compare the democratic system in China and Mexico
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President, and Luis Ruiz, Marketing and Research Associate, El Paso Regional Economic Development Corporation
Mexico’s standing as a leader in the global manufacturing market has been long established, even amidst increased global competition. Many Fortune 500 companies and other multi-national companies have turned to Mexico in an attempt to cut costs while maintaining U.S. standards of quality and efficiency.
Since the inception of the twin plant or maquila industry in the 1960’s, global companies have established labor intensive assembly operations in Mexico while paying substantially less for labor, components and real estate compared to the United States and many parts of Europe.
the early 1990’s, the North American Free Trade Agreement (NAFTA) was established, making Mexico even more attractive for foreign direct investment by reducing and often eliminating existing tariffs -- resulting in larger volumes of trade between North American countries. In 2007, trade between the United States and its NATFA partners (Mexico and Canada) stood at $908.9 billion, growing from $613.6 billion in 2001 -- a 48 percent increase.
For more than 30 years following the creation of the maquila industry, Mexico enjoyed an environment that was relatively free of global competition in the race to make products for consumption in North America. But in 2001, the competitive landscape changed.
After 15 years of aggressive negotiation, China was granted membership in the World Trade Organization (WTO). Since then, manufacturing operations have grown exponentially in China, catapulting it to a globally significant player in the exportation of manufactured goods, placing it in direct competition with Mexico.
In 2001, U.S.-Mexico trade stood at $232.9 billion, almost double that of U.S.-China trade. In 2006, China surpassed Mexico in total trade with the U.S. for the first time, and in 2007, U.S. trade with China ($386.7 B) was approximately 13 percent higher than trade with Mexico.
A closer look at the data, however, shows that U.S. exports to Mexico are still more than double the level of US exports to China -- which is probably an indication of the close manufacturing relationship that continues to exist between the U.S. and Mexico.
A recent survey by Deloitte Research indicates that China and Mexico are the top two potential destinations for foreign direct investment by U.S. manufacturers. Thirty-eight percent of respondents indicate they are contemplating China for manufacturing operations and an additional 25 percent are considering Mexico. As a result, a high level comparison of Mexico versus China is merited.
The wage comparison tends to attract the attention of most multi-national corporations. Direct labor wages in China currently stand at $0.90 per hour, which in most cases includes room and board. Mexico’s direct labor wage is $2.50 per hour, including taxes, meals, transportation, and medical benefits -- as well potential productivity and punctuality bonuses. A closer look at the labor force of the two countries reveals a substantial difference in productivity.
Per capita GDP in Mexico stands at $7,467, more than six times greater than China’s per capita GDP of $1,240. Research also shows that Mexico’s labor force may be more technologically savvy. There are only 62 computers and 220 cell phones per 1,000 people in China, while there are 228 computers and 600 cell phones per 1,000 people in Mexico.
Mexico’s strengths tend to favor companies that manufacture highly customized products that are particularly sensitive to shipping costs and lead times. Production in Mexico will also tend to favor bulkier, heavier products that are destined for consumption in North America.
Because of its considerably lower labor cost, China typically favors labor intensive, commodity type products. While China’s labor assets are enormous (the population is almost thirteen times larger than Mexico’s), their skills are typically less developed than their Mexican counterparts. As a result, China is typically better suited for high volume, low mix manufacturing operations.
While it is not true in every instance, the following list provides an overview of the types of industries that tend to favor one country over the other.
Mexico’s standing as a leader in the global manufacturing market has been long established, even amidst increased global competition. Many Fortune 500 companies and other multi-national companies have turned to Mexico in an attempt to cut costs while maintaining U.S. standards of quality and efficiency.
Since the inception of the twin plant or maquila industry in the 1960’s, global companies have established labor intensive assembly operations in Mexico while paying substantially less for labor, components and real estate compared to the United States and many parts of Europe.
the early 1990’s, the North American Free Trade Agreement (NAFTA) was established, making Mexico even more attractive for foreign direct investment by reducing and often eliminating existing tariffs -- resulting in larger volumes of trade between North American countries. In 2007, trade between the United States and its NATFA partners (Mexico and Canada) stood at $908.9 billion, growing from $613.6 billion in 2001 -- a 48 percent increase.
For more than 30 years following the creation of the maquila industry, Mexico enjoyed an environment that was relatively free of global competition in the race to make products for consumption in North America. But in 2001, the competitive landscape changed.
After 15 years of aggressive negotiation, China was granted membership in the World Trade Organization (WTO). Since then, manufacturing operations have grown exponentially in China, catapulting it to a globally significant player in the exportation of manufactured goods, placing it in direct competition with Mexico.
In 2001, U.S.-Mexico trade stood at $232.9 billion, almost double that of U.S.-China trade. In 2006, China surpassed Mexico in total trade with the U.S. for the first time, and in 2007, U.S. trade with China ($386.7 B) was approximately 13 percent higher than trade with Mexico.
A closer look at the data, however, shows that U.S. exports to Mexico are still more than double the level of US exports to China -- which is probably an indication of the close manufacturing relationship that continues to exist between the U.S. and Mexico.
A recent survey by Deloitte Research indicates that China and Mexico are the top two potential destinations for foreign direct investment by U.S. manufacturers. Thirty-eight percent of respondents indicate they are contemplating China for manufacturing operations and an additional 25 percent are considering Mexico. As a result, a high level comparison of Mexico versus China is merited.
The wage comparison tends to attract the attention of most multi-national corporations. Direct labor wages in China currently stand at $0.90 per hour, which in most cases includes room and board. Mexico’s direct labor wage is $2.50 per hour, including taxes, meals, transportation, and medical benefits -- as well potential productivity and punctuality bonuses. A closer look at the labor force of the two countries reveals a substantial difference in productivity.
Per capita GDP in Mexico stands at $7,467, more than six times greater than China’s per capita GDP of $1,240. Research also shows that Mexico’s labor force may be more technologically savvy. There are only 62 computers and 220 cell phones per 1,000 people in China, while there are 228 computers and 600 cell phones per 1,000 people in Mexico.
Mexico’s strengths tend to favor companies that manufacture highly customized products that are particularly sensitive to shipping costs and lead times. Production in Mexico will also tend to favor bulkier, heavier products that are destined for consumption in North America.
Because of its considerably lower labor cost, China typically favors labor intensive, commodity type products. While China’s labor assets are enormous (the population is almost thirteen times larger than Mexico’s), their skills are typically less developed than their Mexican counterparts. As a result, China is typically better suited for high volume, low mix manufacturing operations.
While it is not true in every instance, the following list provides an overview of the types of industries that tend to favor one country over the other.
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