South Rises Again?

No, I’m not referring to the former CSA, rather, south of the South’s border. This release came across my desk recently, and I thought you’d be interested.     An economist for the fabricating and metalworking industry predicts that Latin America, once thought as a growth area for manufacturing but over

No, I’m not referring to the former CSA, rather, south of the South’s border. This release came across my desk recently, and I thought you’d be interested.

An economist for the fabricating and metalworking industry predicts that Latin America, once thought as a growth area for manufacturing but overwhelmed by Asian competition, is poised for a significant manufacturing revival.

“The once formidable benefits provided by manufacturing in China, India and other Asian states are eroding, “says Dr. Chris Kuehl, economic analyst for the Fabricators and Manufacturers Association (FMA).

“The most important factor is the cost of transportation, and it’s feeding what’s being referred to as ‘near shoring’,” Kuehl says. “This means hauling cargo across the ocean in a diesel burning ship isn’t as cheap as it once was. It’s now more cost effective to be closer to the U.S. market, which has sparked a wave of relocation plans.

“Other costs are rising as well,” he adds. “Chinese labor isn’t as cheap as it once was, especially in the fast-growing costal cities. The cost of energy is increasing, and China is contending with 8.3-percent inflation percolating through its economy. The same pattern is developing in other Asian supplier states.

“And now we’re seeing a lack of capacity in many Asian states,” Dr. Kuehl continues. “There may be a large labor pool, but there is not a large pool of skilled labor and capable managers. This has established limits on what can be accomplished there.”

According to Kuehl, these developments point to a return of the manufacturing sector to Mexico, Central America and South America as well as many sections of the United States. “China, for example, has never been easy to work with,” he adds. “Now that the cost advantages are fading, the appeal of working with our neighbors to the south has become obvious.”

Tell me what you think about Dr. Kuehl’s remarks. E-mail me at ckoepfer@productionmachining.com