Mexico: The New China

http://www.nytimes.com/2013/01/27/opinion/sunday/the-tijuana-connection-a-template-for-growth.html?_r=1&&pagewanted=all

by ldayley • 13 years ago

152 58 13 years ago

"most of the flat-screen TVs sold in the United States, from companies like Samsung and Sony, are made there, along with everything from medical devices to aerospace parts."

Not sure about medical devices or aerospace parts, but one of the reasons those float-screen TVs are "made" there is the tax advantage. They were mostly made in Asia and the final assembly was done in Mexico.

Still, you have to start from somewhere.

ap32• 13 years ago

I believe the Maquiladora principle is that Mexico doesn't charge import taxes if the finished product is for export. So components come in from Asia, get put together, and pushed out as a finished TV.

fatjokes• 13 years ago

Very interesting. However---and perhaps maybe I've read too much American drug war propaganda---I wonder if the cartels would be interested as well if it turns out to be a profitable industry.

In this regard, China has the advantage of a very strict government.

pasbesoin• 13 years ago

Mexico was "China" before China was "China" (for scoped values of "China").

http://en.wikipedia.org/wiki/Maquiladora

My limited understanding and impression are that, now that China and transportation have become expensive enough (both in direct costs and in logistics and support issues), Mexico is warming up again -- for the present. I seem to recall that, actually, a significant portion of this activity is now backed by Chinese concerns, including for the favorable effects of NAFTA and whatever else I have some vague recall of having read.

As for this marking the "recovery" of U.S. industry... No more so than watching Zenith implode (personal case), a decade and more ago. IMHO.

P.S. I also have not kept track of the following in a manner to argue it well, but my impression is that part of Mexico's narco-state problem was exacerbated (not caused) by the vacuum left when China's rise sucked the life out of the maquiladoras in a matter of a few years, transforming these localized pockets of relative, if uneven and risky, economic success into economic wastelands.

I guess the overall lesson might be not to trust in such tenuous economic relationships and advantages. Here today, gone tomorrow.

hakaaaaak2• 13 years ago

Maybe, but China is just better suited for production work than Mexico if you look at the following factors:

1. Food, water, shelter. Lack of these means infrastructure will be tough to setup and you are making it harder on imported human resources.

2. Culture, infrastructure and security. These go hand-in-hand. If you don't understand and play by the rules of the culture, security is compromised, and without security, infrastructure is at risk. Without infrastructure things are much more costly. A less liberal government (one that enforces conviction of drug lords that make security a nightmare) may result in better security and therefore better infrastructure.

3. Resources. Access to labor, materials, etc.

4. Heat. In hotter climates, humans are rewarded physically by not working as hard by the fact that they don't get overheated. This is engrained in almost all of us, but even more so when evolution and natural selection also have rewarded lazy behavior. I will probably get downvoted multiple times for saying this, and it isn't true everywhere, but I believe that it happens and can become a cultural phenomenon. Ever heard of a siesta? I know it is just a "break", right...

PakG12• 13 years ago

My day job is in a Chinese office of a multinational. After lunch, everyone takes naps. Some people even take them for an hour. From what I understand, post-lunch naps are common across the country. I think Chinese people understand siestas quite well. ;)

marquis• 13 years ago

>Heat

Mexico is a large country with a huge variety of climates. Besides, it was just 20 degrees today in Tijuana (72F).

cpleppert• 13 years ago

>>4. Heat. In hotter climates, humans are rewarded physically by not working as hard by the fact that they don't get overheated. This is engrained in almost all of us, but even more so when evolution and natural selection also have rewarded lazy behavior. I will probably get downvoted multiple times for saying this, and it isn't true everywhere, but I believe that it happens and can become a cultural phenomenon. Ever heard of a siesta? I know it is just a "break", right...

The 19th century is calling and wants their theories of the development of western civilization back

vorg• 13 years ago

Haven't read the article because the NY Times is blocked in China, so not sure if the article says it but...

