China and Mexico Are Urged Wins

China and Mexico are urged wins
Rising wage Asian workers causes companies to move to Mexican lands, the shortage of young employees and generate inflation China's competitiveness problems.
The salary of a Chinese worker is 14% lower than a Mexican. (Photo: Photos to go)
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MEXICO CITY (Reuters) - The Mexican economy is getting help from unlikely allies: the workers in China , whose salaries are increasing leading to more companies to build plants in Mexico.

Meco Corporation, an American manufacturer of folding chairs and grills, is shifting production from China to Mexico, after the salaries of its factories in China to have more than doubled since 2007.

"We had numbers and we decided to move our equipment to Mexico , with the decision really based on trying to provide more stable prices to our customers, "said the chairman of Meco, Harrell Ward.

The manufacturer of leather products Coach also took account this week and decided to cut production dramatically in China, rising labor costs.

Meco, a family business of Greeneville, Tennessee, do the math in millions of dollars, not billions.

But his plan to invest $ 10 million in a plant in northern Mexico is good news for a country that has been in the shadow of China for the past seven years in terms of U.S. market share.

For the first time since China joined in 2001 at the World Trade Organization (WTO), Mexico showed in the first 11 months of 2010 increased the growth of the Asian giant in terms of their participation in the U.S. market.

Possibly Mexico ended 2010 with just over 12% of the U.S. import market, a greater role in history.

Wages in Mexican factories are currently about 14% higher than those of China, according to estimates by the Secretary of Treasury.

According to estimates by officials in 2002 wages were 240 times higher than those of China, which canceled the natural advantage of proximity to the United Mexican States.

The advantage has also been supported by an increase in transport fuels to their highest levels in two years , which has become less attractive to send goods across the Pacific.

The smallest wage gap makes it possible for Mexico to achieve an even greater gain in the U.S. market in the coming years, said Sergio Luna, deputy director of economic studies at Banamex unit in Mexico from Citigroup .

Manufactured goods account for a fifth of the Mexican economy and 80% of its exports go to the U.S.. The good news for Mexico also show how the labor markets may be helping to correct the problem of so-called global imbalances.

Many countries, including Mexico, say that China has kept its currency artificially weak to support its export industry.

Economists say China's approach to exports, along with U.S. reliance on imports, has unbalanced the global economy and increased the risk of financial instability.

But in China are becoming scarce young workers, which is driven higher wages.

It is expected that rising food prices at the beginning of 2011 inflation boost after a dip in December, which further push wages upward.

Mexican factories are seeing more opportunities to compete after years of losing share to Chinese competitors, prompting the country's participation in the U.S. import market to 10% in 2005.

"Sooner or later the water had to return to their level," Solomon said Pressburger, head of the Confederation of Industrial Chambers (Concamin) of Mexico, who owns a factory jackets near Mexico City.

Benefit to U.S.

Foreign investment in Mexico is growing , as in countries like Malaysia and Vietnam, and the country's estimated about 19.000 billion in direct investment this year.

Established in Mexico may be good for business because the Mexican Americans tend to buy more US-made components in China. In general, Mexico buys nearly double U.S. exports to China , and anything that creates more demand for U.S. goods reduce the imbalances.

"If a company needs to move out of the country, is of strategic interest to the United States do to Mexico or Canada, our largest customers," said Barry Lawrence, industry and commerce who studies at Texas A & M.

In the past two years, Jabil Circuit has hired about 7,000 workers in the Mexican city of Guadalajara, which produces electronic goods, including BlackBerry phones to the Canadian firm Research in Motion, said Cesar Castro, a manager at Jabil.

"As labor costs are almost flush with China," he added.

Collectron, a provider of services to U.S. factories to Mexico recently led investments for the manufacture of medical devices a few years ago would have gone to China, said company president, Maria Elena Rigoli.

But the trend has not changed at all. China still has a huge share of 19% in the U.S. market. Most of the companies leaving Mexico may not be back soon, as some investors are concerned about security in a country beaten by drug violence.

AlixPartners places Mexico as the most competitive country for producing various manufactured goods, but a consulting client recently canceled plans to move to Mexico for safety, said managing director Stephen Maurer.

More than 34,000 people have died since President Felipe Calderon declared war on drug cartels

in late 2006, although some regions have been hardest hit than others.

Meco's new plant is opening in Saltillo , a city of less than one million people so far has not been hit by the violence of drug traffickers. Official statistics show 45 deaths related to drug trafficking since 2006, against 260 in Morelia, a city of comparable size.

Ward runs the risk by allowing their employees traveling in Mexico who travel at night. Is even considering building a second factory in Saltillo, working in tandem with its assembly lines in America