Editor | Liu Jingfeng

Often, the joys and sorrows of humanity do not intersect.

Graduates of prestigious universities compete fiercely for street-level civil servant positions; young, energetic university students ride electric bikes, clad in delivery jackets, darting through streets and alleys; once-prominent professionals face the daunting 35-year-old career threshold with despair...

Amidst a global economic downturn, the employment difficulties faced by young people have become an omnipresent backdrop of our times.

Yet, on the other side of the ocean in Mexico, the picture is vastly different.

Recently, Forbes México reported that Pola Grijalva, President of the China-Mexico Chamber of Commerce, revealed that at least 100 Chinese companies are expected to invest and establish factories in Mexico within the next two years.

The influx of manufacturing enterprises into Mexico has transformed the country into an employment haven. According to a previous report by Mexico's El Economista, data from the National Occupation and Employment Survey (ENOE) showed that the unemployment rate fell from 2.5% to 2.3% in March, reaching an all-time low.

As the unemployment rate declined, the number and quality of jobs in Mexico also soared.

Mexico's National Institute of Statistics and Geography conducted a special survey on this matter, revealing that traditional manufacturing sectors created the most jobs. As of March 2024, manufacturing added 379,576 jobs, far surpassing other industries.

Almost all of these new jobs offer minimum legal benefits, and there has been a decrease of nearly 90,000 jobs requiring over 48 hours of work per week compared to previous years.

Jobs are abundant, easily attainable, with shorter working hours and ample benefits.

In the current global economic downturn, Mexican workers are truly winning big! Decades ago, however, Mexico, with its vast territory exceeding 1.96 million square kilometers and a population of over 130 million, was plagued by social issues such as severe income inequality, drug trafficking, and gun violence, earning it negative labels like "poor," "chaotic," and "gang-ridden."

From being on the fringes of society to becoming the guests of capitalists, what has Mexico gone through in recent years?

Before answering this question, let's take a look back at Mexico's historical evolution.

As one of the ancient cultural centers of indigenous peoples in the Americas, Mexico has nurtured rich Aztec and Mayan cultures. However, aside from these glorious historical achievements, there's a painful fact that cannot be ignored: for the past five centuries, this country has lived under immense duress.

In 1519, Spanish conquistador Hernán Cortés invaded Mexico, conquering the Aztec Empire.

For the next three centuries, Mexico was ruled by Spain. It wasn't until 1821, after over a decade of independence wars, that Mexicans finally shook off Spanish control and achieved national independence.

Sadly, this brief respite was short-lived. As the United States industrialized and its demand for expansion grew, it clashed geopolitically with its neighbor Mexico.

In 1846, the United States and Mexico went to war. Facing the economic might of its adversary, Mexico surrendered two years later, ceding 2.3 million square kilometers of territory, including Texas and California, and never fully recovered. Meanwhile, the United States emerged as a global superpower, spanning both the Atlantic and Pacific Oceans.

For over a century thereafter, under the relentless geopolitical and economic pressure from the United States, Mexico descended into a country rife with drug trafficking and gang activity.

Even Porfirio Díaz, Mexico's 30-year dictator, lamented, "Mexico is too far from heaven and too close to the United States."

The Monument to the Revolution in Mexico City. Adorning the four square columns supporting the dome roof are four sets of sculptures, each symbolizing one of the four banners of the 1910-1917 Revolution: Independence, the Reform Laws, the Agrarian Law, and the Labor Law.

Clearly, there are no heavens descending from the skies. In a sense, being too close to the United States has been a double-edged sword for Mexico.

On one hand, Mexico shares a long border with the United States, where affluence contrasts sharply with Mexico's poverty, fueling aspirations among many Mexicans to emigrate to the north. This has led to a thriving illegal immigration trade, creating vulnerabilities that facilitate drug smuggling.

On the other hand, to maintain its global dominance, the United States needs to continually expand its economic sphere of influence. Mexico, with its large population, stagnant economy, and lack of capital and technology, has become a prime destination for American entrepreneurs.

In 1994, the United States, Canada, and Mexico jointly signed the North American Free Trade Agreement (NAFTA), aiming to create a free trade zone among the three countries, reduce trade barriers, increase investment opportunities, and establish dispute resolution procedures.

Under this agreement, American companies have invested in and established factories in Mexico, enjoying tax incentives and lower labor and land costs. Similarly, capable Mexican companies have invested in the United States.

Since then, with the strong support of American financiers, Mexico's economy has taken off.

According to reports from Mexico's official research center, as of 2020, Mexico attracted $29.079 billion in foreign investment, with 30.1% coming from the United States and 40.6% flowing into the manufacturing sector. In recent years, the Sino-US trade friction has prompted many companies to relocate their production bases from China to Mexico to avoid high tariffs and potential geopolitical risks in the United States.

