(June 7, 2004) — Low prices are killing Mexico. And if we're not careful in the United States, we could face the same dilemma.
At the recent Plastimagen 2004 show in Mexico City, many machinery companies showcased the latest in high-speed equipment and new controllers. This was equipment that many Mexican processors could use to gain respect as world-class molders.
In fact, that need could become more acute. In an interview at the show, Horacio Lobo, president of Mexican plastic industry association Anipac, said technology must become more of a factor for the country to compete on the world stage. “We have to show the rest of the world what we can do,” Lobo said.
Yet, while those words might be noble ones, Mexico has yet to walk the walk. Most of the world's large equipment suppliers exhibiting at Plastimagen also were showing off their lower-end equipment, without automation or controls or other features aimed at efficiency. Those bottom-rung models generally were the ones selling.
Everyone buys on price, said Arburg GmbH + Co. distributor Juan Carlos Lachica, based in Mexico City. “If a [processor] is looking at quality vs. low price, low price always wins,” he said. “They start buying cheap equipment. And it hurts them later.”
Companies at Plastimagen said a shift in attitude toward equipment that is more automated and less labor-intensive is slowly coming. They are struggling to change that paradigm.
But processors in Mexico also are conditioned to offer parts at a discount, compared with other regions of North America. It is an attitude that helped the country gain prominence in the 1990s.
At the same time, it has left many Mexican processors with little money to buy capital equipment. Prices are low, and so are profits, said many exhibitors.
At the same time, Asia is becoming a threat to Mexico in more ways than one. Yes, goods made in China already are sold at prices well below what Mexico can offer. But in addition, low-priced machinery from all parts of Asia — South Korea, Taiwan and China — is flooding the Mexican market.
At Plastimagen, the number of Asian machinery makers exhibiting was at least as large as that of European and North American suppliers. Many, like Lien Yu Machinery Co. Ltd. of Taiwan, sell units of 50 tons or smaller that claim both quality and low price.
There's little wrong with competition or in the market finding its own level, but those things do not make it any easier for Mexican processors to get out of their slump.
Except for a few multinational companies, many of which are pulling up stakes to manufacture in China, the Mexican market still is relatively depressed. It also is shrinking at a rate that agitated many visitors to Plastimagen.
How can we relate to that in United States and Canada? Well, we also have quite a few processors that like to sell on price, even at the expense of profit margins, and are not buying sophisticated machinery. We also are complaining about Asian competition.
They say that Mexico is a microcosm of the United States, that we are brothers in business. Think about that the next time you consider whether to invest in automation or efficiency. They're asking the same questions down south.