Mexican manufacturing: from sweatshops to high-tech motors

Tue Apr 9, 2013 2:42pm EDT
 
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By Krista Hughes

SILAO, Mexico (Reuters) - Made in Mexico is increasingly more likely to mean cars than clothes as the country's manufacturing sector moves away from the low-skill, high-volume production lines of the past toward more sophisticated products.

Times are tough for the assembly-for-export plants known as maquiladoras clustered along the U.S. border, a region that has lost economic muscle in the face of competition from China, successive U.S. recessions and drug war violence.

But there are signs of a turnaround elsewhere. Mexico is winning back U.S. import market share and an energetic new government promises deep economic reforms in pursuit of 6 percent annual growth.

Key to the revival is a shift in activity from the border toward more high-tech manufacturing in central states far from the drug gang turf wars and smuggling routes.

New foreign investment, especially in the auto industry, heads increasingly to Guanajuato and Aguascalientes states, northwest of Mexico City. Together with neighboring Queretaro - home to a small but booming aerospace cluster - and San Luis Potosi, they are shaping up as Mexico's next-generation manufacturing hub.

Boosting productivity and adding local content is crucial to Mexico's goal of breaking out of the emerging market B-list and narrowing the income gap with advanced economies, as countries such as China and carmaking competitor South Korea have done.

Bucking an overall trend of falling productivity, the central states already have a similar manufacturing output to the four border states of Baja California, Coahuila, Chihuahua and Tamaulipas with about one-third of the workforce.

On Guanajuato's Federal Highway 45, heavily traveled by trucks heading north to the U.S. border, a gleaming new factory stands where corn and beans used to grow.   Continued...

 
Technicians work on an engine during a media tour at the inauguration of Volkswagen's 100th plant worldwide in Silao in this January 15, 2013 file photo. Made in Mexico is increasingly more likely to mean cars than clothes as the country's manufacturing sector moves away from the low-skill, high-volume production lines of the past toward more sophisticated products. Picture taken January 15, 2013. To match Feature MEXICO-ECONOMY/MANUFACTURING REUTERS/Mario Armas/Files