Why Mexico Could Be A Winner As A Result Of The Coronavirus Experience Of The US

If I had a big factory in Mexico or if I even aspired to have a big factory in Mexico, I would be doing my research right now to find out which American manufacturers did the most manufacturing in China.  And then, I would make an appointment to visit.

Why? To take advantage of what could be a move away from manufacturing done in China and to promote why that manufacturing could be done better, with less risk, and more profitably in Mexico.

I would first put myself into the likely mindset of the senior management of a US company that does manufacturing in China and consider what they may be thinking as a result of the Coronavirus experience in the US. (They wouldn’t be happy.) I would then try to alleviate that unhappiness and fear with the main reasons why it would make sense to reduce their amount of manufacturing in China and to move it to Mexico. First, as to their fear and unhappiness, I would point out:

• It wouldn’t take a big leap of faith to believe that many US voters and consumers have a less favorable view now than they did before the Coronavirus of China in general, manufacturing in China, and US companies that do manufacturing in China. As a result, your “Made in China” stamp on your products is not a marketing or reputation plus. Many US consumers will look for alternatives.
• The political risk of some negative issue between the US and China coning up that has nothing to do with your business is certainly increasing and likely to do so for quite some time. Risks include but are not limited to China’s ambitions militarily and economically relative to the US.  If this happens, the result may be increased tariffs on your goods made in China, outright bans, or the US government in countless ways favoring companies and products manufactured in places other than China.
• It is not that easy to predict what China will do as things change. After all, China has gone through enormous changes in the last few decades and is very likely to experience even more in the next few years. And with enormous changes comes greater uncertainty to your business. 
• Even before the Coronavirus, many purely business trends were not in favor of expanding manufacturing in China, including China’s increasing labor costs.

As an existing or aspiring Mexican manufacturer, I would then present a set of reasons why, all other things being equal, it would make sense for that senior management of the US company I would visit to consider moving some or all of their China manufacturing to Mexico:

• There would be a huge reduction in your very difficult to predict or calculate risk from the concerns outlined in the bullets above. I would then emphasize, with a sense of humor drenched in reality that if it’s one thing you as senior management tries to avoid, it’s risk, especially the kind that’s hard to predict. Then, I would wink.
• Very few, if any, of the risks of you doing business with China outlined above are likely to happen regarding you doing business with Mexico. For example, Mexico is very unlikely to build artificial islands to claim part of the Gulf of Mexico and make them into military bases or have geo-political ambitions to challenge the US or to dominate US trade shipping routes.
• Mexico is geographically closer than China, so shipping costs should be much lower. Cone on, amigo; we share a common border!
• Mexico has existing factories, so its people do have experience in relevant fields. According to the US Census Bureau, Mexico is already the number one trading partner of the US, not China. And the size of Mexico’s economy would surprise many people who aren’t paying attention. Mexico is the 15^th largest economy in the world, just after South Korea, Spain, and Australia.
• According to TopForeignStocks.com, as of 2017, labor costs in Mexico were about half of what they were in China.

Are there lots of other things to consider, including manufacturing in countries other than Mexico? Of course there are, but the trends do seem to strongly favor Mexico.

Full disclosure: I run a company that moves people’s household goods to Mexico, so I may be a bit biased. Also, while I have lived in Mexico (and do so presently), I have never lived in China, so I have no firsthand knowledge with which to compare where it is better to live.

However, I can say that the weather, the beaches, the lifestyle, and the cost of living in Mexico can be pretty great, and that, according to Investopedia, more than one million Americans already live in Mexico, while, according to Sampi, only about 70,000 or so Americans live in China. The reasons for more Americans living in Mexico than in China, of course, are many. And, many of those same reasons favor doing more business with Mexico as well.