Low labor costs no longer drive Mexico’s appeal: Index

Low labor costs no longer lead Mexico’s attractiveness for investment, said Luis Manuel Hernández, president of the National Council of the Maquiladora and Export Manufacturing Industry (Index).

“We are no longer a country that is a cost center,” he said at the opening of the Index National Convention this Friday in Mexico City.

Hernández said that a recent McKinsey article ranked Mexico’s cost factor in position 8 out of 11 among the main reasons to invest in Mexico, adding that the first is logistics efficiency to reach the North American market.

“Large investments would not make sense if they are not accompanied by the welfare of the workers,” said Claudia Sheinbaum, head of government of Mexico City, at the same event.

The New Minimum Wage Policy of the federal government – ​​in force since 2019 – promoted gradual and sustained increases. With the four consecutive increases from 2019 to 2022, the minimum wage recovered 65.1% of its purchasing power at the national level, while in the Northern Border Free Zone the recovery was 148.7 percent.

Among its other attractions, Mexico is the 16th largest economy in the world and has generally enjoyed slow but steady economic growth since the 1990s.

Mexico is also a gateway to the most important market in the world and a leading exporter of advanced high-tech manufactures, in addition to having a young, talented and trained population.

Finally, Mexico is the largest Spanish-speaking country in the world. Its $1.29 trillion economy is the second largest in Latin America, and the country maintains deep trade and investment ties with the United States.

Sheinbaum proposed analyzing and discussing the availability or scarcity of labor in the different regions of Mexico, while Hernández stressed that the companies of the Maquiladora and Export Manufacturing Industry (IMMEX) generate some 10 million direct and indirect jobs.

The operations of the IMMEX companies represented an economic spill of 140,780 million dollars in 2021, considering salaries and wages, social security contributions, benefits, as well as the consumption of supplies and services in the national market. Hernández projected that this economic benefit will prevail and increase.

In the last five years, Mexico has continued to implement, without substantial changes, export promotion programs through which it offers tariff and tax concessions, particularly in favor of the manufacturing sector, to promote productivity and increase competitiveness and thus allow a Greater incorporation of Mexican products in the world market.

The main programs continue to be the IMMEX and the Import Tax Refund Program for Exporters (drawback).

roberto.morales@eleconomista.mx