By Daniel Boulton
The possibilities of a country depends on the capacity of it´s industry to add value at a lower cost, develop new products and the way they do things. The competition among companies due to globalization, makes them change to adapt, searching for new countries to produce andobtain an advantage.
The goverments of the countries play a key role in the creation of comparative advantages through incentives, programs and encouranging local advantages for the different industries. Companies must be able to see the incentives a government is giving and has to think the country is reliable, goverments should make it easy for companies.
What makes a country to be atractive is:the size of the internal market and its growth, labour prices and quality, cost of transport, taxes, natural resources, the currency strenght, costs of tariffs and the culture of the society among many others.
The countries I am comparing are Mexico and China, two huge countries with many posibilities that we are going to explore in depth. In some areas mexico presents advantages and in otherdisadvantages.
In the 60s Mexico had a raising income of international money, specially from the United States, that where investing in manufacturing industry. Today the importance in the economy of the international money invested in comapanies is still very big, but its growing at a much lower rate. This is because asia has been growing at incredible rates, and since 1992 when china definitlyopened its markets, the growth of this country has not stopped.
The government policies applied by china seem to have been more succesful recently, and it seems as if they are more effective for atracting companies than the mexican policies. So, it is essential to know the comparative advantages of each country to see the future of this countries and how atractive can it be to invest in one oranother.
Labour costs: The great advantage of China over Mexico and many other developing countries. Low labour costs is what many companies are looking for in order to cut expenses and maximize profits. The salaries paid for semi-qualified workers in china are lower than mexico, this is why many companies that where before in mexico have now gone to china.
Infrastructure: Inthe 90s china invested huge amounts of money in railways, airports, roads and more, this was due to the economic plan of the chinesse government. All the country is now well comunicated for products transportation. In mexico there has been a lack of an economic plan to improve infrastructures which has limited the competiteveness of companies.
Geographic ubication: Both countries have a greatgeographic ubication. Mexico is right by the United States, biggest importer in the world, this means a great advantage fot companies settling them selves in Mexico. China has as neighbours japan, south korea, hong kong, malasya and India, a huge growing market. The international costs of transportation has been reduced, minimazing the mexican advantage of being next to the United States. But itstill has other advantages such as the time it takes to deliver, the distance, and problems that can occur in entering the United states main west maritim port, long iland. Even do mexico has this advantages, being ubicated in asia with so many raising economies can overcome this advantages. Both countries are in good ubication, although the dinamism of the asian region seems to be a better place toinvest in.
Natural resources: Both countries have plenty of natural resources to offer at low cost, such as electricity, water, petrol, land.
Qualified labour: qualified labour is an important asset as it improves efficiency and its necessary for some tasks. There is greater disponibility of this kind of workers in mexico and their cost are low in an international level altough this trend is...