In the '51 world, globals also have problems:

If data is global, it must exist (ie, take storage) for the whole duration of the program; with limited storage, this is bad.
By using local data, you give the compiler the chance to re-use the space.

Using local variables can give your compiler a better chance to optimise.

Also, tools for "smaller" processors tend to have more restrictive limits; eg, if your linker has only a limited number of public symbols, be sure to use 'static' functions & local variables wherever possible.