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New Trend May Draw U.S. Manufacturers To Mexico

— The average manufacturing costs in Mexico last year dropped below those of China, the Boston Consulting Group said.

Mexico's close proximity to the U.S. and cheaper labor may draw U.S. manufacturers out of China.

Photo by David McNew

Cars cross into Mexico.

Just 13 years ago, Mexican labor was 58 percent more expensive than in China. By 2015, the consulting firm projects it will be nearly 20 percent cheaper. Along with the relative plummeting of Mexican wages, its proximity to the U.S. also cuts down on supply-chain costs.

That trend is expected to continue, especially after a recent labor reform law in Mexico that gives companies more freedom to hire and fire workers and pay them hourly rather than daily rates. This trend is expected to lead many U.S. manufacturers to relocate to Mexico, despite concerns about security and corruption.

The consulting firm's research said this shift will add $20 to $60 billion in output to Mexico's economy each year.

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