What country is America’s biggest trading partner? If your answer is China you are wrong. Mexico has passed China as the biggest trading partner of the USA. Tensions with China have caused American companies to back off from years of offshoring to Communist China. Reshoring and investments in America are the focus of many companies. Others are opting for nearshoring with Mexico as the prime beneficiary. Made in Mexico is replacing Made in China for everything from electronic vehicles to baked goods. The issue for us is how to invest in Mexico.
Why Is Everyone Leaving China?
The attraction of China for offshoring was cheap labor and potentially access to a huge market. For this, companies and investors were willing to put up with intellectual property theft, questionable financial statements, heavy-handed Communist Party control of whole industries and a supply chain that began on the other side of the Pacific Ocean. What has happened is that foreign companies are finding it harder and harder to operate in China. Folks like Apple are seeing their products banned in government offices. And there is the very real possibility of military conflict with Taiwan that would involve US forces.
What Does Mexico Have to Offer?
Like Canada, Mexico is right next door to the USA. Canada, Mexico, and the US have the NAFTA trade agreement which reduces duties and makes trade easier. Shipping goods from Mexico to the USA is significantly cheaper and faster than shipping from China. Executives can often visit their Mexican operations and return home on the same day.
Mexico has a substantial labor pool available at much lower wages than in China. It has 130 million people as opposed to Canada’s 38 million. More than 88 million Mexicans are of working age. Not only does Mexico have a large labor pool, but its wage scale is also substantially lower than in the USA (or in China) with the workers on average making $281 a month. By comparison UAW workers make on average $3212 a month and mainland China workers average $4012 a month!
The Mexican military does not control whole sectors of the economy like in China where the Communist Party and Red Army call the shots. These are good reasons for a company to consider near shoring to Mexico. Now the question is how can you invest in Mexico?
Follow the Smart Money to Mexico
A useful tactic when deciding where and how to invest is to follow the smart money. Foreign direct investment in Mexico has gone up 40% in 2023 according to Bloomberg in their article about how Mexico replaced China as our top trade partner this year. Mexico’s stock market is doing well. Two ways to invest in Mexico are to invest in Mexican companies that are growing and to invest in US companies that will benefit from near shoring to Mexico.
Mexican ADRs
One does not need to speak Spanish, deal with a Spanish speaking broker, or buy stocks on the Mexican stock exchange (Bolsa de Valores Mexico). Mexican companies have American Depositary Receipts on the New York Stock Exchange. America Movil SAB de CV is the biggest wireless carrier in Latin America. Its stock is up about 60% in the last two years. Cemex CEMEX S.A.B. de C.V is a multinational building materials (concrete) company that is up about 60% since last year. Bimbo is a multinational food company whose stock had doubled in the last two years. Follow this link for a full list of Mexican ADRs.
SlideShare Version – How to Invest in Mexico
