Why not Mexico? Moving production to the South would provide many benefits: the local populace would stay in place with a decent wage, freight expense would be greatly reduced with elimination of Pacific vessel shipments, with better income Mexico would become a better trade partner, illicit drug industry would be subject to better control by both governments if Mexican economy stabilized.
Is something going on in China?
- Thread starter mynameisjonas
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They're too afraid to test the waters on whether the brainwashing is really absolute there.
I've thought we should focus more economic development to central and south America. It would provide economic stability and benefit in eliminating or limiting some of the criminal gangs as well. Thus leading to an overall increase in quality of life in those areas.
I understand why you'd want to have operations in Asia, its a large and growing population with a lot of monetary potential. However, I think any Asia strategy a company has needs to be in addition to production you have in the US (or other countries). I believe all iPhones are made in China, so your really reliable on a single economy to come through. Bottom line, having a diverse supply and production chain is beneficial and risk averse.
I agree and I think US-centric companies will eventually move in that direction. Larger global companies like Apple and such will probably stick to Asian manufacturers. Personally, I would feel more comfortable with Mexican infrastructure than I would India.
NAFTA was supposed to help with that. And it did, but it also hurt the manufacturing sector, and now its a giant "theay tuuuuk huuurrr juobzzz" political football. So now it's a frozen issue so both parties can accuse the other of being terrible, and no motivation to make it better in any way.
Also, to say security and rule of law has become a problem there is a serious understatement. I wouldn't put anything there, too much risk. It's not close to being a failed state, but it's bad enough that it has to be considered.
We're grading on a curve here.
There aren't a lot of developing nations with good governance and rule of law left.
Why?
Because if they had those things, they're no longer developing by now (e.g., South Korea).
Not much low-hanging fruit left to pick.
Lower costs come with higher risks.
It's too bad that Brazil and Argentina can't get their act together because they have potential as destinations, but they continue to elect absolute clowns who eff up the economy. The inflation there makes investment a non-starter.
I had work colleagues that were located in McAllen, TX and we frequently had to move things across the border. I was amazed at all of the security issues due to cartel activities that would come up in the area that nobody else in the country would here about. Kidnappings, thefts, car explosions, etc. was just considered almost normal for the area.
I do wonder why some tech companies prefer China though. Close proximity to rare earth metal mines for batteries? Maybe China's wage and worker protection laws, as well as regulations, favor tech companies.
I have a friend in So Cal whose husband used to operate a cross border business in Cali and Mexico. He would drive a mile or so from the border and switch to a beater of a pickup to take across the border. He always dressed really plainly so as to not draw attention to himelf and spoke perfect Spanish and is dark complected so he can pass for Mexican. But in the last few years it got to be just too risky despite all of the precautions he took so he had to work elsewhere.
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Doh! I should have considered the obvious when I asked that question. Well played.
Having been to Brazil once, that place has absolutely untapped potential. It could be warm Canada. But they do keep getting garbage governments. I was there in 2004, and inflation was being tamed, Bolsa Familia was working to help people out of poverty... Then Lula & company overspent like crazy and were corrupt, and now Bolsanaro is a nut job and still corrupt.
And in spite of all this, the people are great, there are a lot of fantastically good businesses... I hope they get it right.
Definitely everything you mentioned, except worker protection laws. But also the Asian market is a huge developing market for companies to tap. A lot of money can be made there due to population and their growing economy.
I had a professor tell our class a decade ago, when the benefits of manufacturing items in China to only be sent to the US started to not be as beneficial to US companies. Those companies that had manufacturing in China to sell to the Asian markets were the winners.
Macroeconomists often joke there are only four types of economies in the world --
Developed countries (e.g., U.S., Canada, western Europe, etc.)
Developing economies (most everybody else)
Japan
Argentina
Japan has no obvious reason to be prosperous based on its geography and natural resources. It is a small island nation with very little arable farmland (though good access to sea-based foods), very little in terms of mineral resources, and even less in terms of domestic fossil fuel resources. Japan is essentially just the rugged peaks of an underwater mountain range in an isolated corner of the Pacific Ocean.
Yet they thrive -- third-largest GDP after the U.S. and China, industrial powerhouse and a leader in countless industries, exports all over the world, influential culture, stable/successful politics.
Argentina has every reason to be successful -- close access to the Atlantic economy connecting eastern North America and western Europe, some of the best farmland in the world, the benefit of being in the southern hemisphere so its harvests always come during peak price conditions, incredible natural resources, mild temperature throughout most of its territory, really has everything that you need.
Yet it is a total basket case and has been for almost a century.
Policy and governance matters.
Agreed. As long as the Kim dynasty keeps doing what they are doing they will be fine. If the dynasty for some reason started to become a more liberal type of regime they might be in trouble. That was the hypothetical the "experts" were talking about.
Their populations seem to overreact every time their is an election resulting in a governance change. Maybe elect a centrist and evolve from there based upon what programs work best.
A "centrist" isn't going to fix their corruption and fiscal mismanagement.
What they need is a blowtorch.
80hr workweeks and sleeping in pods isn’t for everybody. They better hope the Asian work ethic holds.
You are probably right. Unfortunately, this applies to about 75% of the world. As much as it seems like we have corruption here, it's pretty minor compared to elsewhere.
I've always semi-joked it works like this...
Imagine a scale from 1 to 100 with North Korea as the 1 and Switzerland as the 100.
The U.S. is like a 90 on that scale.
Now, as an American, I can find a lot to complain about in that remaining ten. Debating what measures we should take to address the remaining ten is the sound and fury of our politics.
But I am very aware that compared to most countries, the U.S. is well-governed.