Cheaper to Produce in Mexico than China?

Posted in: Blog on October 3, 2012

Cheaper to produce in Mexico than ChinaSource: Industry Week

Mexico, meanwhile, is at “the dawn of a new era” as more and more manufacturers set up shop here due to China’s growing labor costs, the Asia-based financial firm added.

The Boston Consulting Group, a global management consulting firm, says it could already be cheaper to produce in Mexico than in China.

“We believe that this year … the costs of producing in Mexico are the same or lower than the costs of producing in China,” said Hal Sirkin, a senior partner at the Boston Consulting Group.

Average manufacturing wages, when adjusted to productivity, were $3.06 an hour in Mexico in 2010 compared to $2.72 in China, he said. By 2015, they will rise to $5.30 in China and just $3.55 in Mexico.

Sharing a border with the United States, the world’s biggest importer, has helped too. But reliance on the United States has its risks.

“The substantive role that external conditions have played in Mexico’s economic recovery makes their eventual weakening a fundamental risk,” said Mexican central bank deputy governor Manuel Sanchez.

“In particular, if U.S. industrial production slows, Mexican manufacturing exports may decelerate notably,” he said in New York on Friday, according to a copy of his speech.

Barclay’s bank analyst Marco Oviedo wrote on September 6 that, after lagging Chinese manufacturing exports for a decade, Mexico took the lead after 2008-2009.

“We believe this change is likely to be structural and persistent,” Oviedo wrote.