Transformation of the spatial structure of the Mexican automotive industry under the impact of FDI

Abstract

The purpose of this article is to determine the impact of FDI on the changes in the spatial distribution of the automotive industry in the years 1999-2013. The article examines the spatial structure of FDI inflows associated with the automotive industry to Mexican states, trying to determine their size and structure as well as their impact on the change in the level of employment and production in this sector. The analysis allowed for indicating the newly formed clusters of this industry in the analyzed states. In the years 1999-2013, the Mexican automotive industry attracted the inflow of more than USD30.4 billion in the form of FDI, which accounted for 8.5% of the total cumulative value of FDI inflow in this period. This led in consequence to the dynamic growth of the production of new vehicles as well as parts, most of which was spent on export to neighboring countries of NAFTA. One of the important elements of the transformation of the Mexican economy in the early 1990s. was the liberalization of foreign trade and the opening of the inflow of foreign investment. The second very important economic advantage was joining NAFTA in 1994. Those two factors caused Mexico to become a very attractive place for the location of industrial activities. Firstly, due to its large domestic market, growing with the increase in wealth of the society. Secondly, due to the NAFTA agreement guaranteeing the freedom of movement of goods to the USA and Canada meant that Mexico was becoming an attractive production platform offering relatively cheap and well-educated workforce and access to capacious market. Another important factor increasing the inflow of FDI, particularly in the automotive industry, was connected with changes of the strategies of the international car producers under the influence of globalization and increasing competition in global markets. The desire to reduce production costs while maintaining the quality of the produced vehicles and access to the market, have forced particularly American corporations (GM, Ford and Chrysler) to transfer an increasing part of their production to Mexico. The country has also become attractive to other transnational corporations competing with American manufacturers, which also intensified FDI inflow in this sector to Mexico.