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The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
By David Sterman
NEW YORK (
StreetAuthority) -- Every few weeks, another major manufacturer announces plans to shut down production in China and bring jobs closer to home. Some companies such as
GE(GE) aim to boost production in the U.S. (GE will make hot water heaters in Kentucky, for example). That's because China is no longer the bargain it once was, thanks to a rising minimum wage and a strengthening currency. It's important for investors to be aware of this trend, because economists say it will only build in the years to come, as China's wages and currency are expected to rise even higher.
Perhaps the greatest beneficiary of this trend will be Mexico, which will always remain a low-cost environment for manufacturers. Since the North American Free Trade Agreement was ratified in 1994, Mexico has seen a steady rise in goods shipped north of the border. More than 70% of Mexico's exports head to the U.S., and that figure is expected to hit 75% in 2012. It's telling that even as global economies slumped in 2011, Mexico's exports still rose 13% to $336 billion, according to the CIA World Factbook.
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Perhaps the clearest sign of increased economic activity can be seen in airport traffic.
Aeroportuario del Sureste(ASR), which operates nine regional airports, recently announced that passenger traffic rose 10% in January from a year earlier. Business executives scoping out new manufacturing opportunities are likely part of that spike.
Rising exports are creating myriad benefits from Mexico. First, thousands of workers are finding jobs in factories each year, pushing them from subsistence living into the lower middle class. That boosts demand for all consumer-facing businesses. Second, the firms that transport goods are seeing a rise in business. Lastly, the government is able to secure rising tax receipts, crucial when you consider that government-owned energy giant
Pemex is seeing falling output in key energy fields, leading to reduced remittances to the government.
These three investments are a great way to play the surging Mexican export sector.