Why can’t Mexico be the new China, given the cost advantages to cheap manufacturing and proximity to the US?
Neo YI, B.A. Economics, Nanchang University (2012)
My brother married a Mexican girl last year and I stayed there for weeks.
My trip to Mexico is one of the best memories of my life. I was intoxicated by the ubiquitous art of Mexico.
But I also see the economic differences between Mexico and China.
I think the inequality between the rich and the poor is a problem. At a certain stage in the development of any society, the rich will begin to abandon the poor. So the security and infrastructure of the rich communities are good, while the poor communities are much worse than the rich communities because of the lack of help.
The Chinese go nment is working very hard to help the poor. The Chinese go nment has a precise poverty alleviation policy. Every member of the Communist Party is responsible for a poor family and helps them find ways to develop their careers and make money and become rich.
In Mexico, as in the United States, there are many police in rich places and there are no police in poor places. In turn, the more chaotic places in China, the more police forces the go nment will deploy to maintain law and order. In my hometown, a small, 300 000 population, underdeveloped town, there was no murder in 2018. As a matter of fact, I have a cousin who is a policeman. He is very upset because he can hardly come across a theft. It's hard for him to get promoted.
In China, the police are the most reliable people. But I was blackmailed by the police in Mexico.
The security and stability of the social environment are essential to economic development. If the Mexican go nment can tilt more social resources and policies towards the poor and narrow the gap between the rich and the poor, there will certainly be better development.
But then again, Mexico is really beautiful. Mexicans are happy, unlike the Chinese, always worried about the future.
I miss my Mexican friends. Hope can be there again.
译文来源：三泰虎 http://www.santaihu.com/48797.html 译者：Joyceliu
Joseph Wang, studied at Ph.D Astronomy UT Austin, Physics MIT
Happen to come from Texas.
By far, the biggest problem is the drug war. The parts of Mexico that would benefit from manufacturing to the US are places that have been totally devastated by the drug war. It’s really hard to operate a factory when you have to deal with armed gangs and kidnapping. China is a safe place. You can walk the streets, and you can show off your money and nothing bad happens. The border regions of Mexico are not safe places, because the drug gangs will get you, and the go nment doesn’t have a monopoly on force.
The other problem is that it seems pretty obvious that if Mexico takes the place of China that the US will put trade barriers against Mexico
Michael Modler, M.A. from The George Washington University
Four important reasons are given, although the list could obviously be expanded.
1.Mexico does not have a highly successful and entrepreneurial diaspora capable of contributing to its development. If you look at the private investment flows into China that helped turn the country into the “worlds’ factory”, a very large portion of it has come from Hong Kong, Taiwan, Singapore (which all have a dominant ethnic Chinese majority population) and Southeast Asia (where ethnic Chinese minorities dominate the business community to such a degree they are compared to the Jews.). Mexico obviously has a large overseas diaspora, but it is mainly working class and based in the USA. Those people can send small remittance payments to their families, but this does not have the same social and economic impact as large capital investments into business ventures that employ people and make products.
2.China emergence as a manufacturing powerhouse in the last 30 years was supported by a truly massive surplus in rural labor, which made China a cheap base for simple assembly operations and other labor intensive industries . Once China’s dirt poor and underemployed peasants left the countryside for work in the city, their productivity and income increased, creating all kinds of spillover effects. Mexico and the rest of Latin America may be poor and underdeveloped compared to the US and Canada, but they are comparatively urban societies with much higher wages than China in 80s, 90s and 2000s. Mexico is not really in a position to compete with the likes of China, Vietnam or India for labor intensive manufacturing industries.
3.Mexico has not been able to overcome its problem with drug cartels and criminal gangs. Obviously, China and other countries have underworlds of their own, but they nowhere close to Mexico’s criminals in terms of their willingness to use violence and they ability to influence institutions via co ption.
David Tufte, works at Southern Utah University
On one level, Mexico already fits this bill.
