By Nathaniel Parish FlanneryPublished July 29, 2014
Fox News Latino

Standing in front of the assembly line in Volkswagen’s massive campus in Puebla, Mexico, 35-year-old line boss Milton Araujo, looked at the shiny new Volkswagen Beetles rolling off the conveyer belt, illuminated by the bright lights overhead. “Back in the day, everybody had a Beetle,” he told Fox News Latino. “Now the car is different, much more modern.”

So is Puebla, which has emerged as one of the main hubs of Mexico’s automotive sector. “There are more stores, shopping centers,” Araujo said.

VW’s facility is a modern metropolis unto itself, covering more than 1.1 square miles, employing nearly 16,000 people and producing more than 500,000 vehicles a year.

It’s the largest car factory in North America and a big part of the reason why in 2013 the company celebrated the production of its ten millionth car made in Mexico.

Beyond Volkswagen and Puebla, the automotive industry is also growing throughout the country, in places like Aguascalientes, where Nissan opened a $2 billion facility late last year.

The latest evidence of this came in early July, when BMW announced plans to build a $1 billion assembly plant, most likely in the central state of San Luis Potosí.

In the last decade, Mexico has emerged as the world’s fourth-largest automobile exporter, behind only Germany, Japan and Korea, and earlier this year the country eclipsed Japan as the biggest exporter of cars to the world’s largest market, the United States.

“Investors see Mexico as an export platform with access to the United States,” Eric Farnsworth, the Vice President at the Council of the Americas in Washington D.C. told FNL.

Auto manufacturers from around the world are drawn to the country because of its proximity to the U.S. as well as cheap labor. Workers are paid about one-sixth what their counterparts in the U.S. make.

Chrysler builds Hemi engines and Ram pickups in Saltillo, the capital of the Mexican border state of Coahuila. General Motors builds Silverado trucks in the state of Guanajuato, northwest of Mexico City.

Although Chrysler still builds its highly profitable Jeep Grand Cherokee in Detroit, both Ford and General Motors have shuttered facilities in the Motor City.

Today Detroit is bankrupt, known nearly as much for its urban decay and abandoned factories and 14.5 percent unemployment rate—a figure more than double the national average—as it once was for manufacturing the cars.

The simplest logic suggests that there is a zero-sum calculation that any new auto plant in Mexico means one less plant in the U.S. and that every job created means one fewer job in the U.S.

Advocates of cross-border, regional economic development as exemplified by the North American Free Trade Agreement (NAFTA), however, argue that U.S. companies working in tandem with partners in Mexico can out-compete manufacturers in Asia and help build up the industry on both sides of the Rio Grande.

“Mexico isn’t taking jobs from the U.S.," Eric Farnsworth told FNL, “Because of integrated supply chains, up to 40 percent of the content of the products Mexico exports comes from the U.S.”

NAFTA has helped create more than six million jobs in the U.S., its defenders claim, but it’s a notion that is frequently disputed.

What is clear is that, since NAFTA came into force in 1994, foreign direct investment (FDI) in North America has increased nearly sixfold from $110 billion per year in 1992 to $650 billion per year in 2010, and today more than $1 billion dollars of goods and services cross the U.S.-Mexico border every day.

“A prosperous Mexico is good for the U.S.,” Farnsworth added, echoing the sentiment expressed by Mexican President Enrique Peña Nieto last year in an editorial in the Dallas Morning News. The U.S., Peña Nieto observed, “sells more of its exports to Mexico than it does to Brazil, Russia, India and China combined. By increasing economic growth in Mexico, we create jobs in the U.S.”

“The North American automobile industry is one of the most compelling cases of economic integration in the world,” Tony Payan, director of the Mexico Center at the Baker Institute for Public Policy at Rice University, told FNL. “It’s a success story, but at the same time it’s a darker story about Mexico betting on low wages” to drive development.

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