Earlier this month, Minyanville ran an article from Moneyshow.com entitled Mexico: The China of the Americas
, which highlighted the best ways to invest in Mexico’s burgeoning manufacturing sector. Investing in iShares MSCI Mexico Investable Market Index
(NYSEARCA:EWW) is just one way to profit from Latin America’s second largest economy, as it benefits from increased investments, close proximity to the United States, and a favorable legal system.
Mexico’s thriving GDP, which grew 4.6% last year, made it the world’s 14th largest economy
, owing much credit to exports.
While Mexican crude oil reserves were ranked 16th largest in the world in 2011 (according to OPEC
data) -- at an estimated 13.8 billion barrels -- Mexican crude oil production ranked eighth. The US Energy Information Administration totaled
Mexican oil production at 2.96 million barrels day in 2011, which is actually a steep drop-off from 2004, when production hit its historical peak, at 3.83 million barrels per day.
The value of Mexican crude oil exports totaled $49.4 billion in 2011, which is significantly larger than the $35.9 billion worth of crude Mexico exported in 2010, when it ranked as the 10th largest oil exporter according to the United Nations Commodity Trade Statistics Database
, A.K.A., UN Comtrade. (Note that 2011 export data hasn’t been reported by every country yet.)
Of Mexico’s 2011 crude oil exports, 81.6%, or $40.3 billion worth of crude oil, went to the United States.
Mexico’s state-owned Petróleos Mexicanos, better known as Pemex, is a bastion of the Mexican economy, accounting for 40% of the government’s revenue. Pemex has in recent years been hindered by the efforts of the newly formed National Hydrocarbon Commission, as reported
by the New York Times
. The commission has enforced strict safety regulations on and questioned the current practices of Pemex. In its 70 years of operation, the company has largely gone unchecked.
Earlier this month, CNBC covered
the potential changes incoming Mexican President Enrique Pena Nieto could have on the Mexican economy, expressly, his commitment to push for increased private sector participation in the oil sector. In recent years, a number of non-Mexican companies have been granted permission to develop Mexican oil fields, including US-based McDermott International
(NYSE:MDR) and Schlumberger Limited
(NYSE:SLB), and UK-based Petrofac
Drillers currently bidding to develop Mexican-controlled oil fields in the Gulf of Mexico include Chevron
(NYSE:CVX), Baker Hughes
(NYSE:BHI), and Halliburton
Pemex may also join Brazilian semi-state-owned Petrobras
(NYSE:PBR) as a publicly traded company at some point in the future if Nieto's reforms are fully realized. Passenger Vehicles
Mexico exported $26.8 billion worth of automobiles in 2011; in 2010, it was the 11th largest passenger car exporter in the world, with over 60% of its exports traveling to the US.
(NYSE:F), General Motors
(NYSE:GM)-acquired Buick and Chevrolet, and Fiat
(BIT:FI)-acquired Chrysler have manufactured cars in Mexico since the first-half of the 20th century, they’ve been joined in recent years by global automakers like Volkswagen
(NYSE:HMC), and others comprising the 42 auto manufacturers that helped make Mexico the world’s eighth largest
car producer in 2011.
In a Washington Post article
earlier this year, Nick Miroff likens Mexico’s current auto industry to the United States’ during its own car manufacturing heyday.
...[H]ere in central Mexico, where the global auto industry is booming, a job at Nissan is a path to the middle class. To work for the company in Aguascalientes today is akin to what it might have been like working in the 1950s for General Motors in Flint, Mich., or for Ford in Dearborn.
(The death of the American auto industry is old news in Michigan, whose state Economic Development Corporation, in a move to attract consumer spending in the state, recently went as far as to release
tourism ads in China.)
And -- despite criticism that Mexican auto worker wages are too low -- the industry is a key factor fueling the expansion of Mexico’s middle class, which recently became
a majority of Mexico’s population.
The industry should see further investment, too, according
to GXS industry marketing director Mark Morley, who wrote in August that the 2011 Japanese earthquake has caused a shift among global automakers. Many have "near-shored" operations -- or brought factories to countries closer to or bordering their own -- and Mexico has become an attractive alternative to those selling in the American market. This is not only thanks to the 1994 NAFTA free trade agreement that disintegrated trade barriers between Mexico, Canada, and the US, but to Mexico’s planned 0% import tax on auto parts beginning in 2014.
The NAFTA free trade agreement didn't help the Mexican auto industry alone, according to the Mexican government’s trade and investment organization ProMéxico
. Television production saw explosive growth in the mid-1990s. By 2008, exports peaked at $22 billion before scaling back to $18.8 billion in 2011, as the sector fell prey to the global economic slowdown.
Eight of the world’s ten biggest electronics manufacturing services (or EMS) providers have operations established in Mexico, including Flextronics
(NASDAQ:FLEX), Jabil Circuit
(NYSE:CLS), and the continually controversial Foxconn
(HKG:2038). These are component makers who have benefited from booming demand for LCD televisions over the past decade. With the increasingly cheaper component costs, original design manufacturer (or ODM) companies like Sony
(NYSE:SNE) and LG
(NYSE:LPL) have relied on Mexico to remain profitable and stay grounded in regional markets. Over 80% of Mexican television exports go to the United States.
In 2009, Mexico was the the largest exporter of flat-screen TVs in the world. Special Purpose Vehicle Parts and Accessories
Tractors, wreckers, mobile cranes, fire trucks, concrete mixers, road sweepers, spraying vehicles, mobile workshops, and mobile radiological units are just some of the special purpose vehicles whose parts and accessories make up Mexico’s fourth largest category of exports.
This addendum to Mexico’s auto industry saw $16.8 billion in exports in 2011, sending a large majority of its exports to the US.
The world’s leading manufacturing and mining equipment maker Caterpillar
(NYSE:CAT) has 28 manufacturing facilities in Mexico (second only to Caterpillar’s 59 US manufacturing plants). In March, Caterpillar opened
a parts distribution center in San Luis Potosi, Mexico, and the company said it was the first of many investments it will make to improve operations in the region.
Mexico’s Automatic Data Processing Machine -- or computer -- exports in 2011 totaled $16.5 billion, with over 70% traveling to the United States. Mexico is the second largest supplier of electronics to the United States, and the third largest
computer manufacturer in the world. Dell
(PINK:LNVGY), Samsung, and LG all have manufacturing operations established in the country.
More Top Exports From Mexico
The list of Mexico’s biggest exports goes on to include: Telephone and fax machines equipment ($16 billion); motor vehicles for the transport of goods ($12.5 billion); insulated wire and cable ($8 billion); gold ($7.7 billion); and non-crude petroleum oils ($6 billion).