The Benefits of Manufacturing in Mexico: Leveraging Exchange Rates for Cost Savings

By working with a  shelter manufacturing services provider  like Co-Production International, the currency exchange fluctuations can improve your bottom line when exchanging dollars in Mexico to purchase local goods and services.

Major banks are now posting the peso between 18 and 19 pesos to the dollar, leading Co-Production International to explain the benefits of Mexican peso devaluation for nearshore manufacturers. Companies manufacturing in Mexico are finding that the cost of labor and fixed expenses continues to reduce their overhead costs as the peso declines and the dollar value in Mexican pesos increases.

Twenty years ago, the Mexican peso, though significantly devalued against the dollar, was fixed and offered no opportunities to hedge against it for a greater return. With much of Mexico’s economy dependent on its nationalized petroleum industry, the peso becomes heavily dependent on oil prices. Carranza explained that with the global price of oil dropping over the last two years, Mexico has seen the peso go from twelve pesos on the dollar to upwards of eighteen.China. Labor cost in Mexico went from being 200% more expensive than labor cost in China, to an impressive 19.6% difference today.

Adding in transportation, logistics time and costs, manufacturing companies are finding manufacturing in Mexico is dramatically less expensive, even with the growing gap in labor wage.