Mexico car industry booms, not wages
Mexico’s booming automobile industry is generating more export dollars than oil, building more cars than Brazil and giving a job to Esmeralda Velazquez. What it isn’t doing is raising her living standards.
The 37-year-old machine operator at an auto suspension plant earns $295 per month — not enough to afford a telephone service or separate beds for her two daughters, let alone a computer or car. Pay raises have barely kept pace with inflation since she began working in the industry 15 years ago, she said.
“When I see a nice car pass by I think, ‘I made that suspension but I’ll never be able to own one,’” Velazquez said from her rented cinder block home in the city of Queretaro, about 130 miles northwest of Mexico City.
Productivity has risen twice as fast as wages since 2005 in Mexico, Bank of America Corp. calculates, helping the country attract investment and become the second-largest auto supplier to the U.S. and the world’s biggest flat-screen TV exporter. The flip side is there’s not much left over for workers, capping retail sales and keeping economic growth in the past 10 years at less than half the pace of regional peers such as Chile, Peru and Argentina.
While Mexican exports have risen an average 7.1 percent a year since 2001 on the competitiveness of local industry, domestic retail sales gained 2 percent through the end of last year. That compares with 5 percent in Chile, 5.1 percent in Brazil and 5.6 percent in Colombia.
“Purchasing power has deteriorated,” said Rafael Camarena, an analyst at Grupo Financiero Santander Mexico SAB. “Low salaries, the result of slow growth, are becoming a limiting factor for the development of the domestic market and therefore for the economy.”
Since 2003, Mexican workers’ earnings in the auto industry have risen an average of 0.3 percent per year more than the inflation rate, according to data compiled by the Labor Ministry. It’s a pattern repeated across the economy.
Labor unions, which are organized at each automaker rather than providing representation across the industry, have failed to boost wages significantly, according to Armando Soto, president of Kaso & Asociados, a Mexico City-based auto industry consulting company.
Cheap labor has helped attract $16.1 billion in investment announced by automakers since the beginning of 2010, according to the Center for Automotive Research in Ann Arbor.
Nissan Motor Co., Honda Motor Co. and Mazda Motor Corp. have opened factories in the last 13 months. Daimler AG, BMW AG and Kia Motors Corp. plan similar expansions. The new plants will push Mexico’s auto output to 5 million vehicles by 2019 from 2.93 million last year, according to IHS Automotive.
“The cost of the work force in Mexico adjusted for productivity has become much more attractive,” Luna, the chief Mexico economist at Citigroup’s Banamex unit, said by e-mail. “This allows you to draw more investment.”
While Mexico has surpassed Brazil in auto production this year, Mexican dealers sold 1.06 million light vehicles in 2013. Brazil’s domestic sales were three times as high, while the population is less than twice as much as Mexico’s.
Velazquez, who is divorced, lives below the poverty line as her monthly income is less than $190 per mouth to feed, according to standards set by the government. Her home with one room and one bathroom, separated by a shower curtain, lacks sufficient space for her children, according to those criteria.
Her daughters, ages 19 and 8, share a child-sized bed with a race-car frame. As she prepared to take her family to a friend’s house for Sunday lunch, Velazquez lamented she’ll have to start working at a grocery store on weekends to supplement her income.
“The hardest part is leaving my daughters alone for so long,” she said.