the same month a year earlier, the nation’s Automobile Industry Association
said on Sept. 8 in a statement distributed in Mexico City . Exports
increased 58.1 percent from a year ago to 175,904 cars and light trucks.
Mexico’s exports to the U.S. gained market share from China during the
global financial crisis as companies benefited from lower shipping costs
from a border country, said Luis De la Calle, a former Mexican negotiator
for Nafta.
‘Competitive Destination’
“ Mexico is perceived as good diversification of risk versus China ,” said
De la Calle , who is now a partner at Mexico City-based business adviser De
la Calle Madrazo Mancera SA. “ Mexico is a competitive destination for
manufacturers and corporations.”
In the first seven months of the year, Mexico ’s share of U.S. exports rose
to 12 percent from 11 percent a year earlier. China ’s share fell to 18.1
percent from 18.7 percent, according to the U.S. Commerce Department.
Companies from Tlalnepantla-based Mexichem SAB, Latin America’s largest
plastic pipemaker, to Grupo Carso SAB, the holding company controlled by
billionaire Carlos Slim, helped lead gains in Mexico’s benchmark stock index
this year. The IPC index trades for 15.8 times analysts’ estimates for 2010
earnings, more than the 13.4 times for the Bovespa and a 13.7
price-to-earnings ratio for the S&P 500.
The violence hasn’t kept Volkswagen AG, Europe’s largest carmaker, and
Purchase, New York-based PepsiCo Inc., the world’s largest snack-food maker,
from investing in Mexico .
Volkswagen plans to start construction this year on a plant in Silao ,
Mexico , that will have a capacity to produce 330,000 engines annually. The
project will create about 700 jobs in the city “over the medium term,” the
Wolfsburg , Germany-based company said in a Sept. 22 statement.
“The Nafta agreement helped Mexico and provided support,” Pimco’s Osses
said. “The influence that the drug violence has on business isn’t that
significant at this point. Volkswagen decided that it’s not going to prevent
them from investing in Mexico .”
Pepsi’s local unit took out a full page ad in the Monterrey-based El Norte
newspaper on Sept. 30, pledging $20 million for a food research center in
the region and promising to maintain its presence in the country’s north.
“We’re proud of our roots with 81 years in Monterrey ,” the ad said. “We’re
here today, and we’ll be here tomorrow.”
Mexico’s stocks, bonds and currency are beating the U.S. and Brazil for the
first time since 2002, data compiled by Bloomberg show.
For all of the killings of elected officials at war with the criminal drug
gangs, there is no stopping the Mexican investment boom thanks to the
16-year-old trade agreement that is buoying Latin America ’s second-largest
economy.
Mexico’s stocks, bonds and currency are beating the U.S. and Brazil for the
first time since 2002, data compiled by Bloomberg show. Dollar debt issued
by Mexico is returning 16 percent in 2010, more than the 14 percent for
Brazil bonds and 8.8 percent for U.S. Treasuries, according to JPMorgan
Chase & Co. and Bank of America Corp.
The IPC stock index is up 5.3 percent, compared with a 2.8 percent advance
for the Standard & Poor’s 500 and 2.4 percent gain for the Bovespa. The peso
rallied 4.5 percent against the dollar this year, surpassing the Brazilian
real’s 3.2 percent increase.
“The reality is that you will continue to see companies making long-term
investments,” said Guillermo Osses, who helps oversee $50 billion in
emerging-market assets at Newport Beach, California-based Pacific Investment
Management Co., the world’s biggest bond fund manager. “We still have
significant exposure in Mexico .”
The North American Free Trade Agreement that took effect in 1994 continues
to lure investors even as Mexico confronts its worst-ever drug violence. The
treaty signed with the U.S. and Canada caused overseas sales to quadruple.
In the first seven months of this year, Mexico ’s share of U.S. exports rose
while China ’s fell, according to the U.S. Commerce Department. Gross
domestic product expanded 7.6 percent in the second quarter, the most since
1998, boosted by U.S. demand for everything from refrigerators to cars.
Growing Partnership
“Since 1995, the advantage that Mexico has as a partner with the U.S. in
Nafta has been growing,” said Sergio Luna, the head economist at Citigroup
Inc.’s Banamex unit in Mexico City .
Investors poured $2 billion into Mexican equities in the 12 months to July,
reversing a $470 million net withdrawal in the year-earlier period,
according to EPFR Global, a research firm in Cambridge , Massachusetts .
The IPC index will climb 6.5 percent in the next year, compared with 15
percent for the Bovespa, according to Bank of America forecasts on Sept. 16.
The S&P 500 will gain 4.3 percent by the end of this year, according to the
average estimate of 11 strategists surveyed by Bloomberg.
The violence is negative “from a human perspective,” said Pimco’s Osses.
“But from an investor perspective it’s not that big of a problem.”
‘Tragic Dimensions’
Yields on Mexico ’s benchmark 10 percent bonds due in 2024 dropped to an
all-time low 6.36 percent on Aug. 20, following a record three-month-long
decline in consumer prices through June.
The peso is forecast to climb 2.3 percent by the end of next year, compared
with a 0.6 percent drop for the real, according to the median estimate of
analysts surveyed by Bloomberg.
The peso fell 0.6 percent versus the dollar by 1:25 p.m. today in New York ,
while yields on Mexico ’s 10 percent bond due in 2024 fell four basis
points, or 0.04 percentage point, to 6.46 percent. The IPC index of stocks
gained for a third day, rising 0.2 percent.
