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Originally published February 21, 2014 at 4:50 PM | Page modified February 21, 2014 at 8:50 PM

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Mexico may trump Japan in car exports to U.S. next year

When NAFTA was signed two decades ago, Mexico produced 6 percent of the cars built in North America. It now provides 19 percent.


The Associated Press

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CELAYA, Mexico — 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 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 helped kept the poverty rate between 40 and 50 percent since the passage of the North American Free Trade Agreement (NAFTA) 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.

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.

Mexico has roughly 580,000 autoworkers, 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.



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