There's almost no foreign transport costs for manufacturing just south of the US/Mexico border. Fuel for shipping can only go up over time.

If Mexican workers get too expensive, Mexico would find it easier politically to take in immigrants from poorer countries than the US would.

Then there's Turkey for Europe.

barry-cotter2• 13 years ago

Fuel for shipping may be on an upward cost trend but shipping is more energy efficient than more or less any method of transportation requiring an engine. Trucking stuff across the border takes a lot more fuel per unit weight.

I doubt the point on immigrants too; Mexican enforcement of immigration laws is a great deal more vigorous than its US equivalents.

ap32• 13 years ago

I would say that Mexico's immigration laws are less open that the US's, but enforcement is nowhere near the level of US enforcement.

Mexico has no Border Patrol, no DHS, no USCIS equivalents and is more open to bribes and such.

meej2• 13 years ago

I was surprised that this article seemed devoid of historical context.

Surely I am not the only person who remembers that twelve years ago, it was a big deal that the Xbox was being assembled in Mexico by Flextronics -- heck, Wired even published an article about it: http://www.wired.com/wired/archive/9.11/flex.html

Or we can go back twenty years, when Maquiladoras were kind of a big deal. And over the last decade, there was a lot of recognition that China posed stiff competition for them. For example, here's an 2003 article from The International Economy titled "How China Is Eating Mexico's Lunch": http://www.international-economy.com/TIE_Sp03_Rosen.pdf If you google 'maquiladoras china' you can find other articles with the same theme.

In other words, over most of the last decade, China was the new Mexico. I can believe that the trend might be reversing now, but writing an article with the title "Mexico: The New China" without mentioning any of this history seems... disingenuous? uninformed? I'm not quite sure what to think about it. The most charitable explanation I can come up with is that the space constraints of a NYT opinion article didn't allow for a discussion of it. Whatever the reason, it strikes me as odd. Am I the only one?

rgbrenner4• 13 years ago

If you want to see where US goods are being manufactured, then just visit the Census bureau.

Trade in Goods with Mexico 1985-2012 http://www.census.gov/foreign-trade/balance/c2010.html

Trade in Goods with China 1985-2012 http://www.census.gov/foreign-trade/balance/c5700.html

And the rest http://www.census.gov/foreign-trade/balance/

erickhill• 13 years ago

Actually, the columnist - not reporter - is Chris Anderson. He used to run Wired for years, but now (as he states in the article I assume you didn't read) runs a company called 3D Robotics.

The column is based on his personal experience running a company that requires high tech manufacturing. It's interesting - you should read it.

huherto4• 13 years ago

It is nice to see an article like that, lately most articles are about the violence between the drug cartels. Also, after 9/11 Mexico has been ignored by the general media, and the public attention focused in the middle east.

It is not fully recognized that the US and Mexico have complementary economies. The US is able to compete with China by taking advantage of Mexican labor. Furthermore, Mexico is a big market for american products. The ideal situation is to have american companies opening the Mexican market and at the same time take advantage of the available labor. There many advantages, the younger generation of Mexicans is very open and understanding of american culture(music, movies, sports, video games, clothing, etc) and they are willing to learn, travel is done as easily as traveling with in the US, times zones are the same, etc.

dhaivatpandya• 13 years ago

I'm not sure if top notch engineering talent is available in a place like Tijuana - from what I've read, it doesn't seem like their education system is churning out engineers a couple a minute like China and India are...

hingisundhorsa• 13 years ago

What are you trying to communicate? What have you read that would indicate Mexico is unable to produce equivalent engineers to India? (Note, I'm not comparing with China since that's a different can of worms).

rgbrenner4• 13 years ago

This is an interesting article on that:

http://articles.washingtonpost.com/2012-10-28/world/35498580...

