Mexico on a Fast Lane: Investments in Mexico Boost Auto Output

A recent report by Bloomberg Businessweek reported Carlos Guzman, head of the nation’s investment promotion agency informed that Mexico will boost annual auto output by 1 million vehicles within three years, a 38 percent jump from last year, as foreign manufacturers use the country as an export base.

In an interview held in the publication’s Mexico City office, Guzman, president of ProMexico, said that investments already announced by carmakers will allow Mexico, the world’s fourth-largest auto exporter, to increase annual production from last year’s 2.6 million units. Surging car and aerospace sales will help Mexican exports climb by about 15 percent this year to a record of around $400 billion surpassing a $350 billion high reached last year.

Mexico’s economy is proving resilient as its auto industry booms, with both vehicle production and exports reaching their highest levels in the first seven months of the year for any January to July period, the nation’s Automobile Industry Association, or AMIA, said on Aug. 6. New plants announced by companies such as Mazda Motor Corp. (7261), Nissan Motor Co. (7201) and Audi AG (NSU) will help the nation close the gap with Korea, the biggest exporter after Germany and Japan, Guzman said.

“Other companies are exploring the possibility of opening facilities in Mexico,” Guzman said. “We expect a very good period of five to seven years in Mexico in terms of growing exports” for cars, he said.

Due to rise in the wages in China and higher oil prices increase costs for Asian companies, the world is turning to Latin America’s second-largest economy for investments and opening of new plants. U.S. Auto majors such as GM are also investing millions in setting up their plants in Mexico. Japanese are also not far behind after realizing the enormous potential of Mexico. Recently, Nissan announced that it will pour $2 Billion to build new plant in Mexico.

According to information provided by the Economy Ministry, car companies announced $5.3 billion in new investments from January through April and $2.8 billion last year. Mexico’s gross domestic product grew in the second quarter, expanding 0.9 percent from the first three months of 2012. Exports also showed an increment of 5.8 percent from a year earlier.

Mexico will attract foreign direct investment of as much as $20 billion this year and $20 billion to $25 billion annually in coming years, Guzman said.

Foreign investment fell 9.2 percent in the first half of the year to $9.62 billion from preliminary figures for the same period in 2011, Mexico’s Economy Ministry said on Aug. 23. The nation received $20.4 billion in investments last year.

Guzman said that aerospace exports are also expanding and probably will rise to as much as $5.2 billion this year from $4.5 billion in 2011, citing estimates from the Mexican Aerospace Industry Association.

“In 15 to 20 years, we will be talking about aerospace manufacturing in Mexico like we are talking about automotive manufacturing” today, he said.

Definitely Mexico is witnessing a boom period in every sector and with such positive growth, the country is sure to emerge as a global leader in future.