Why Are Global Companies Manufacturing in Mexico? Advantages of Manufacturing in Mexico

Manufacturing in Mexico extends a combination of advantages not found anywhere in the world: lower labor costs, next door proximity to North American markets, free trade agreements with nearly every country, a plentiful and highly skilled workforce, and production quality commiserate with U.S. and international standards. Every major global manufacturer can be found here with Mexico’s principal manufacturing industries being aerospace, automotive, auto parts, electronics, medical devices, furniture, metal mechanical, and plastic injection molding. Some manufacturers in Mexico focus on lower cost assembly or contract manufacturing operations, while others opt for their own maquiladoras in Mexico that are complimentary and collaborative with the rest of their supply chain.

KEY ADVANTAGES OF MANUFACTURING IN MEXICO

Mexico has the most free trade agreements in the world, NAFTA/USMCA (North America) and the new CPTPP gives manufacturers and suppliers tariff-free access to 11 countries throughout the Asia-Pacific (Canada, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam).
Duty free temporary imports of raw materials and machinery under Mexico’s IMMEX program
Less volatile trade relationship, we are geographical neighbors with deeply integrated economies.

Highly skilled and plentiful labor force that is largely bilingual and bicultural.
Decades of foreign direct investment and governmental investment in the billions of dollars for modern facilities, infrastructure, roads, electricity, and water.
Stone’s throw proximity to the United States with dedicated commercial border crossings and deep-water port connected to the world.

Proximity Matters

For global manufacturing companies seeking to reduce costs there is no location in the world that is closer than Mexico. Location factors are important to manufacturers planning for transportation, logistics and time-in-transit costs to get their product to market.

At North America’s southern end, Mexico has next-door access to the United States and Canada. Along with cargo ships for transporting goods, “NAFTA  Corridors” and highways connect ground transportation from Mexico to all of North America, allowing products to be moved quickly and just-in-time.

Compared to overseas locations like China where transportation can take nearly 30 days by container ship, shipping costs as well as time-in-transit becomes an all-too-critical consideration when manufacturers are operating in a different country.

NAFTA (USMCA)
and Free Trade in Mexico

The  North American Free Trade Agreement  (NAFTA/USMCA) is now in its 22nd year and is the world’s biggest success story for international trade agreements. Under NAFTA, the United States, Canada and Mexico, 99% of imports are duty-free with the remaining 1% benefiting from preferential-duty.

Additionally, under the Manufacturing, Maquiladora Program and Export Service Decree, the  IMMEX Program  allows for goods, raw materials and components to be imported into Mexico on a temporary basis, duty-free and VAT-free, as long as they are returned abroad within the established timeframes (most are 18mos). For the aerospace industry, aircraft and aircraft parts are also free of tariffs.

Labor Force in Mexico

Mexico has an abundant highly-skilled, low-cost labor force catering to the Aerospace & Defense, Electronics, Medical Device, Automotive & Parts, Cleantech and contract manufacturing industries. With an over 2,373,416 strong manufacturing workforce in Mexico.

Something else to consider the workweek in Mexico,  the US has a 40-hour work week and Mexico has a 48-hour work week, this will increase your production output by 16%.

The wages in Mexico are dramatically less than in the United States and 14.6% less than China, according to a KPMG study. Mexico, for the most part, has remained stable in its labor rate averaging anywhere from 1.85 to $2.25 per hour. Mexico vs. China

Experience & Expertise: Mexico Industries

FACT: MEXICO EXPORTS OVER $80 BILLION ANNUALLY IN ELECTRONICS PRODUCTS

Mexico's entry to the  manufacturing  arena began more than 50 years ago. At its inception, the draw for foreign manufacturers was its low-cost labor rates. Today the manufacturing landscape and Mexico is much different; Major industries in Mexico have attracted global manufacturing companies such as Volkswagen, GM, Bombardier, Bose, Eaton and other world class corporations by proving the technical skills and capabilities to compete not only in North America, but on the world stage as well.

Products manufactured in Mexico reach far beyond simple assembly, it is common to find companies that design, develop and manufacture some of the most complex products in the marketplace in a variety of industries. Read: Products You Didn't Realize Were Made in Mexico

Tijuana,  the most visited  border city  in the globe  has become a manufacturing powerhouse for companies from all over the world pertaining to major industries in Mexico such as  Aerospace & Defense,  Medical Device,  Automotive  and Electronics.  Cities like Tijuana are burgeoning hubs for manufacturing activities.

Top 10 Reasons
Manufacturing in Mexico Vs. China

Over a decade ago manufacturers wouldn't hesitate to say that China and other overseas locations were hands-down cheaper than anywhere in the world. That is no longer the case. The trend has shifted for both political as well as economic reasons, and Mexico has arrived to the top of the short list.

Download Mexico vs China Top 10 Reasons to Nearshore Manufacturing Infographic

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