As we have crabbed before in this space, for the longest time it seemed like all you ever saw in the press about Mexico was nasty news about drug trafficking violence. But at some point in 2012, it was like a new memo went out (and maybe one did), and all of a sudden stories started popping up about Mexico’s economic progress, bright future, and flashy manufacturing industries. It’s not like our problems have gone away – they certainly have not – but it is nice to see something more positive in the media for once. After a while we started collecting these stories to enjoy time and time again, so we thought we’d share them so that you can enjoy them as much as we have.
In the run-up to this weekend’s G20 meeting in Huntsville, Ontario, much ink has been spilled regarding the value of the Chinese currency. Economists, pundits and observers of all stripes have taken positions on various sides regarding the question of how much and how fast the yuan (or Renminbi, if you prefer) needs to appreciate against other major currencies. And, of course, how willing Chinese authorities are to allow this to happen.
Hypothetical scenarios projected in some circles of a rapid appreciation of 40% have China’s export competitors salivating. Basic trade theory holds that by hiking the value of the yuan, Chinese exports become more expensive, making competing products made in countries such as Mexico that much more cost competitive. Gaining ground of this type is seen as critical in the hotly disputed U.S. market for goods such as appliances and electronics. Trade data for 2009 suggests that Mexico is already gaining some overall market share from China in the United States, and we have touched on the relative cost competitiveness between Mexico and China in this space before.
Here’s one that, we confess, took us by surprise: in a recent study of tax attractiveness for business, when the final numbers were in, Mexico came in at a whopping…wait a moment…(removes glasses, rubs eyes, puts glasses back on)…number one??!!
Well, we are beaming, we must say. It’s not that we feel Mexico is not tax competitive – it’s just that, well, we’re still a little grumpy after filing our own Mexican corporate and personal taxes earlier this year. But in KPMG’s Competitive Alternatives 2010 Special Report: Focus on Tax, Mexico is ranked number one, with the lowest Total Tax Index (TTI) based on a study of 95 cities in 10 countries. The three major tax components under analysis in the report are corporate income tax, other corporate taxes, and statutory labor costs. Tax systems vary widely from country to country, of course, and the overall tax burden on businesses can vary significantly by industry within a country. Any attempt to boil down the corporate tax environment to a single index score will be complex, and KPMG addresses the challenges to such an undertaking in detail in their report. Nonetheless, at least in this document, we are number one, and we must say we are well chuffed. Now, if we can only keep the momentum going into the World Cup…