It is therefore not surprising that the Mexican government confidently predicted at the end of 2023 that it would receive $110.744 billion in foreign investment within the next two years.

Among them, the United States is the top investor with $42 billion, followed closely by China with $13.19 billion in investment.

Mexico's robust economic performance has made it a focal point for global industries and capital.

In 2023, international giants like Tesla, Bosch, Volkswagen, Kia, General Motors, BMW, Nissan, Philips, and Unilever expressed intentions or took actions to invest and establish factories in Mexico.

Meanwhile, Chinese companies like Huawei, JETOUR, Yanfeng Automotive Trim Systems, Man Wah Holdings, and Lenovo have also followed suit, setting up shop in Mexico.

However, many corporate executives accustomed to making strategic decisions from afar have discovered upon arrival that making money in Mexico is not as straightforward as they had imagined.

A glimpse of Monterrey, Mexico. Monterrey, the capital of the northeastern state of Nuevo León, is Mexico's third-largest city and the country's second-largest industrial base. Centered on the automotive industry, it is located just 200 kilometers (about 124 miles) from Texas, USA, a two-hour drive away, and only six to seven hours from Tesla's Austin factory in the United States. Therefore, it is the preferred destination for automotive suppliers investing in Mexico.

Located here is the North American Huafu Industrial Park, jointly invested and established by the Chinese companies Holley Group and Futong Group, along with Mexico's Montes de Oca family.

In February 2023, Tesla founder Elon Musk announced plans to invest $100 billion in building a factory in Monterrey, Mexico. The facility will be 20 times larger than Tesla's Shanghai Gigafactory and is projected to have a production capacity exceeding 1 million vehicles.

As a supplier to Tesla, Suzhou Ruikeda was notified that it must establish a factory in Mexico or risk losing its status as a Tesla supplier.

Thus, Fu Yongfeng, with years of overseas employment experience, was sent to Mexico to serve as the factory manager. Caixin Magazine previously reported his story. Due to visa issues, he was detained by customs upon arrival in Mexico and spent the entire day struggling, losing his luggage and missing his flight.

This incident was just the first obstacle he encountered in Mexico.

During the construction phase, the contractor miscalculated the dimensions of two columns, resulting in a loss of RMB 2 million. Before Fu Yongfeng could even report this to headquarters, the air switches needed for construction were discovered stolen.

An investigation revealed that the security guards had colluded with a theft ring.

These air switches cost only a few hundred yuan in China but could fetch up to tens of thousands of yuan in Mexico. The yellow steel structures used to support the factory cost only RMB 150,000 in China but RMB 850,000 in Mexico.

Even after construction, rigid costs remained high.

The average industrial electricity price in Monterrey is about RMB 1.2 per kWh, twice as expensive as in China. Factory rental prices are approximately RMB 51 per square meter per month, while in Dongguan, known as the "World Factory," rentals are around RMB 30 per square meter per month.

Even so, it's not easy for ordinary people to build a new factory in Monterrey. Just applying for electricity can take at least eight months, and even then, approvals are not guaranteed.

A building under construction

Entrepreneurs seeking opportunities abroad are no strangers to Mexico's poor security and high costs. Nevertheless, constrained by North American customer orders and the risks of Sino-US trade, they have no choice but to accept these challenges.

As Huang Yuanpu, founding partner of the think tank CGGT, said, "The purpose of going to Mexico is not the local market but the entire North American Free Trade Agreement region. Whatever the United States needs, Mexico will have it."

What frustrates domestic investors even more is that the experience they've accumulated over the past 30 years fails to apply in Mexico.

Firstly, labor costs in Mexico are not low; in fact, they are even higher than in China's first-tier cities. When people think of Mexico, images of drug traffickers carrying heroin and firing AK-47s at police often come to mind, painting a picture of a violent and impoverished nation.

This is clearly a misconception.

In reality, coveting the robust automotive consumer market in the United States, almost all global automakers have established overseas factories in Mexico. While Mexico does indeed smuggle large amounts of drugs to the United States, it also exports automotive components, medical equipment, energy minerals, and other technologically advanced products in even greater quantities.

According to international authorities, Mexico's per capita GDP in 2023 was $13,803.74, ranking 64th globally and 11th in North America. In comparison, China's per capita GDP in 2023 was $12,541.40, ranking 72nd globally and 18th in Asia.

Mexico is not as poor as perceived, and the misconception that its labor costs are low is a common misunderstanding among Chinese companies.

