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"Hoy!" Mexico wants development
- today!
Nine years ago, during the 1992 U.S. presidential campaign,
Ross Perot summed up what many people saw as the future of
economic relations between the U.S. and Mexico: a "giant sucking
sound" as jobs left the United States for Mexico under NAFTA.
The U.S. auto industry and its suppliers, including the casting
industry, looked like one of the prime candidates for that
phenomenon.
Unquestionably, in the past nine years Mexico has become
a player in automotive and equipment assembly and the metalcasting
related to it. But a review of the statistics reveals that
the industry in both the U.S. and Mexico has gotten stronger
during that period . The "giant sucking sound" has turned
out to be more of a harmonious duet.
Rising Tide for Both U.S. and Mexico
-- A comparison of average national casting tonnage during
the late '80s vs. the late '90s indicates that Mexico practically
tripled its foundry production in a decade. Yet at the same
time, the United States itself experienced a 30% increase
in foundry production. Given that the United States was beginning
from a massive base, 30% is an impressive increase. And this
was at a time when world casting production was essentially
flat.
Similarly, national production of cars, trucks, and buses
has been up in both countries over the past three years --
13% in Mexico and 8% in the U.S. -- compared to a world average
of 4% over the same period. (Mexico produces about 1/10 as
many units as the U.S.)
Two-way trade in Castings --
For the U.S., Mexico is an important trade partner, but certainly
not the only one. Mexico, on the other hand, trades mainly
with the U.S., which accounts for about 90% of its exports
and 75% of its imports. While one category of casting -- engines
-- has become a major Mexican export, Mexico is also a major
importer of all kinds of other products that use castings
-- metal manufactures, agricultural machinery, and electrical
equipment.
The maquiladoras have had their effect on Mexico's casting
industry: about 25% of the nation's casting tonnage now comes
from the area of Mexico near the U.S. border; in value terms,
the percentage is probably much higher. But it is Veracruz,
in the far south, that is the single largest casting producer
in Mexico, with nearly 50% of the nation's tonnage. (There
is also a significant concentration of casting production
around the capital, Mexico City.) Mexico remains a nation
of small foundries: more than 90% of all Mexican foundries
employ less than 100 workers.
Read separate report
on die casting industry in Mexico.
Multinational Investments
-- Therefore, perhaps more important to Mexico than absolute
increases in casting tonnage is the investment in human capital
by multinational corporations that are behind those increases.
A long list of companies, from the U.S. and elsewhere, have
come to Mexico to set up operations, and in doing so have
raised the bar in terms of quality of worker treatment, management,
technology, and environmental responsibility for industries
throughout the country. These companies have included Auburn
Foundry, Citation Corp., CMI International, Hitchiner Mfg,
and National Casting; foundries of Fiat (Italy), Kitz (Japan),
AFB Metals (France), and Caterpillar (US); greenfields operations
by Nemak, Monterrey, Teksid, Monclova, Caterpillar-Citation,
Saltillo, and Cifunsa (aluminum- Castech, Ramon Azizpe).
A Market in Flux -- Mexican
industry, and particularly its labor market, is in an extreme
state of flux. As emphasized in a recent article in The
New York Times, while Mexican workers coming to work in
a border area maquiladora "make in a day less than their American
counterparts earn in an hourc" they still earn triple the
Mexican minimum wage, and this has led to massive migration
of workers. (Hourly wages in the Mexico's foundry industry
1/9 those in the United States, according to AFS statistics:
$2.60/hour for Mexico vs. $22.70 for the U.S.) Often those
workers live in shantytowns, welcoming the opportunity to
progress -- however slowly-- towards having homes -- however
small -- that they can call their own. "I am not saying that
it will be easy to start life here," one immigrant to the
border areas told The New York Times. "But at least
there is a chance that things for me will get better. There
was no chance of that in Veracruz. I had no hope."
At the same time, those workers find themselves in a squeeze:
costs are rising in the border areas, and rising wages are
always chasing higher living expenses. Many of these represent
needs the workers never knew they had before.
And what is true in microcosm for the workers is true in
macrocosm for the municipalities: they are suddenly realizing
that there are enormous needs in providing water, sewage,
and all kinds of other infrastructure to the new immigrants.
The only silver lining is that the mayors of these towns and
cities have some hope of turning to the foreign-invested manufacturing
operations that started the cycle in the first place.
The Move to Aluminum -- There
has been a concomitant move up the value chain by foundries
in Mexico. Altogether, there are about 600 foundries in Mexico
-- including 100 iron, 27 steel and 166 non-ferrous. (You
can access over 400 of them on the www.castingtrade.com database.)
The interesting thing is that Mexico's casting industry
has the highest value metal mix of any country in the world,
according to CastingTrade analysis, due principally to the
very high proportion of aluminum cast there. This came about
in two distinct leaps over the past decade. The first came
in the '93-'94 period, when there was a sudden leap in output
of aluminum castings in Mexico, at the same time that output
of iron castings slumped. The second surge came in the '96-'97
period when, even as output of (relatively low-value) iron
castings rebounded, Mexico started to produce large amounts
of zinc castings.
Fox's Vision of Economic Union
-- Mexico is led today by a man who thoroughly understands
these changes and has a vision of where they are heading.
President Fox sees that future economic growth -- in the United
States as well as Mexico -- will really boil down to a struggle
to get enough qualified workers to do the jobs that are available,
including those located both north and south of the border.
"For the United States the problem of continuous middle- and
long-term growth has to do with migration; the United States
needs immigrants in order to continue growing at its current
rates," he has said. His long run solution? "In the future,
the central element has to involve narrowing the gap in income
between Mexico and the countries to the north." This he says,
is a far preferable solution to "building up walls, putting
up armies, dedicating billions of dollars like every border
tate is doing to avoid migration." In short, he sees a North
American free market in goods and services, with free movement
of workers between Mexico, the United States, and Canada.
When Mexican wages rise to be closer to those in the U.S.
and Canada, what will be the outcome. Fox is optimistic. "I
just can't imagine the huge potential of Mexico, the United
States and Canada 20, 30, 40 years from now. The capacity
of this bloc of nations would be the best in the world. We
three countries would be absolute winners," he has said.
FOR MORE INFORMATION, PLEASE CONTACT:
Octavio Lerma Emmert
President
Sociedad Mexicana de Fundidores
Mexican Foundry Society
Col Amp Napoles
Av San Antonio 256 8 Piso
Mexico City 03849
Mexico
E-mail: smf@dsi.com.mx
Telephone: 611-96-78
Fax: 563-84-96
http://www.smf.org.mx
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