CELAYA, Mexico (AP) — Mexico is on track to become the
United States’ No. 1 source of imported cars by the end of next year,
overtaking Japan and Canada in a manufacturing boom that’s turning the
auto industry into a bigger source of dollars than money sent home by
migrants.
The boom is raising hopes that Mexico can create enough
new jobs to pull millions out of poverty as northbound migration slows
sharply, but critics caution that most of the new car jobs are low-skill
and pay too little. Mexico’s low and stagnant wages have kept the
poverty rate between 40 and 50 percent since the passage of the North
American Free Trade Agreement two decades ago.
An $800 million
Honda plant that opened Friday in the central state of Guanajuato will
produce more than 200,000 Fit hatchbacks and compact sport-utility
vehicles a year, helping push total Mexican car exports to the U.S. to
1.7 million in 2014, roughly 200,000 more than Japan, consulting firm
IHS Automotive says. And with another big plant starting next week,
Mexico is expected to surpass Canada for the top spot by the end of
2015.
"It’s a safe bet," said Eduardo Solis, president of the
Mexican Automotive Industry Association. "Mexico is now one of the major
global players in car manufacturing."
When NAFTA was signed two
decades ago, Mexico produced 6 percent of the cars built in North
America. It now provides 19 percent. Total Mexican car production has
risen 39 percent from 2007, to nearly 3 million cars a year. The total
value of Mexico’s car exports surged from $40 billion to $70.6 billion
over that span.
"I congratulate Honda for its having confidence in
Mexico, for having total confidence in the development of our country,"
said Mexican President Enrique Pena Nieto, who attended the opening of
the plant in the town of Celaya along with Honda CEO Takanobu Ito.
"They’re contributing to two basic objectives, generating wealth and
creating jobs in this country."
Manufacturing in Mexico is now
cheaper than in many places in China, though the vast majority of the
cars and trucks made in North America are still produced in the U.S. for
domestic consumption and export to other countries.
And many of
the vehicles built in Mexico are assembled with parts that are produced
in the United States and Canada and cross the border without tariffs
under NAFTA.
"There was a realization that there were some
structural issues that had to be resolved in the auto industry to make
it more competitive again. Moving parts, not all of the production, to
Mexico was a good way to deal with that," said Christopher Wilson, an
expert in U.S.-Mexico economic relations for the Woodrow Wilson
International Center for Scholars.
Mexico’s government and the car
industry say the automotive industry has become the primary source of
foreign currency for Mexico, surpassing oil exports and remittances from
immigrants in the United States.
Migration to the U.S. has slowed
dramatically in recent years, though experts attribute that mostly to
tougher enforcement and a slower U.S. economy. Despite successes such as
the car-making boom, Mexico still isn’t creating nearly enough formal
jobs for the hundreds of thousands of people entering the workforce each
year.
While Mexico’s official unemployment rate dropped to 4.62
percent in the last quarter of 2013, nearly 7 percent of working-age
people work less than 15 hours a week and nearly 60 percent scrape by in
off-the-books jobs such as street vendors or day laborers, whose
benefits are virtually nonexistent and whose wages are often below the
legal minimum.
The Mexican government announced Friday that the
economy grew a meager 1.1 percent in 2013, its worst performance since
2009.
The government is hoping to see 3.5 percent growth this year.
Mexico
has roughly 580,000 auto workers, whose numbers have risen by 100,000
since 2008. They are paid about $16 a day, more than $4 less than what
the average U.S. autoworker is paid every hour. More than half of all
Mexican workers earn less than $15 a day, according to Mexico’s census
agency.
Many car factories in Mexico operate with pro-company
unions and some workers have fought without success to form independent
unions that could bargain for higher pay and better pensions.
"It’s
one of the most modern industries that is generating the most money for
the country," said Huberto Juarez, an auto industry expert at the
Autonomous University of Puebla. "It’s not right that these workers are
making so little."
Solis, the president of the auto industry
association, acknowledges wages are low compared to the U.S. and Canada,
but says the boom is creating a new generation of young engineers and
funding automotive research in Mexico. A handful of Mexican
entrepreneurs have launched boutique car companies in recent years,
although their production remains insignificant compared to that of
foreign manufacturers in Mexico.
"It’s not only about lower
salaries. That’s short-sighted. It is a component of a larger equation
that has to do with the expertise we are developing," Solis said.
Much
of the new production is by Japanese companies drawn by the ability to
move parts into and out of Mexico without tariffs. Local governments
have been competing for new plants by offering tax exemptions, employee
training and improved highways connecting the plants to the U.S. border
and Mexican ports.
Just 25 miles from the new Honda plant, Mazda
is set to open a factory next week to produce 230,000 cars a year.
Nissan is expected to turn out 175,000 cars annually at a $2 billion
plant it opened late last year in the nearby state of Aguascalientes.
And Audi will be producing luxury models at a plant in the state of
Puebla that is slated to open in 2016.
"We have gained momentum
throughout the years," Economy Secretary Ildefonso Guajuardo said. "Now
Mexico is attracting international attention because it has proven to
have quality of production and a friendly investment climate."
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Adriana Gomez Licon on Twitter: http://twitter.com/agomezlicon
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