“Drug-related violence in Mexico has increased, and even spilled over to
areas in the country previously thought to be immune,” said Stefan Hofer, an
emerging-markets equity strategist at Bank Julius Baer & Co. in Zurich,
which oversees about $160 billion worldwide. “While the security situation
is an important issue to watch, and has many tragic dimensions,
international investors have not been dissuaded from investing in Mexico .”
Eleven Mexican mayors have been killed since the start of the year, adding
to gang violence that killed more than 28,000 people since President Felipe
Calderon took office in 2006.
Mass Murder
Gunmen kidnapped Edelmiro Cavazos, the mayor of Santiago in Nuevo Leon
state, on Aug. 15. He was found bound and shot on the side of a mountain
road on Aug. 18. Marco Antonio Leal, the mayor of Hidalgo in the border
state of Tamaulipas, was assassinated while driving on Aug. 29. Alexander
Lopez, mayor of El Naranjo in San Luis Potosi state, was shot as he sat at
his desk on Sept. 8.
Gustavo Sanchez, the interim mayor of Tancitaro in Michoacan state, was
found on a country road on Sept. 27. His corpse showed signs that he had
been stoned to death, state officials said.
Seventy-two murdered migrants were discovered at a ranch in Tamaulipas on
Aug. 25. Two days later in the same state, a car bomb exploded outside the
offices of Grupo Televisa SA, the world’s largest Spanish-language
broadcaster.
Mexico’s push to draw tourists, the country’s third-biggest source of dollar
inflows after oil and remittances, is getting more difficult as the violence
persists. Eight Mexicans were killed in an attack on Aug. 31 at a bar in the
resort city of Cancun .
College-Age Tourists
Hotels in Acapulco and Cancun had a smaller-than-normal influx of
college-age customers in March, according to tour operators. The number of
spring breakers handled by travel service StudentCity dropped 45 percent
from last year in Acapulco and 30 percent in Cancun , Christina Ferraro, an
event organizer for the company, said in March.
Mexico’s international tourism revenue fell 15 percent last year, the first
decline in a decade, as swine flu drove down spending by travelers to $11.3
billion. While spending by visitors rose 6.8 percent in the first six months
of the year to $6.5 billion from the same period in 2009, the amount is
still down 11 percent from the first six months of 2008.
“If tourism is affected, it’s not so much from the drug violence but from
issues here in the U.S. , such as the economic crisis,” said Francisco
Alzuru, who helps manage about $200 million in emerging-market assets at
Hansberger Global Investors in Fort Lauderdale , Florida . “The impact of
the swine flu was a major one.”
Biggest Threat
Fifty-seven percent of business executives say the drug war is the biggest
threat to the economy in Mexico , Latin America’s second-largest after
Brazil , according to a July survey published by Deloitte Touche Tohmatsu,
up from 49 percent in March and 22 percent in December 2009. Finance
Minister Ernesto Cordero said Sept. 1 that violence from organized crime is
shaving 1.2 percentage points off economic output a year.
“The federal government reiterates that it will continue working for the
security of its citizens with all the state resources at its reach,”
Calderon said in an e-mailed statement on Sept. 8.
Expanding Economy
The International Monetary Fund forecasts Mexico ’s economy will expand 4.5
percent this year after shrinking 6.5 percent in 2009, the biggest rebound
among the world’s largest nations after Russia . Sales at retailers in the
U.S., Mexico’s largest trading partner, climbed in August for a second
consecutive month, allaying concern the world’s largest economy will stumble
in the second half.
Mexican production of cars and light trucks rose 53 percent in August from
the same month a year earlier, the nation’s Automobile Industry Association
said on Sept. 8 in a statement distributed in Mexico City . Exports
increased 58.1 percent from a year ago to 175,904 cars and light trucks.
Mexico’s exports to the U.S. gained market share from China during the
global financial crisis as companies benefited from lower shipping costs
from a border country, said Luis De la Calle, a former Mexican negotiator
for Nafta.
‘Competitive Destination’
“ Mexico is perceived as good diversification of risk versus China ,” said
De la Calle , who is now a partner at Mexico City-based business adviser De
la Calle Madrazo Mancera SA. “ Mexico is a competitive destination for
manufacturers and corporations.”
In the first seven months of the year, Mexico ’s share of U.S. exports rose
to 12 percent from 11 percent a year earlier. China ’s share fell to 18.1
percent from 18.7 percent, according to the U.S. Commerce Department.
Companies from Tlalnepantla-based Mexichem SAB, Latin America’s largest
plastic pipemaker, to Grupo Carso SAB, the holding company controlled by
billionaire Carlos Slim, helped lead gains in Mexico’s benchmark stock index
this year. The IPC index trades for 15.8 times analysts’ estimates for 2010
earnings, more than the 13.4 times for the Bovespa and a 13.7
price-to-earnings ratio for the S&P 500.
The violence hasn’t kept Volkswagen AG, Europe’s largest carmaker, and
Purchase, New York-based PepsiCo Inc., the world’s largest snack-food maker,
from investing in Mexico .
Volkswagen plans to start construction this year on a plant in Silao ,
Mexico , that will have a capacity to produce 330,000 engines annually. The
project will create about 700 jobs in the city “over the medium term,” the
Wolfsburg , Germany-based company said in a Sept. 22 statement.
“The Nafta agreement helped Mexico and provided support,” Pimco’s Osses
said. “The influence that the drug violence has on business isn’t that
significant at this point. Volkswagen decided that it’s not going to prevent
them from investing in Mexico .”
Pepsi’s local unit took out a full page ad in the Monterrey-based El Norte
newspaper on Sept. 30, pledging $20 million for a food research center in
the region and promising to maintain its presence in the country’s north.
“We’re proud of our roots with 81 years in Monterrey ,” the ad said. “We’re
here today, and we’ll be here tomorrow.”
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