Mexico might be out of the World Cup, but this year, the country is poised to beat rival Brazil on another global stage: For the first time in a decade, Mexico is expected to become the top Latin American automobile producer. And that bodes well for its economy overall.
Consultant IHS Automotive says Mexico has been making and exporting more cars than Brazil in 2014, and it should keep up pace through the rest of the year.
Analysts point to cheaper labor and proximity to the United States, one of Mexico’s biggest customers, as contributors to the surge in auto production. There’s also new investment from foreign automakers.
“Audi, Nissan, Mazda, GM, Ford and many, many others,” says Shannon O’Neil, a senior fellow for Latin America studies at the Council on Foreign Relations. “These are the types of firms where you’ve seen huge growth and innovation and productivity among Mexican workers that have made it really a competitive sector.”
That momentum could jump start productivity across Mexico’s economy, according to Lisa Schineller, an analyst for Standard & Poors.
“The key challenge is trying to tackle outside the manufacturing sector, and improve education, infrastructure, et cetera,” she says.
Schineller adds that S&P is also watching legislative reforms that would open Mexico’s energy industry to foreign investment.