In a deglobalizing world, regionalism matters. Wealthy countries higher up the value chain often rely on lower-cost locales to provide their consumer market with labor-intensive products at lower prices. For the better part of thirty years, China has provided that for much of the world turning out everything from children’s toys to solar panels. But the winds of geopolitical change are driving many companies to source products closer to home to reduce the risks that range from pandemic-related supply interruptions to tariffs to the threat of armed conflict.
In this current environment, Mexico is the yin to the United States yang. Low labor costs, proximity, and free trade make Mexico the obvious alternative for the “Made in China” machine. For Europe, North Africa, specifically Morocco, Tunisia, and Egypt, have the potential to fill the same gap. While they all have a role to fill, you would be mistaken to think the shining star of these, Morocco, is the value equivalent of Mexico. It is so much more.
While Mexico’s GDP is nine times the size of Morocco’s (2021) and its population is nearly 3.5 times the size, Morocco has several things that Mexico and its continental rival Egypt do not.
First, Morocco has stability and security. Through the adept leadership of Morocco’s sovereign King Mohammad VI, Morocco was able to better navigate the turmoil associated with the Arab Spring in 2011. It also ranks as one of the world’s safest countries from violent crime with a murder rate per 100,000 of 1.3 compared to Mexico’s whopping 28.4.
Second, whereas Mexico is a weak, democratic state with much of the power lying with the states, Morocco is a strong state with power residing in Rabat with the national parliament and the King. As such, the central government of Morocco can undertake large infrastructure projects that require long-term commitment, rapidly cutting through bureaucratic red tape. One such example is Tanger Med Port strategically located where the Atlantic meets the Mediterranean. What was a family beach less than two decades ago is now the largest container port on the Mediterranean and the largest in Africa. At more than 7 million TEUs in 2021, it rivals the US port of New York/ New Jersey in terms of volume.
Other notable projects include:
- a 15 km rail connection to the Tanger Med Port to transport Renault cars for export
- a nationally sponsored vaccine manufacturing operation created in response to the previous and prepare for the next pandemic
- a rich aerospace cluster that boasts of making critical parts for Boeing, Airbus, Gulfstream and others
All of these projects were spearheaded by the central government as a part of its vision to modernize the country’s economy.
Third, electricity costs in Morocco are more competitive, electricity service is more reliable, and electricity generation is less carbon intensive than in Mexico. Mexico has abundant reserves of hydrocarbons, but government and private industry have often sparred with one another and underinvested making Mexico’s energy sector underdeveloped, disappointing and expensive. Morocco on the other hand has almost no oil and gas resources and is aggressively building wind and solar generation to leverage its favorable climatic conditions. The result is electric prices for industry can be half in Morocco what they are in Mexico with a lower carbon footprint and higher reliability.
Of course, Morocco has its share of challenges. Morocco has been in a state of drought for the last several years and will likely need desalination to meet its water needs. The scarcity of natural gas may limit which industrial processes can locate there either due to availability and cost of natural gas. And despite growing gender inclusivity (ranking similarly to Mexico), Morocco still has a way to go to take full advantage of the talents of the fairer sex.
Nonetheless, Morocco is a safe, productive manufacturing hub with a can-do culture. As companies reckon with the risks of cost escalation and security of supply of their far-flung, global supply chains, Morocco is a competitive location for the production of European consumer and industrial goods. And it’s free trade status with the US, China and many other nations make it a competitive location to supply global demand as well. So next time you think of Morocco, don’t forget that on top of its culture, cuisine and scenic views, there’s a booming economy ripe for the taking.