Manufacturing Mexico: Outlook and Factors to Consider When Setting Up Operations
By Isaías Rivera | Mkt & Business Development Director at American Industries Group®
With the reworking of global supply chains after disruptions caused delays and even total shutdowns of manufacturing and production operations over the last two years, businesses are adapting their business models and focusing on business continuity. In order to achieve this, one of the most significant trends we will see in industry over the next 5-10 years is the adoption and strengthening of a regional manufacturing model with companies producing goods closer to their markets.
This process of reverse globalization is motivated by several factors, including the increasing volatility of geopolitics affecting trade relations and supply chains. Strengthening regional supply networks allows companies to carry out more thorough due diligence with business partners, reduce costs and lead time, and be more responsive to market changes.
In addition to these benefits, the regionalization of manufacturing also reduces environmental impact by reducing waste and using fewer resources, including fuel needed for transportation.
On the other hand, there has been an overall global economic leveling, causing the cost of manufacturing to rise in traditionally low-cost countries. This process is putting an end to the disruptive race to the bottom for these countries, and improvements in automation are making it more economical to produce in higher-labor cost regions.
All these factors combined make manufacturing in Mexico increasingly attractive. The aforementioned economic processes mean Mexico’s labor rates are more competitive than ever compared to Asia.
Companies must choose the best region depending on supply chain proximity, availability and cost of labor, and local infrastructure for their specific operations.
Therefore, the factors to consider when analyzing facility locations for manufacturing include an area’s:
- Openness to trade and ease of doing business
Mexico has trade agreements with over 40 countries.
- Proximity to market
Mexico’s geography offers proximity to the largest market in the world.
- Infrastructure requirements (real estate, utility costs, highways, supply chain, and logistics)
Mexico provides the logistics benefits and costs companies are looking for.
- Socio-economic and environmental climate
Mexico also has mature business ecosystems in different areas, attracting foreign direct investors from diverse industries.
- Availability of support services
Mexico offers a unique support framework to help facilitate the establishment of international companies in Mexico known as shelter services. This legal figure allows companies to team up with and work under the legal entity of a company like American Industries. This means they can leverage a shelter company’s expertise to find an ideal location and start operating in Mexico in the shortest amount of time possible.
If you are interested in finding out more about the benefits of manufacturing in Mexico under a shelter program, reach out today.