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mexico-cargo-shipAs the cost of outsourcing manufacturing to China levels out with the United States, companies are looking for new places to set up shop—locations with competitive labor costs, optimal transport options and an open trading environment—and finding them much closer to home in sunny Mexico. There's a lot that's attractive about America's neighbor to the south that may drive American manufacturing from China to just next door: A stable economy protected by government policy, a robust telecomm infrastructure and abundant natural resources. Regulation and macro-economics aside, part of what's attracting foreign trading to is a combination of where it is, who lives there and who they trade with.


Proximity

Mexico and the United States share nearly 2,000 miles of borderland. The country itself is laced with over 80,000 miles of highway and dotted with 76 airports, along with dozens of ports. Here's something impressive: A truck bearing manufactured goods can drive from Mexico and deliver its cargo to any point in the continental U.S. within 24 hours, aided by proximity to the U.S.'s infrastructure system. This can help lower costs as oil prices continue to climb. It also makes for easier monitoring of the manufacturing process from across the border.

 

Young and able workforce in Mexico

Over the next 30 years, Mexico's population of roughly 116 million is predicted to double in size. Currently, some 60 percent of the population is under 35, while only 6.5 percent is over 65. The country is also reaping the benefits of a demographic bonus, in which working-age people comprise the greatest chunk of the total population; this is expected to last until 2028, according to a study by the United Nations. And according to the census, over half the population is concentrated in urban areas. In size and location, the population is set up to for competitive pricing. But it's not just cheap labor. Mexican universities graduate some 111,000 engineering and tech students every year, and the population overall is fairly healthy, with life expectancies close to those in the United States (unfortunately, Mexico also rivals the U.S. for obesity, though the government is campaigning to roll back waistlines).

Networked

Nearly 81 percent of Mexico's exports—30 percent of its GDP—is comprised of manufactured goods. This type of exporting has risen significantly since Mexico entered into the North American Free Trade Agreement of 1994. And the country has continued its trade network expansion; it now participates in FTAs with 44 other countries around the world. According to HSBC's report "The World in 2050," in 36 years, Mexico will snag the number eight spot on the list of the world's largest economies, and its open trade is one factor getting it there. In the end, doing business in Mexico means doing business with the world.

 

Of course there are numerous other reasons to near-source your business to Mexico. Also consider:
  • A stable economy: Regulated by Banco de Mexico and the country's Finance Ministry, Mexico's economy has risen several places on the World Economic Forum's Global Competitive Index since 2011, currently holding spot 55 out of 148. The report measures macroeconomic variables like public finances and public debt.
  • Government-sponsored initiatives to simplify foreign investment regulations: It takes only six steps over nine days to open a business in Mexico, and 10 steps over 105 days to obtain a construction permit.
  • Strong infrastructure and telecomm: In the last several years, the Mexican government has increased its investment in infrastructure to 5 percent of the GDP, up from 3 percent.

Ultimately, there are a number of factors to consider when choosing a country to outsource part or all of your business. For those looking for efficient transportation options, a low-cost, high-quality workforce, and access to a vast trading network, nearshoring to Mexico might just be the answer.

Source: Forbes by Deanna Cioppa

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