Mexico’s growth has long relied on manufacturing — that may be changing

By José Luis Martínez

Mexico may not be able to rely on manufacturing alone to drive future growth, according to new research that says the country’s service sector is gaining ground faster than many policymakers realize.

James Gerber, a U.S.-Mexico economic relations researcher, said a global decline in manufacturing jobs could push Mexico toward a more service-driven economy. 

At the same time, productivity in service industries — how much economic value each worker produces — is growing faster than in manufacturing.

“The outright dismissal of services or the failure to consider them as a focus for economic development efforts is a missed opportunity,” Gerber wrote in his paper titled: “Are Services an Alternative to Nearshoring in Northern Mexico?”

The report, published by the Claudio X. González Center for the U.S. and Mexico at the Baker Institute for Public Policy in Houston, comes as Mexico continues to benefit from nearshoring — the shift of manufacturing closer to the U.S. after trade tensions with China and supply chain disruptions during the COVID-19 pandemic.

But Gerber also cited academic research showing that manufacturing’s share of employment has declined in Mexico and other countries since 1990. Vietnam is one of the few exceptions and remains a key low-cost competitor.

Manufacturing still plays an outsized role in Mexico’s economy, especially along the U.S. border.

In 2023, about 25% of jobs nationwide were in manufacturing. In the six border states, that number was much higher — about 40%, up two percentage points from two years earlier.

At the same time, service industries are expanding more quickly.

From 2008 to 2018, service-sector output grew about 50% faster than manufacturing. 

Productivity growth in services was also far stronger — nearly 19 times higher than manufacturing over that period.

In some industries — including wholesale trade, finance and insurance, and corporate offices — workers are now more productive than those in manufacturing across all six border states.

Gerber also pointed to another factor: resource efficiency.

Service industries tend to generate more economic value per unit of water and energy than manufacturing, which could become more important as infrastructure pressures increase.

“The average service sector worker is less productive than the average manufacturing worker, but productivity is growing at a much faster rate,” Gerber said.

The takeaway: manufacturing will remain a key part of Mexico’s economy, but services could play a much larger role in what comes next.