Over the last 20 years, the growing global economy has allowed manufacturers to enter new markets to serve an increasingly global customer base while also shortening supply chains and reducing cost structures.
Mexico’s prospects for reforms that would eventually unleash the country’s economic growth potential are on the rise since Enrique Peña Nieto was elected president in July 2012. Since the election and taking office on December 1, 2012, the president has focused his energy on a host of proposals, including ambitious reforms that would shake up an economy that has shown disappointing results on the growth front for two decades.
Over the next few years, five structural developments will dominate the scene in Latin America and will have definite impacts on U.S. manufacturing companies doing business there. Three relate to large energy projects that will both demand manufactured goods and lower manufacturing costs, stimulating production and economic growth. In Brazil, the 2014 World Cup and 2016 Olympics are triggering opportunities across manufacturing sectors. Finally, Mexico’s politicians are attempting to tackle the lack of competitiveness of their economy, an effort with benefits for the nation’s export-oriented industrial sector.
A new study produced by MAPI and Deloitte draws on a survey of global manufacturers to offer insights into which new markets manufacturers plan to enter in the next five years. As might be expected, the United States and China should see the greatest number of investments in existing operations by 2020. Various countries in Asia and South America should see increases in new project investments.
For years, protectionist policies helped Brazil build a fortress around its manufacturing base, which profited from a rapidly expanding domestic market over the past decade. Ever-rising purchasing power and the best credit conditions in decades fueled the demand for durable goods and housing, in turn stimulating most intermediate industries. A sort of virtuous cycle led to a broad-based manufacturing expansion that was interrupted in the wake of the 2008 global economic crisis. It took Brazilian factories more than a year to recover pre-crisis output levels, and manufacturing subsequently stopped growing. Three years have passed without genuine manufacturing growth in Brazil, despite the government’s protectionist stance that is ingrained in every sector of the economy.
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