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News Article

Breaking Down Mexico’s Advantageous Position

By Pedro Alcalá | Wed, 05/11/2022 - 16:21

Several key factors paint Mexico’s economy in a positive light despite the crises that are defining a post-pandemic world, according to an in-depth analysis presented by Martin Toscano, Mexico President, Evonik Industries. 

The first one of these factors is Mexico’s demographic structure, which is “very different to competing population pyramids in the EU,” said Toscano. Mexico is strengthened by its young population, with a national average age of 29 years old. The population is also expected to be 84 percent urban by 2030. Over 60 percent of Mexico’s workforce is concentrated in the services sector and its minimum wage is highly competitive at a global level, said Toscano. These and other variables reveal the many benefits that companies can expect to enjoy when betting on the reliability of Mexican workers. 

A younger population means a higher potential for training, education and talent development, which Toscano claimed applies significantly to Mexico in its post-pandemic phase. “In Mexico, demographic availability of young talent is an important factor to further develop the labor force, especially when considering how the pandemic developed the dual education options available to companies and employees." Toscano also noted that Mexico’s key performance indicators (KPIs) were very positive, in alignment with other aspects of his analysis. According to Toscano’s breakdown, Mexican growth forecasts have returned to pre-pandemic levels in large part thanks to the success of its export industries and markets, which enjoyed “solid and noble growth.” 

While Toscano did mention the issue of inflation, he also made clear that its effect on the international comparison was minimal considering the fact that it was affecting other “more developed economies” just as much, if not more. Inflation is also being increasingly affected and exacerbated by the war in Ukraine, from which Mexico is shielded, said Toscano.   

Mexico also remains competitive thanks to its foreign direct investment (FDI) levels, which have remained stable and healthy despite current political discourse, according to Toscano. In fact, Mexico remains the world’s 9th overall largest recipient of FDI. While some risk factors endemic to Mexico remain, they are not new and have failed to trigger a significant FDI decrease. As the commercial relationship between the US and China continues to be redesigned and redefined, Toscano says that Mexico will continue to benefit from the US’s desire to reduce its dependence on Chinese imports. This is an example of the “China Plus One” strategy, through which companies avoid investing only in China, he added. This strategy has benefited other countries such as Vietnam. In this sense, Mexico remains at the center of an active trade environment, and the current nearshoring boom that the Latin American country is enjoying is likely to remain constant, leading to sustainable and reliable growth.

Moreover, COVID-19’s overall impact on Mexican markets was relatively “minimal” when compared to other countries, said Toscano. Mexico remained “almost completely open when compared to the EU” throughout the pandemic. The growth enabled by this measure allowed Mexico to gain a new position in global market rankings. For example, Mexico became the top four manufacturer of auto parts in the world, taking over a position previously held by Germany.

Pedro Alcalá Pedro Alcalá Senior Journalist & Industry Analyst