Mexican labor market

Investment Analysis Clubs Macro Economic Trends and Risks
1

Anecdotal media reports suggest that the nearshoring move to Mexico is at hand, while hard data provide no such conclusive evidence. Anecdotal accounts include a Banco de México survey published in September 2022 in which 16 percent of respondent firms indicated they had benefited from nearshoring trends in the prior 12 months. A separate Citibanamex analysis of Mexican industrial properties cited nearshoring as contributing to low industrial vacancy rates of around 5 percent nationally and to zero along the border in Tijuana.

snip

Growth in China FDI

China FDI flows into Mexico grew on a nominal basis from $38 million in 2011 to $386 million in 2021 before slipping last year to $282 million—still well above its historical average. While China represents only about 1 percent of Mexico’s FDI, the country has significantly expanded its investments and is the fastest-growing source of foreign investment in Mexico.

Right now Mexico is low cost labor and natural gas flowing from the USA is fueling significant economic growth. However the FDI (Foreign Direct Investment) is not showing this.

Now let us look at the demographics.

Mexico will be able to service its labor needs for another 20 years if it can automate. If it grows at a rate faster than it has, it will not have enough labor.

So far Mexico has had a low 1.5 percent growth rate over the last 20 years. If that changes, then Mexico will quickly become a labor sink, not a labor supply. Mexico is much larger than the other Central American countries that are supplying labor to the USA, thus a change in the labor situation in Mexico will dry up so much labor that there will be none available to the USA.

Right now, China and to a lessor extent India are still exporting labor via value added labor. However, demographics says that this will change within the next 20 years. Considering the absolute size of those populations and economies, this will be a very large change in labor flows across the southern border.

The very low growth rate in Mexico reflects its close ties the the USA and its slow growth economy and Mexico’s governance challenges including corruption and infrastructure. Without these being addressed I have low confidence that FDI of any sort will change the GDP and labor situation in Mexico.

Cheers
Qazulight

2 Likes
2

That is why arrangements between the US and Mexico have Mexico taking the fleeing central and southern Americans. The US has a lot of factories in Mexico that need the labor.

2 Likes
3

Some years ago, I was reading about significant numbers of people heading toward the US from Central America, that never made it. They were recruited to work in the factories in Mexico. Wonder why that isn’t still a thing, or maybe the flow of people has exceeded the employment needs?

4

Steve,

The Title 42 rush at the border actually never happened. All that drama over the last couple of weeks for nada.

5

Promoting hype and hysteria is what the Shiny media does. What was the lead story on all three broadcast networks tonight? Anything that really mattered? Nope. British royal “celeb” drama.

Steve

1 Like