After 17 years of macroeconomic stability, low inflation, manageable debt, an open economy and increasing competitiveness, the Mexican gross domestic product increased 3.9 percent in 2011, ahead of Brazil’s growth of 2.7 percent, reported The New York Times on Monday, June 18th.
Car makers Nissan, Mazda and Honda all announced that they would build new plants in Mexico, and new investments in aerospace and electronics are also on the horizon. At the same time, Mexican factories are exporting record quantities of televisions, cars, computers and appliances, replacing some Chinese imports in the United States and fueling a modest expansion. As a result, Mexico’s economy grew faster than Brazil’s in 2011.
The better economic performance in Mexico relies on its policies of open markets, free trade and deregulation while Bazil’s model involves muscular government intervention through big state-controlled companies, the Times reported.
Mexico also has a geographic advantage to lower freight costs and has improved its speed to serve the U.S. market. Therefore, Mexico remains the top choice for near-shoring to serve U.S. demand for companies looking to overcome the higher costs of manufacturing in places like China, according to a survey released today by the business advisory firm AlixPartners.
“As with doing business in Brazil or, for that matter, parts of Asia, caution should always be top of mind; but on the other hand, with the aid of the right kinds of advisors many companies today are employing Mexico as an attractive alternative source of production,” said Chas Spence, a director at AlixPartners.