Don't know about the quality of the degrees though.

rayiner• 13 years ago

Is top notch engineering talent available in china or India...

potatolicious• 13 years ago

Lots, it's also pretty easy to pry them stateside given the dramatic quality of life difference. Not to mention unlike India, China's software industry is underdeveloped and compensation relative to the rest of the population is not as high as it is in India.

mediaman• 13 years ago

Yes, remember we're not talking about web app developers here. Skills such as CNC programming, injection molding toolmakers, etc are quite abundant and easier to find than in the US. For manufacturing China has a satisfactory engineering skill set.

I don't have experience with Mexico so it's hard to say there.

huherto4• 13 years ago

You will have access to the top 5%. I know one person that is working at Google, two friends are studying at Harvard, one is going to be working at dropbox. Everybody from the same town in Mexico.

There are great private and public schools. For example, The Institute of Technology of Monterrey (ITESM) http://en.wikipedia.org/wiki/Monterrey_Institute_of_Technolo...

leoh• 13 years ago

How safe is Tijuana compared to most Chinese manufacturing cities? I was always discouraged from visiting when I grew up in San Diego.

sunnybythesea• 13 years ago

TJ as San Diegans call is not as safe as it used to be. But, there is more to Mexico than TJ.

cglace• 13 years ago

Funny, the comment above you says it is safer than it used to be.

frncscgmz• 13 years ago

Its actually pretty safe now if you stay out of the obvious ugly parts (zona norte,eastern Tijuana). Violence escalated 4 years ago because of the heavy handed approach against drug gangs from our former president, now It's been pretty tame with a couple of incidents, nothing compared to whats happening right now in northeastern cities.

crusso• 13 years ago

I travel to San Diego every month. The locals there warn that Tijuana is much more dangerous than it used to be. Even the more adventurous partiers that I know avoid Tijuana for fear of being robbed, beaten, and/or killed.

tsmith2• 13 years ago

I can't speak to a comparison with Chinese cities, but TJ is pretty safe, as there are hundreds of thousands of middle class people living there now. Just stick to the places they go to (Zona Rio, Agua Caliente, etc) and you can have a nice evening out for 1/2-1/4 what you would spend in San Diego.

I believe there are also 1-2 startup incubators (space only, no money to invest) in Zona Rio now.

splicer2• 13 years ago

> You can drive from our San Diego engineering center to our Tijuana factory in 20 minutes, no passport required. (A passport is needed to come back, but there are fast-track lanes for business people.)

Oops, I forgot my passport. Now I'm stuck in Mexico!

jessaustin• 13 years ago

Surely there are options at that point? Like go to the USA consulate during business hours, show a driver's license, and pay a fine? Or even call a family member and ask her to bring your passport (she should bring her own as well)?

jamieb• 13 years ago

Get a passport card and stick it in your wallet, next to your drivers license.

http://travel.state.gov/passport/ppt_card/ppt_card_3926.html

tsmith2• 13 years ago

You can just show up at the border with your license / ID. If you have a passport they can look it up in the system. No fine, maybe a little lecture. Happens 100s of times a day as lots of people are still not aware that you need a passport for re-entry (used to be just a DL until a few years ago).

joonix• 13 years ago

What's the point of this comment? You aren't stuck. There is a multitude of options.

splicer2• 13 years ago

http://en.wikipedia.org/wiki/Humour

TechNewb2• 13 years ago

Chris Anderson: The New Sensationalist. IMO, this is a weak sensationalist comparison to compare Mexico, to a emerging superpower of China. The title should be "Mexico: Learning from China's Success"

jvm• 13 years ago

> "Mexico: Learning from China's Success"

This stuff always drives me a little nuts.

GDP per capita (PPP) (Wikipedia) Mexico: $15,177 China: $9,146

HDI (Wikipedia) Mexico: .77 China: .66

Percent living on $2 / day (PPP) http://data.worldbank.org/indicator/SI.POV.2DAY Mexico: 5.2% China: 28.8%

A quick scan of the quality of life facts would suggest that China has more to learn from Mexico than vice versa. Perhaps China will escape the middle income trap, but it hasn't done so yet, and remains considerably poorer than Mexico.

TechNewb2• 13 years ago

I don't know much about Mexico or China, I was merely trying to point out that Anderson has a history of sensational controversial headlines, in Wired, and now post Wired.

