LOUISE GOESER: While oil and gas have been at the forefront of energy reform, one of the key needs in Mexico is to become more competitive in the cost of electricity. Despite the country’s competitive advantages: one of the biggest impediments to growth has been the high cost of energy, which is the key ingredient to production. Mexico can no longer afford to pass up on investment and employment in this area. Without it, firms will find better margins in neighbouring countries, which may have higher labour costs but much cheaper energy. Reforms now in progress aim to make energy cheaper, and are giving high hopes to the industrial sector. The determining factor, however, will be putting such policies into practice. Handing over power generation to private producers should, in itself, cut electricity costs by up to 40%. The numbers will vary with how energy-dependent a given industry is, but in general, every sector of the economy should see substantial gains.
A variety of industries are booming in Mexico, and while many are in basic manufacturing, the opening up of the energy market will bring lots of investment to value-added industries, too – especially energy-related ones like gas and petrochemicals. Having built a reputation as a major global carmaker, Mexico is now expanding its manufacturing capacities to include aerospace and is becoming a key manufacturer of advanced value-added products. This leaves no room for exclusively cheap manufacturing, as these industries are highly technical.
One can see how companies are now beginning to shift their investment strategies towards research and development (R&D). Those who build centres for innovation have a first-move advantage and the most to gain. Mexico’s high number of engineering graduates, year in and year out, will not only buttress manufacturing but boost the whole value-added supply chain.title