News & Press


Economic Growth Results from Chinese Investments in Mexico

June 19th 2024

Rogers & Brown

Written By: Raymond Kelley, President of Rogers & Brown

As discussed in our previous article, Key Insights into Importing in Mexico, we examined the incredible growth that made Mexico the number one trading partner with the United States. The United States-Mexico-Canada (USMCA) was a contributing factor, along with more stable supply chains from Mexico that avoided the Geopolitical issues in the world today and potential future ones. This has led US companies to make significant investments in Mexico to support their production needs. The other leading factor in Mexico’s economic growth is the tremendous number of investments from entities in China. How much have the investments increased, and why have the Chinese invested so much in Mexico?

Chinese Investments and Initiatives

In 2011, the investments from Chinese companies in Mexico totaled approximately 40 million dollars. In the past four years, investment levels averaged nearly 300 million dollars. Many of the investments have been in the manufacturing sector. The expenditures have been in many industries – automotive, technology, construction equipment, furniture, electronics, medical equipment, aerospace, and several others.

Infrastructure development is another key driver behind China’s investments in Mexico. Through its “Belt and Road Initiative,” China enhances its connectivity and infrastructure across the globe. By investing in Mexico’s infrastructure projects, China strengthens its economic ties, thereby contributing to the modernization and development of Mexico’s infrastructure. This strategy can be seen in other countries, such as the construction of the new deep-water port in Peru that China is developing.

Geographic Location:

A leading factor for China’s investments in Mexico is geographic location. The most obvious factor is the proximity to one of the largest consumer markets in the world—the United States. Chinese investments are in industries that US companies often source for their imports. Not only is Mexico a gateway to North American countries, but it is also one for Central and South American countries.

Looking into the development of the new port in Peru, China is investing more in these regions to expand its economic growth further. Suffice it to say that Mexico’s location on the other side of the Pacific Ocean from China presents advantages for Chinese companies that open there. Lastly, Mexico’s location supports a more stable supply chain—production is closer to customers, has shorter transit times, is less affected by pandemics, geopolitical instability, capacity issues during peak seasons, etc.

Map of Chinese Investments in Mexico

Skilled Workforce:

Another leading factor that attracted Chinese investments in Mexico is the skilled workforce. There is a highly well-trained group in the manufacturing sector. This can be attributed to improved education systems in Mexico and to the maquila industry that has been present in Mexico for over 30 years. Many of these produce automotive parts, consumer products, electronics, medical devices, and other products imported into the United States.

Approximately 2500 to 3000 maquiladoras operate in Mexico near the United States border, with over 1 million workers. These foreign-owned maquiladoras have created a well-trained and available workforce for these new Chinese-backed companies to employ in their new factories. Also, employment costs for factory workers in Mexico are lower than they are in China. A less expensive, skilled workforce is a strong motivator factor for Chinese investments in Mexico.

301 Tariff:

An obvious attraction for Chinese investment in Mexico is to take advantage of its favorable trade relations with the United States and Canada. This is through the United States-Mexico-Canada Agreement (USMCA). When the United States imposed the 301 Tariffs in 2018, the United States anticipated the effects would be for US companies to source products from countries other than China, bring jobs back to the United States, negatively impact the Chinese economy, and protect US companies’s Intellectual Property Rights. The intended consequences of the 301 Tariffs have not been successful. With President Biden extending the tariffs, the Chinese will continue to investigate paths to avoid these higher tariffs and lower the costs of their products to the United States consumers. Thus, they are beating the system.

Trade Agreements:

The lesser-known benefit of China’s investing in manufacturing in Mexico is taking advantage of Mexico’s many other trade agreements with countries worldwide. Mexico is a member of the World Trade Organization (WTO), the Asia-Pacific Cooperation (APEC), the Group of 20 (G20), and the Organization for Economic Cooperation and Development (OECD). Currently, Mexico has 13 Trade Agreements that involve 50 countries. These include the USMCA, Free Trade Agreements with the European Union, Japan, Israel, and 10 Latin American countries, and the Progressive Agreement for Trans-Pacific Partnership. Mexico is also a member of the Pacific Alliance, a trade bloc formed in 2011 with Chile, Peru, and Mexico—these present opportunities for Chinese companies to continue their economic growth.

In conclusion, China’s investment in Mexico was brought on by a combination of factors: avoidance of 301 Tariffs, economic interests, supply chain concerns, infrastructure development (China’s Belt and Road Initiative), and trade opportunities fueled by the numerous partnerships and trade agreements that Mexico is party to. The continued growth of this collaboration between Mexico and China is expected as both parties flourish and benefit for many years to come.

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