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Top 5 Exports: Mexico

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Oil, cars, TVs, tractor parts, and computers top the list of Mexico's biggest exports

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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.

While Ford (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 (ETR:VOW), BMW (ETR:BMW), Toyota (NYSE:TM), Honda (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.

Televisions

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:JBL), Celestia (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.
No positions in stocks mentioned.
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