In Nuevo León, where Chinese companies are most concentrated, the average wage for ordinary workers is approximately RMB 4,000. In Baja California Sur, the most expensive state, it's around RMB 4,400, but workers are only required to work a maximum of 57 hours per week, with 48 hours being the standard.

And this is just the basic salary, excluding social security contributions, double or even triple overtime pay, and other benefit costs.

Mexican law mandates that the minimum wage must increase by 20% annually to offset inflation, and companies must allocate 10% of their annual profits to employee bonuses after turning a profit.

This means that if a company fails to achieve over 20% annual profit growth, it will only incur greater losses.

Secondly, cultural clashes present significant challenges to personnel communication and management.

In Chinese workplace culture, subordinates are expected to obey superiors. In contrast, Mexicans crave respect. They believe that even the lowest-ranking employees have the right to voice their grievances directly to their bosses, rather than shouting and pointing fingers, as is sometimes seen in Chinese workplaces.

Chinese managers often criticize Mexican workers for being inflexible and adhering rigidly to rules, while Mexicans perceive Chinese companies as lacking clear operational guidelines. Chinese managers prioritize employee loyalty, whereas Mexicans prioritize tangible benefits, often tempted to switch jobs for a mere 10-peso (approximately RMB 4) daily wage increase at another factory.

Moreover, compared to the diligent and pragmatic Chinese workforce, Mexican workers are notably unreliable and lax.

In Mexico, most companies pay biweekly or monthly. Biweekly payments are typically made on Fridays or Saturdays, while monthly payments are usually at the end or beginning of the month.

Regardless of the payment schedule, if payday falls on a weekend, Monday invariably sees the lowest attendance rates, as employees are often hungover from the previous night's revelry.

Dancing and parading Mexicans

On April 8, 2024, the longest total solar eclipse in 14 years occurred in North America, coinciding with a Monday. It is said that the average attendance rate at Mexican factories that day was only 80%.

Employees cited childcare responsibilities as their reason, but the truth was that they wanted to witness the solar eclipse.

Many Chinese investors in Mexico have expressed their difficulties in developing in the country during interviews with reporters.

However, contrary to this perception, from 2018 to 2022, Chinese enterprises created over 112,000 jobs in Mexico, accounting for nearly 40% of the total.

According to a survey conducted by BBVA, Mexico's largest commercial bank, among foreign-invested enterprises entering Mexico from 2018 to 2022 (the period when the China-US trade war erupted), the United States accounted for 35%, while China accounted for 6%. By 2025, Chinese companies are expected to account for 20% of the market share.

Recently, there have also been rumors that BYD plans to build a factory in Mexico, which is expected to create about 10,000 jobs. At the end of August this year, Reuters reported that the national head of BYD, a Chinese electric vehicle manufacturer in Mexico, said that the list of potential locations for the manufacturing plant had been narrowed down to three states, and a series of incentives had been received for plant construction in each state.

You can doubt the nature of capital, but you cannot doubt its vision.

In summary, entrepreneurs' choice to invest in Mexico is not a whim but the inevitable result of a multi-stakeholder game.

On the one hand, North America is the most important market for many Chinese manufacturing companies, and customers in North America hope or even demand that Chinese companies set up factories in Mexico to enhance supply chain resilience and efficiency. On the other hand, for Chinese companies, Mexico's proximity to the United States offers fast logistics, and due to the USMCA (United States-Mexico-Canada Agreement), Mexico enjoys tariff-free exports to North America, saving 25% in costs directly.

Apart from external factors, Mexico's own demographic and market advantages also offer significant potential to investors.

In 2023, Mexico's population reached 130 million, making it the world's tenth most populous country. With an average age of 29, the population is significantly younger, offering a cost-effective labor force.

Mexicans' pursuit of fashion transcends age, and their enthusiasm for online shopping demonstrates strong spending power. According to statistics, in 2021, the disposable income of Mexican households accounted for approximately 86% of total income, almost twice that of China.

Mexican girls performing during a festival

Mexican internet users are active digital media consumers, spending more time than the global average on various activities related to modern social content consumption, including mobile devices, social media news, and music streaming.

Every November, the Mexican government hosts a large-scale online shopping event called 'Buen Fin' for four days, aiming to stimulate economic growth by encouraging consumers to shop during the holiday season.

For Chinese entrepreneurs heavily invested in Mexico and setting sail abroad, navigating through the competitive business landscape to find blue oceans is undoubtedly a test of business acumen.

Risks and opportunities always coexist. Excellent investors must seek opportunities amidst change and learn to profit from uncertainty.

Entrepreneurship is both a spiritual journey and a risky gamble. Every successful entrepreneur is an elegant dancer on the razor's edge.