Competitive Advantages of Manufacturing in Mexico

With steady growth over the last half-century, manufacturing has long been a pillar of Mexico’s economy. The sector accounts for 18.5% of the country’s GDP, nearly half of its FDI over the last five years, and in 2022 has generated 10 million direct and indirect jobs and grown by four percent. With this, and on the heels of an overall reshaping of global supply chains and a shift away from China, Mexico’s government, industry, and academia are particularly focused on continuing to work together to ensure a stable investment environment and strengthen the regulatory frameworks, infrastructure, human talent, and supply chain ecosystems to foster this continued growth in Mexico’s manufacturing sector in a variety of industries.

Some areas with the most growth and opportunities for international and US companies looking to manufacture in Mexico include the automotive and auto parts, aviation and aerospace, medical devices, apparel and textiles, and consumer products industries. All of these have mature ecosystems and well-established industrial clusters throughout the country. Some states with many companies registered under Mexico’s export manufacturing promotion program, or IMMEX, in these and other industries include Chihuahua, Nuevo Leon, Guanajuato, and Jalisco.

Though the automotive industry in Mexico (with a strong presence in the Guanajuato area) is one of the most well-established, with more than 1,100 tier one automotive manufacturing companies operating here, including Ford, General Motors, Mazda, and Nissan, to name a few, there are a variety of related industries that can also take advantage of these mature supply chain and logistics networks to create a competitive advantage for their companies.

Another industry targeted for additional investment in the short and mid-term is Mexico’s electronic manufacturing sector. After global microchip shortages caused widespread delays and halted production on a multitude of products, the United States and Mexico have recently entered into negotiations with leading technology companies to invest in programs that facilitate and strengthen workforce development in the semiconductor and ICT supply chains.

Taking advantage of a long and open trade relationship and with the updating of intellectual property regulations and regional content values under the USMCA, the United States and Mexico continue to work together to reshape global supply chains and decrease disruptions, increase transparency, and lower costs for companies looking to manufacture in Mexico.

One of the main benefits sought by international companies is the country’s labor force. Due to Mexico’s competitive labor rates and trained and productive workforce, it has become known as one of the world’s best regions for manufacturing. This, added to rising labor costs in China, commercial tensions, and a global shortage of shipping containers, has resulted in more companies manufacturing in Mexico than ever.

In addition to these benefits that allow companies to gain market share, lower costs, and become more competitive, Mexico’s openness to trade, many FTAs, low-investment and low-risk business models for setting up operations give it a clear advantage over other low-cost Asian countries. One of the easiest and fastest business models for starting up is by working with a provider of shelter services in Mexico. This model provides a low-risk way for companies not ready to invest in installing a wholly-owned company in the country to take advantage of its benefits. Don’t hesitate to reach out if you want to learn more about the competitive advantages of manufacturing in Mexico for your specific company or industry or how the shelter model works.