Auto sector in leads growth south of the borderBy Peter A. Buxbaum, AJOTMexico has received some negative press reports of late over ongoing drug-gang violence, yet leading global manufacturers continue to locate and expand their operations in that country. Perhaps most notable is the remarkable growth in automobile manufacturing in Mexico, but the phenomenon is not limited to vehicles. Mexico has attracted major aerospace and consumer product manufacturers as well. A number of factors contribute to the boom in Mexico’s manufacturing sector. One is that the country is now cost competitive with China as a manufacturing venue. Another is that Mexico’s growing middle class provides a fertile local market for manufacturers. Last but not least, Mexico’s proximity to United States markets streamlines logistics operations and costs for exports north of the border. Automobile manufacturing and exporting in Mexico is breaking records this year, according to the Mexican Association of the Automotive Industry (AMIA). In May 2011, a record 213,000 cars were manufactured in the country, 19.4 percent more than in the same period in 2010. In the same month, exports rose 21.3 percent. During the first five months of 2011, 17.1 percent more cars rolled off Mexican assembly lines than the same period in 2010 and 16.4 percent more than in 2008. “Mexico is the ninth-biggest vehicle producer in the world,” said said Eduardo Solis, president of the AMIA. “We produced over two million vehicles in 2010, up 50 percent from 2009.” The growth in automobile manufacturing reflects the vibrancy of the Mexican economy as a whole, according to Caitlin Watson a researcher at the Center for Strategic and International Studies, a Washington think tank. “Mexico has recently emerged as one of the Western Hemisphere’s more robust economies,” she said. “It boasts a booming business sector, an auspicious social welfare program, rising opportunities for the poor, and greater transparency in governance.” Recent wage increases in China have made Mexico more competitive in recent years, said Mike White, an international trade consultant. These developments have given global manufacturers “more reason to re-think their outsourcing options,” he explained. “Costs of doing business in China have risen steadily over the past five years, most notably in the urban areas.” Rising oil prices and West Coast port congestion add to Mexico’s suitability as an alternative to Asian imports. Despite continuing economic and security problems, the Mexican economy has performed well in recent years, noted Watson. “In 2010, it grew 5.5 percent, and economists predict it will grow another 4.5 percent this year,” she said. “The gap between the rich and poor remains large yet incomes have risen across the board and poverty has declined since 2002.” In recent weeks a number of leading auto manufacturers have announced expansions of their operations in Mexico. Mazda announced that it will begin construction of a new $500 million plant in Salamanca city, Guanajuato state, 150 miles northwest of Mexico City. The plant, which will employ 3,000 people at full capacity, will have the capacity to produce 140,000 Mazda 2s and Mazda 3s annually. The site will be established as a compact vehicle manufacturing hub for Central and South America. Honda is also likely to build a plant in Salamanca, investing $500 million, and adding a second plant to its existing facility in the southwestern state of Jalisco. Daimler Trucks North America recently added a third shift at its plant in Saltillo adding over 500 jobs. German auto maker Audi reportedly is planning to build a plant in Mexico by 2015 to build the Q5, a mid-size luxury crossover vehicle. Automotive parts supplier Delphi is investing $11 million and generating 2,000 jobs for a new auto parts manufacturing facility in the state of Durango. “Because of its manufacturing capacity, Mexico is a very competitive platform for several European and Asian economies that are looking to penetr