* Mexico's U.S.-bound exports to benefit from stronger yuan
* Mexico competes with China on low-wage factory goods
By Jason Lange
MEXICO CITY, June 23 (Reuters) - Mexico, which competes directly with China to sell electronics and autoparts to the United States, looks like a clear winner in the Asian giant's plan to strengthen its currency.
China this week started revaluing the yuan
But Mexico, which is not a major commodities player, probably wins out no matter what because more than any other nation it competes with China in low-wage manufacturing.
Hundreds of Mexican factories have closed since China entered the World Trade Organization in 2001 and quickly became a global exporting power, eclipsing Mexico as the United States' No. 2 trade partner in 2006.
Mexico, which itself joined the exporting big leagues when it entered the North American Free Agreement (NAFTA) with the United States and Canada in 1994, has complained that China was using a weak currency to help its manufacturers.
"Now we will have an advantage," said Cesar Castro, a
manager at Jabil, which produces BlackBerry smartphones in
Mexico for Canada's Research in Motion
Castro expects rising Chinese labor costs will further erode China's edge over Mexico. "The stronger yuan is going to make their lives more difficult," he said.
At the same time, it is unclear how much China will let the yuan strengthen, and policymakers say the revaluation will be gradual.
CURRENCY EDGE
Mexico has shown recently that favorable exchange rates can boost its exports relative to China.
Mexico's peso
That has helped Mexico's share of U.S. imports of goods and services to rise to 10.3 percent in the first three months of this year from 9.3 percent a year earlier. China's share has fallen to 13.6 percent from 14.3 percent over the same period.
China's plan to revalue "is positive for Mexico because it will continue to gain market share in the U.S.," said Morgan Stanley economist Gray Newman.
Even economists who think a stronger yuan will hurt global growth see Mexico coming out ahead.
A group of researchers from the Inter-American Development Bank, Cambridge University and Rutgers University think a stronger yuan will slow economic growth in the United States, Europe and Latin America.
Mexico, however, was the only Latin American country that would see growth boosted in their model.
"The reason why Mexico is different is essentially because it is in the free trade area (with the United States)," said IADB economist Alessandro Rebucci.
At the same time, Rebucci said gains made because of better currency terms should not be celebrated too much in Mexico, which has lagged behind China in producing more sophisticated goods.
While China has been investing more in education and attracts research and development projects, Mexico has put off changes to tax laws that would allow it to improve its creaky schools, roads and ports.
"A lot of China's exports are high-end and it's not just a matter of increasing or decreasing the price (through adjustments in exchange rates)," Rebucci said, noting that Mexico was not in position to compete with China in areas like battery technology and computer chips.
"Somebody else will compete in that," he said. (Editing by Andrea Ricci)