For starters, note that it’s the other way around: can China be the new Mexico? Mexico is smaller than China, but it is richer top to bottom and more advanced.
Both are already very large economies on the world stage. China, of course, is the 2nd largest. But most people don’t know that Mexico is the 95th percentile for economy size - already bigger than about 190 other countries.
Outside the U.S., many countries aspire to be either China or Mexico. It’s only next to the U.S. that Mexico seems small and/or poor.
BTW: my sources say that within China, Mexico is on the very short list of countries that they worry about losing business to
Pascal Morimacil, Worker
Because of infrastructure.
If you want to open up a factory somewhere, what you are looking for is not just a place with cheap labor, and cheap property prices.
You need somewhere with roads, airports, harbors, trains, etc to get your raw materials, and then move the finished products.
You need workers, and you need workers that are well trained in what you want them to do.
You need to make sure that a roving band of bandits will not take over your factory, and that your workers will not constantly be on strike.
You need your workers to have somewhere to live, and if it is supposed to be a long term thing, you need them to be able to have families and so on.
Mexico doesnt have much of that. Not really more than the US anyway.
But when you need infrastructure, parts and materials, well educated workers, all of that… Then China is starting to look amazing! Because China actually invests in that kind of thing.
Lew Weingarth, BsEE Electrical Engineering & Business Strategy, UMR (1981)
Industry didn’t move overseas to reduce labor costs, it moved to increase profits. Precisely why is a fairly long story, but plain old logic suffices to understand a simple accounting explanation. Start with the contribution of labor in a modern plant, which is under 2% of cost in a high labor cost country like Germany or Japan. This means the MOST you can save on labor is 2%. Now, imagine the cost to ship raw materials to China, transport cross country to factories in EDZs, then ship to the customer. They clearly don’t save enough on labor to justify the hassle. The savings is HUGE tax incentives by the USA to export industry, and HUGE subsidies by China to produce in China. So, yes, Mexico could be the next China, but we’d have to change the corporate subsidies.
Mexico imports are around ⅔ of China imports. Physical proximity is more advantageous for bulky products. Labor costs have converged somewhat. Some manufacturing has come back to North America as production and shipping costs have shifted.
Andy Si, Finance Manager
My guess is that Mexico’s strategic location is not optimized to distribute manufactured goods all over the word. Even if manufacturing is cheap in Mexico, the shipping cost would cost more than what China or other SEA countries can charge.
Mexico has to ship freight to Asia, Europe, Australia, and Africa.
China can ship by land or freight to the above continents (except Australia), but by freight to the North & South American continent. While the US has a big market, the combination of Asia, Europe, and Africa outscale the other side of the world by a big margin.
1.Supply chain network
2.Infrastructure network to support these manufacturing and shipping port industries.
3.Investment in additional capital and time to train new workers.
4.Mexico’s go nment is strangled by the Cartels for the past 2–3 decades.
5.Product Engineers and other factory technicians. China has a massive amount and skills at their disposal. I’m not sure if Mexico can do that.
6.Asia and Africa are where the growth is for the next 50 years.
Leslie Fish, I'm a musician and writer, and history is my hobby.
Mexico has been leeching off the US for nearly two centuries, and hasn’t managed to improve itself thereby. The problem is its whole culture of co ption, thieving, nepotism, racism, class bigotry and sexism, which has proven so impervious to change. That’s why, with all the charitable help in the world, Mexico can’t become “the new China”. The best thing the US could do, short of conquering the country and ruling it as strictly as Ataturk did to Turkey, is to cut Mexico off, close the border, and make the country sink or swim on its own resources.
David Kofh, Physics, MEd at Kofh Publishing Coro (1980-present)
GM moves factories to Mexico,… but still charges Smericans the same price for the cardbit sells to America!
Why do Americans want Mexicans to get our jobs, Mexico get the increase in Taxes, Amanda GM makes more money???
Trump has Tariffs on Chinese companies so that at least American tax payers get something out of these one way deals.