With the recent disruptions in industry and the world economy, many international companies in Mexico and around the world are searching for ways to continue to do business and expand despite challenging times.

Though Mexico has been a popular destination among international investors, expats and businesses for decades, its current combination of assets is making it even more competitive and attractive for companies in many sectors.

Here are six reasons why Mexico continues to be an attractive place for investment and Mexico manufacturing locations as compiled by Mexico’s EGADE Business School at the Monterrey Institute of Technology and Higher Education, and translated and expanded upon here by American Industries:

1. Geographic location. Mexico’s proximity and connectivity to the US allows for an 80% reduction in shipping times and 75% cost savings in transporting cargo and raw materials to its northern neighbor in comparison to China.

With modern highway infrastructure and border crossings to routes in the US, goods can be easily imported and exported via land or transported to one of the country’s main airports, or seaports of Manzanillo, Lazaro Cardenas, Veracruz, Altamira or Ensenada, for shipping to Asia and other international destinations.

The country has a total of 117 operating ports and terminals that connect it to over 145 countries on both the Atlantic and Pacific oceans. According to information from the Secretariat of Communications and Transport, despite a slight decrease in 2019, container shipping and capacities have steadily increased over the five previous years, with 4.93 million TEU moving through Mexican ports last year. In response to this increasing demand, Mexico has worked to encourage growth in this sector, increasing connectivity among ports and supporting the development of integrated intermodal systems to transport products, offering a significant advantage for Mexico manufacturing supply chains.


Source: http://aapa2016mexico.com/en/mexican-ports/mexican-port-system

2. Competitive labor costs. With an average hourly rate for entry-level workers of US$3.95 per hour compared to China’s US$4.50 per hour, it offers significant savings for international companies looking to start up manufacturing services in Mexico.

This is especially attractive for US companies, where this substantial wage gap offers the most ideal circumstances for success and ensures that your company is competitive on a global level.

On this point, it is good to look at using shelter services in Mexico, as it will guarantee that your company will not only be able to make the most of these savings on labor costs and find the perfect talent for your operations, but also that you are in compliance with all human resources, legal requirements and tax obligations in relationship to employees and all other matters.

3. In addition to advantageous labor costs, Mexico also has a large workforce of qualified workers and engineers. With an average age of 30 years old, Mexico’s labor force is relatively young. Furthermore, it also has a large pool of talented and educated workers in the technology and engineering fields. Mexico has changed greatly over the years, and it is important to note that the current generation is much more likely than previous generations to have higher education studies. With internationally recognized institutions such as the Monterrey Institute of Technology and the National Autonomous University of Mexico,

the country has nearly 500,000 students graduating from undergraduate programs each year entering into the labor market. In just the state of Jalisco, a hub for tech companies and other industries, 10,000 engineering students graduate each year.

4. Weakening of Mexican peso versus the dollar. With corrections in global oil prices, declines in world stock markets, and recent restrictions on trade, the Mexican peso has depreciated against the dollar. As an exporter, this gives you more purchasing power in manufacturing operations, labor costs, and materials purchased in Mexico, allowing you to be more competitive. This is particularly beneficial for industries like the automotive and aerospace industries in Mexico, which export a large majority of their output. This increased purchasing power, in addition to savings on shipping costs, makes Mexico more and more attractive compared to China for manufacturing.

5. Access to renewable energies and natural gas. Twenty-six percent of the electricity generated in Mexico is from renewable sources, including hydro power, geothermal, solar power and wind, and it is expected that this will reach 35% by 2035. As one of the largest clean energy markets in Latin America, Mexico attracted US$4.3 billion dollars in investment in renewable energies in 2019.

Although Mexico has previously been considered a less traditional market, it has now become one of the most attractive emerging markets and a world leader in integrating clean energy generation due to its ambitious clean energy targets, fiscal incentives and legislative stance.

In 2016 it implemented an energy auctions system that offers long-term contracts for investors to help meet its ambitious energy transformation system.



6. The signing of the USMCA trade agreement contained updates to Mexican laws regarding protections for intellectual property, the internet, investments and the automotive industry Mexico. Signed in 2018, it eliminated much of the general uncertainty that had been limiting market expansion, resulting in increased confidence and a large number of companies looking to invest in and start up business in Mexico. Some highlights of the USMCA for business include:

  • The elimination of trade tariffs and barriers on exporting digital services.
  • Allowing automobiles that have at least 75% of their components made in Mexico, the US or Canada to be imported across all three countries without tariffs.
  • An updated chapter on intellectual property allowing for strong and effective protection and enforcement of IP rights.
  • Companies are no longer required to establish headquarters in any other USMCA country, encouraging cross-border business by allowing companies to maintain a single headquarters for all of North America.

As you can see, if you are looking to expand or start up operations Mexico, there are many benefits that make it advantageous both financially and logistically, including its location, competitive wages, plentiful and trained workforce, greater purchasing power, expansion of renewable energies, and a host of protections and fiscal and tariff benefits rolled out in the USMCA.


Post by Liliana Hernández, American Industries Group CEO
Did you find this content interesting? Sign up for our monthly newsletter to receive more articles and infographics.

Subscribe

If you would like to find out more about this topic or are interested in receiving a complimentary business case analysis for your operation in Mexico, please fill out this form or contact us at:

US toll-free: +1 (877) 698 3905

CAN toll-free: +1 (844) 422 4922

start@americanindustriesgroup.com
Please note that we do not accept job applications here. If you are interested in applying for a position, please visit the following link: https://www.americanindustriesgroup.com/jobs/




Related posts

January 31, 2023
Reshoring to Mexico: Manufacturing Trend for 2023
Reshoring to Mexico: Manufacturing Trend for 2023
A combination of geopolitical factors in recent years, including trade wars, tariffs and supply chain disruptions, have caused companies to analyze their supply chains and sourcing […]
January 25, 2023
Mexico’s Medical Device Industry
4 Reasons Mexico’s Medical Device Industry is Attracting Interest, Investment
The global medical devices industry is projected to reach up to USD 612.7 billion by 2025, which will be a solid 30% increase between 2020 and […]
January 19, 2023
The Easy Way to Become More Competitive in 2023
The Easy Way to Become More Competitive in 2023
On the heels of global supply chain restructuring and changes in international trade in recent years, nearshoring in Mexico has become one of the best options […]
December 8, 2022
Competitive Advantages of Manufacturing in Mexico
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 […]
November 29, 2022
Mexico: One of the US’s Top Three Trading Partners
Mexico: One of the US’s Top Three Trading Partners
Mexico and the United States have a long history of social and economic interdependence, ties which are more important today than ever. Recent years have highlighted […]
November 28, 2022
Mexico: An Ally in Redesigning Global Microchip Supply Chains
Mexico: An Ally in Redesigning Global Microchip Supply Chains
Some of the most important lessons learned from the global microchip shortage that affected 169 industries and caused multi-million-dollar losses are that today’s global supply chains […]