Post Covid-19: Mexico Bears Strong Pull Factors For Manufacturers

• The Covid-19 crisis will prompt a sharp downturn in economic activity in Mexico over 2020, with the country's industrial sector being most exposed.
• Social distancing and movement restrictions will crimp industrial productivity and service sector activity, investment will suffer amid deteriorated sentiment, and exports will contract from a tightening in global demand.
• As pandemic risks subside, and movement restrictions are eased, Fithc believes that there is greater scope for Mexico’s labour market to recover and benefit from FDI into its automotive industry, as automakers look to bring their supply chains closer to home in order to comply with the US–Mexico–Canada Agreement and reduce their dependence on Chinese manufacturing.
• This is because Mexico offers an attractive operating environment for automakers, scoring a strong 63.2 out of a possible 100 in our Autos Production Risk/Reward Index, due to its strong industrial policy, ability to manufacture complex goods and its proximity to the US and Canada.
• Mexico's costs of employment are particularly competitive, having one of the lowest wages and highest levels of productivity in the wider Latin American region.

 (Source: Fitch)