Mexico and China are both curious countries to study. I have not been to Mexico, but China is developing extremely quickly.

huherto4• 13 years ago

China is relevant because it is huge.

Mexico is not huge but it is big, has a growing middle class and it is close from the US.

overgun77• 13 years ago

Mexican here. Living in a city very near the border (3 hours away), work in a offshore software developing agency, friends and my father works and used to work at Ford's maquiladora and other industries.

For a very long time, foreign investment have played a large role in our economy, since early in the 1900, there is a lot of investment in minery particularly on the states near the border. With the modern age, a lot of "maquiladoras" exists in the cities that are near the border, Tijuana, Juarez, Monterrey, Hermosillo, Nogales. The labor hand is incredibly cheap, and it's not only because the companies like Ford or Motorola or Samsung wants to pay low wages, the government plays a large role since not very long ago our economy secretary considered that a person who makes ~$500 a month can afford to have a car, a good house and send their kids to private schools (which is of course a stupid lie). A typical laborer works 48 hours a week and is expected to change schedules as the needs changes, often working more than these 48 hours sometimes pulling up to 60 hours a week or even more. The average salary for a laborer in a month is around $600, which is around $3 an hour. It is enough to live a fair life. To put this in perspective, the minimun wage is around $4 a DAY. The article says the average wage is $6 an hour, but I find that inaccurate from what I can see every day.

A laborer typically hasn't finished their school, probably dropped before going to college or are graduates who studied something with not a lot of demand, like administration (probably the most studied grade) or graduates that fail to find a job for what they studied. In the eyes of the big companies, the laborers are just disposable people, there's always more from where they came from. People settle with the first opportunity they see, a lot of people dream is to find a job in the government and retire 40 years later. There is a lot of apathy and I think that's one of the reasons we don't progress as a country (Our president is a disgrace, for example).

Luckily the software industry is MUCH different. It's one of the best paid professions here, very flexible hours and working Monday to Friday and the pay is 4 times greater than that of an industry laborer and even then that's less than a junior level engineer would earn, all you need to know is how to speak English and learn some web development. A well paid software engineer with around 5 years of experience, earns around $14 an hour, which is I think around twice the minimum wage in USA? An entry level engineer earns around $5.

Life here is much cheaper, I can go out with my girlfriend, eat something fancy, buy a 3 liters of beer and go see a movie with $25 and still have some money left.

manglav• 13 years ago

sorry for the tangent. Hi overgunn77, can I email you? I have a couple of projects that I might need to contract out due to lack of time, and your email was not in your profile. I am also taking a trip to Mexico soon, and it seems like talking to you might point me in the right direction.

flyinRyan2• 13 years ago

>Life here is much cheaper, I can go out with my girlfriend, eat something fancy, buy a 3 liters of beer and go see a movie with $25 and still have some money left.

But if you're good at software development you could be earning around $1k per day and retire in less than a decade. Are you really happy just chugging away like this for 40 years just so some rich CEO's can get even more money they can never spend?

wazoox• 13 years ago

Your message reminds me of the famous joke of the Mexican fisherman and the investment banker... http://financialmentor.com/true-wealth/the-parable-of-the-me...

xiaoma• 13 years ago

I worked at a tech start-up in China for a year. Labor costs definitely are cheap. That said, considering the high taxes, the extreme levels of regulation, the rules that make things difficult for foreign-owned businesses, the necessity of an ICP and the great firewall, it's actually not such an amazingly cheap place to do business.

I've talked to several who have moved shop to SE Asian countries, but I can see advantages of Mexico, Chile or other Latin American countries that are a bit more welcoming.

ruycer• 13 years ago

Mexico is not only about manufacturing, even if this is one of our strongholds. We are starting to generate a vibrant startup ecosystem. A few months back, there was an interesting overview in TechCrunch: http://techcrunch.com/2012/09/03/mexico-is-happening-at-tech...

Mexico: The New China

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