Mexico’s Foreign-Owned Factories Make Comeback

Mexico’s maquiladoras, foreign-owned factories, have rebounded in recent years as engines of economic growth in the face of overseas competition, especially from China, according to a report by industrial real estate landlord ProLogis. Maquiladoras are typically located in border areas with the United States, and have had a history of impacting the U.S. distribution markets in states adjacent to Mexican manufacturing markets. The reported noted that part of the reason for the recovery of maquiladoras, which were in the doldrums in the early 2000s, has been their shift toward high-valued-added industries, such as aerospace, custom-order electronics and pharmaceuticals. Such industries are better positioned to compete in the the global and U.S. markets. Moreover, “for goods destined for the U.S., global manufacturing companies prefer Mexico to China in situations where the final product is large or heavy (i.e., expensive to ship), where intellectual property rights are a critical concern, or where the final product can be custom ordered,” the report says. “Additionally, Mexico’s already well-established automotive industry has expanded to include additional car manufacturers beyond Detroit’s Big Three. As a result, Mexico’s manufacturing output, exports, and real GDP have resumed brisk growth.” Looking ahead, maquiladoras will continue to be linchpins of the Mexican economy, but the distinction between them and Mexican-owned industries is already fading. Last year, without much fanfare, Mexico undertook a major reform of its tax system that abolished the tax advantages that maquiladoras previously enjoyed, among other fundamental changes. Mexico has also undertaken a massive infrastructure redevelopment program, which is also expected to spur manufacturing development–as well as other kinds of real estate use. Most of the outlays will be for building and refurbishing more than 10,000 miles of highways throughout the country, including the expansion the “NAFTA highway,” a loop around Mexico City.Blog Comments