Where to manufacture product is a pivotal question each company must answer. In North America, manufacturing has declined in some sectors and increased in others such as aerospace and engineering. But, for many companies outside of those, the costs of domestic production can eat up most of the budget. When all is said and done, it may nearly impossible to remain in business. So, what is a solution in which price and proximity are on point? The answer may just lie south of the border.
Around 40-50 years ago many U.S companies started to move their manufacturing to Mexico in search of lower labor costs and the large workforce. Although this slowed after China entered the World Trade Organization in 2001. According to Tecma, many flocked to China because the wages were so dramatically lower due to a lack of worker’s rights and labor laws. Now China’s minimum wage has been increasing in recent years. So, businesses are feeling the pinch and are seeing less benefit for manufacturing so far from home.
This is where Mexico’s manufacturing hub is starting to show growth as more companies are opting for it as their production center. And, there are other benefits to consider in addition to price and location.
PROTECTION, REGULATION AND SERVICES
There is a unique professional service called a Mexico Shelter Service that helps companies figure out how do business in regard to regulation and law. The service assists in: customs compliance, Mexican regulations on corporate accounting, Mexican tax issues, environmental laws, governmental requirements on employers and more. That way, every company starts off on the right foot. Another aspect that protects businesses is the Reciprocal Promotion and Protection of Investments Act (RIPPA). This mandate is a promise for foreign companies that ensure their patents and trade secrets are safe from theft and other illegalities.
Mexico offers lower labor costs that save on average 88% compared to Canadian costs and ranges from 50-70% for the U.S. In addition, companies save on operational costs as well. The cost to purchase and/or lease space in Mexico is simply cheaper than the U.S.
GROWING SKILLED WORKFORCE
The government has been at work establishing technical training centers and programs in which citizens can learn various trades. Many domestic businesses and international ones have jumped on board and started their own programs to provide the workforce (and their own companies) with the educated and skilled people they need.
It takes just shy of two weeks to complete the processes for permits, licensing and governmental approvals. This gets businesses hiring and functioning as soon as possible. The proximity of Mexico to the U.S and Canada also simplifies business travel and other aspects such as immense time differences that can pose problems on the other side of the world. This makes shipping and supply chain management much easier and less costly and has been spun into the term “nearshoring.”
ACCESS TO NEW MARKETS
By manufacturing in Mexico, companies are exposing their product to an entirely new market. Mexico’s population is growing along with their spending power. Also, Tecma states that they have 11 free trade agreements in which product can pass through duty-free.