Monday, August 18, 2014

Mexican Auto Production and the Middle Class

Nathaniel Parish Flannery has an article in Forbes about the auto industry in Mexico. He argues that it does not represent a threat to U.S. automakers because of strong integration.

I'm actually more interested in the demand side of things, which he also addresses. Mexico and the United States produce cars together, but Mexicans are buying far fewer of them than other countries--it exports 8 out of every 10 cars it produces. In other words, we're bombarded by proclamations of Mexico's middle class status, but what we actually see is that Mexico's wealthy buy most of the cars. The rest of the country has to wait until their wages allow it. Mexico is very unequal and has shown too few signs of changing that fact after a bit of success in the 1960s and 1970s.


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