The Economist December 4th 2021 47
The AmericasMexico
Missing links
T
he chunks ofmetal being worked on
do not look terribly special. But the fac
tory of bapAerospace, a chemicalprocess
ing firm in Tijuana, hints at Mexico’s im
portance to global supply chains. These are
components, from tray tables to door
parts, for aircraft made by companies in
cluding Boeing, Cessna and Lockheed Mar
tin. bapapplies surface treatments to the
pieces, from submerging them in big vats
of chemicals to meticulous work done by
hand, before shipping them north.
Mexico has long been a hub for manu
facturing. Toyota, a Japanese carmaker, has
had a plant in Tijuana since 2002. Honey
well, an American industrial giant, opened
one in 2010. But increasingly the country is
moving into highervalue processes. It
now accounts for 34% of aerospace im
ports to the United States, up from 1.5% in
2010. By contrast China’s share, which was
the same as Mexico’s a decade ago, is now
just 1%. American sanctions on China and
tariffs on Chinese goods explain much of
this change, as well as rising wages in Chi
na and the difficulty of doing business
there. The trend has accelerated recently.
Pandemicinduced border closures, in
creased freight costs, and consumers’ de
mands for instant gratification have all
nudged firms around the world to consider
shortening their supply chains.
“This is a golden opportunity for Mexi
co,” says Helen Wang, a consultant. The
country has some natural advantages, not
least a long land border with the United
States. Mexico is party to fully 23 freetrade
deals. Manufacturing wages are lower than
in China. A survey this year by the Ameri
can Chamber of Commerce of Shanghai
found that a fifth of its members were con
sidering moving some work out of China;
more than a third of those who were think
ing of moving were looking to Mexico. In Tijuana the mood among many Mex
ican businesspeople is optimistic. Several
big firms have expanded recently. Pana
sonic, a Japanese electronics company,
opened a plant in 2018 to make cables for
aerospace. Other companies are diversify
ing into logistics and distribution. In Sep
tember this year Amazon, an ecommerce
giant, opened a warehouse there, though
the company denied that it would use it to
serve customers in the United States.
In addition to aerospace, the manufac
turing of medical devices and other elec
tronics is booming. “We are doing things
[in Mexico] that once would have had to be
done in Japan or Germany,” boasts Eduardo
Salcedo, the manager of the local opera
tions of Össur, an Icelandic medicalde
vices company. “We have guys running a
milliondollar machine with their right
hand and another one with their left hand.” Chain reaction
The result is that the richest part of the
country, by the border, is becoming even
better off. “Northern Mexico is growing at
similar rates to Asia,” says Luis de la Calle, a
consultant who used to work at Mexico’s
economy ministry. Elsewhere, however,
the picture is mixed. fdifell from 3.1% of
gdpin 2018 to 2.3% in 2019, compared with
3.7% in Brazil or 6.2% in Vietnam.
And despite its proximity to the United
States, Mexico has its shortcomings. Busi
ness parks provide worldclass facilitiesT IJUANA
Mexico could benefit from China’s exclusion from supply chains—if Andrés
Manuel López Obrador doesn’t hold it back
→Alsointhissection
48 XiomaraCastrowinsinHonduras
50 Bello: Cultural mestizaje