Higher wages could dent Mexico’s competitiveness

18th April, 2019 10:26:53 printer

MEXICO CITY: Higher wages could reduce Mexico's competitive edge unless they are properly applied, the Bank of America Merrill Lynch (BofAML) said here on Wednesday.

The bank's economist for Mexico and Canada, Carlos Capistran, warned raising wages could be risky after legislators approved labor reforms required by the recently negotiated U.S.-Mexico-Canada Agreement (USMCA), reports Xinhua.

Mexico's low wages have long been one of the country's main advantages over its North American trade partners, leading to low production costs and allowing the country to become an "industrial power," Capistran wrote in a report.

"Higher wages could undermine that advantage and also put pressure on inflation, especially inflation in services, which has recently remained stubbornly above the central bank's 3-percent target despite a slowdown in economic activity," said Capistran.