Lego is not afraid of Mexico’s drug war

LegomanThe world is full of production plants, but there are few that impress for their scale and modernity as much as the Lego factory in the northern Mexican city of Monterrey.

The plant, which Lego established in 2008 with a US$197m investment, already produces close to a third of the company’s global production. By next year, output is expected to grow 45 per cent.

To see all of this in action is a two-fold lesson. First, it shows that multinational companies are not overly concerned about Mexico’s growing drugs-related violence.

The centre-right government’s war on organised crime may have stolen the headlines, and with little wonder: the murder rate in Mexico has almost tripled since 2005, with official figures now showing 22 murders per 100,000 inhabitants last year.

But while the violence has made life tough for smaller businesses suddenly having to deal with extortion demands from organised crime as well as the threat of kidnapping, multinational companies do not seem to have suffered the same pressures.

At the same time, Mexico’s privileged location on the doorstep of the world’s largest consumer nation, together with its low-cost and skilled labour pool, and 40-plus free-trade agreements, offer companies an attractive export platform.

The result for Lego is that when it comes to supplying the North American market, it is both cheaper and more productive to manufacture in Mexico.

In the Monterrey factory, inside two vast white shells, each one almost one-quarter of a mile long, 380 surf-green injection-mold machines imported from Austria and Germany churn out the company’s famous little coloured bricks.

According to company estimates, production costs are about 20 per cent less than elsewhere. Meanwhile, the Mexican plant boasts just 43 defective pieces per million compared with 114 in the case of its Hungarian plant, and 350 in Denmark.


Related reading:
Mexico: FDI up despite drug violence, beyondbrics
Investors shrug off Mexican drugs violence, FT
Boom times despite safety fears
, FT
Mexico’s bulletproof economy, beyondbrics
Will drug violence in Mexico scare investors away?, beyondbrics