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Mexico is getting serious about infrastructure

21 Sep 2015

Mexico's manufacturing sector has grown at an exponential rate over the past decade. In response to this growth, the Mexican government has taken important steps to make the country more compatible for manufacturers and to fuel economic growth. Last year, the Mexican government published its "National Infrastructure Program", which outlined a $600 billion plan to improve transportation, communications and energy. Additionally, The Wall Street Journal reported President Enrique Pena Nieto intends to employ new financial tools to fund infrastructure in the country, which makes manufacturing in Mexico possible. There are four key infrastructural areas the Mexican government is focusing on:

1. Education
Part of Nieto's focus on directing capital flows to infrastructural projects is to improve education. As noted by The Wall Street Journal, the measure aims to use funds to improve education levels by establishing a meritocracy among teachers. Additionally, funds will be used to improve schools in rural and poor areas, which often lack electricity, toilets and roofs.

Further, Mexico has taken major strides in creating a more educated populace. For example, as a result of greater funding for two year colleges and universities focusing on science and engineering, more Mexicans earn engineering degrees annually than either Canadians or Germans. 

Infrastructural improvements add to the offshoring advantages of Mexico, that is why AT&T invested $3 billion in order to improve access to their high speed internet on their mobile devices. Infrastructural improvements add to the offshoring advantages of Mexico.

As Mexico continues to improve education within the country, manufacturers in Mexico will have access to valuable, skilled labor. 

2. Transportation
Mexico's participation in NAFTA means manufacturers in Mexico have a major free trade advantage that saves them money and creates efficiencies. Mexico is focusing heavily on improving transportation infrastructure - including roads and bridges - to make supply chains more efficient and empower businesses to save the most money. Additionally, Business News Americas reported the Mexican government plans to invest $1.7 billion to expand rail infrastructure, and Fox News Latino added that construction has begun on a $9 billion airport in Mexico City, which will accommodate four times as many passengers as the current airport.

3. Communications
Communications infrastructure is essential for manufacturers in Mexico. As a result, Mexico has placed heavy emphasis on improving this area.  In fact, Area Development reported that earlier this year, AT&T announced plans to invest $3 billion to extend its high-speed mobile Internet service to Mexico. The expanded network will bring connectivity to 100 million consumers and businesses by the end of 2018.

4. Energy
Since 2013, Mexico has harbored an ideal climate for energy reform and infrastructural improvements that will bring oil prices down for manufacturers. More specifically, when the country's national oil company, Pemex, became a state-owned productive group in 2013, the company was able to enjoy much more independence from the government. More recently, the U.S. government and Pemex made an agreement to exchange heavy oil pumped in Mexico for light crude oil produced in the U.S. As a result, Mexico's oil refineries will be able to make more gasoline and run more efficiently.

As infrastructural improvements remain a top priority for the Mexican government, the offshoring advantages of companies moving their operations there will become more apparent.

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