The Advantages of Manufacturing in Mexico

Nearshoring in Mexico has emerged as a strategic choice for many US companies seeking to optimize their manufacturing operations. With its proximity to major North American markets and favorable trade agreements like USMCA, Mexico offers significant advantages over traditional offshore locations. 

Nearshoring allows companies to reduce logistical complexities and costs associated with offshore production while maintaining operational efficiency and supply chain resilience. The strategic alignment of time zones and cultural similarities further enhances communication and collaboration between teams. 

Moreover, Mexico's skilled and cost-competitive labor force, supported by robust infrastructure and the Maquiladora program, provides a compelling proposition for businesses looking to expand or relocate manufacturing closer to their consumer markets. As nearshoring continues to gain momentum, Mexico stands poised as a pivotal hub for companies seeking to leverage these strategic advantages in the global marketplace.

Ready to explore the secrets of overseas manufacturing? Here are the six main advantages of manufacturing in Mexico:

1. Mexican Cost Savings

One of the primary benefits of manufacturing in Mexico is the tremendous cost savings the country provides to businesses. Mexico boasts highly-skilled, dependable labor that is up to 70 percent cheaper than the cost of labor in the United States. Moreover, companies operating in Mexico have access to infrastructure that is modern but affordable. Here are some average hourly fully-fringed  wages for employees in Mexico:

• Average hourly fully-fringed wage for unskilled labor in Mexico: $4.39 USD
• Average hourly fully-fringed wage for semi-skilled labor in Mexico: $5.20 USD
• Average hourly fully-fringed wage for welders in Mexico: $7.11 USD
• Average hourly fully-fringed wage for CNC machine operators in Mexico: $6.69 USD
• Average hourly fully-fringed wage for CNC machinists in Mexico: $8.89 USD

2. Existing Industry Clusters

Mexico's strategic location near major markets ensures that manufacturers can export their products both efficiently and cost-effectively. The country's diverse industrial base offers businesses a vast customer pool across various sectors. As the fifth-leading computer exporter, sixth in aerospace supply, and eighth in automotive production, Mexico is a hub for businesses looking to collaborate with a growing network of OEMs and Tier 1 companies in need of local suppliers.

The nation's rich industrial concentration also means businesses benefit from well-established infrastructure and a resilient supply chain network. Take the automotive sector as an example: it's a dominant force in Mexico's manufacturing landscape, boasting 21 OEM plants that produce over 3 million vehicles every year. 

3. Young and Skilled Workforce 

Mexico's workforce stands out, especially when compared to its North American neighbors, the U.S. and Canada. With a median age of 26, Mexico boasts a youthful and dynamic labor pool, ensuring a continuous influx of fresh talent into various industries.

In contrast, the U.S. and Canada are grappling with the challenges posed by an aging workforce. As baby boomers retire in large numbers, these countries face potential labor shortages, especially in specialized sectors like manufacturing. An older workforce often means higher healthcare costs for employers, potential decreases in productivity, and the looming challenge of transferring knowledge and skills to younger generations.

Mexico, on the other hand, is in a favorable position with its young demographic. Producing 115,000 engineering graduates annually and having a literacy rate of 93%, the country is well-prepared to meet the demands of modern manufacturing. This youthful energy, combined with a strong educational foundation, offers a sustainable solution to the challenges faced by manufacturers in the U.S. and Canada.

Moreover, the blend of youth and education in Mexico provides businesses with a workforce that's not only ready to adapt to the ever-evolving technological landscape but also primed for innovation. While manufacturing companies in the U.S. and Canada are seeking strategies to address the issues of an aging workforce, Mexico is already poised to offer a vibrant, skilled, and sustainable labor solution.

4. Market Diversification

When Mexico joined the North American Free Trade Agreement (NAFTA) in 1994, it signaled a transformative shift towards a more diversified economy, positioning the country as a prime destination for various businesses. However, the trade landscape evolved further with the introduction of the United States-Mexico-Canada Agreement (USMCA) in 2020, reinforcing Mexico's commitment to modern trade dynamics.

Recent global trade tensions, especially tariffs imposed on China, have led many companies to reconsider their international business strategies. The instability of doing business with China has prompted a significant 'nearshoring' trend, where companies are looking to relocate or expand their operations closer to home. Mexico, with its proximity to major North American markets and favorable trade agreements, has emerged as a top contender in this shift.

Mexico's robust economy, enriched by its vibrant culture and stable environment, offers companies an effective platform to navigate these changing trade waters. Additionally, the Mexican government's initiatives, like the IMMEX or Maquiladora Program, further incentivize businesses to leverage the benefits of operating in a diversified and strategic market.

5. The Shelter Program

Manufacturing in Mexico offers undeniable benefits, and one might wonder about the challenges of setting up shop there. Yet, the process is surprisingly straightforward, largely due to the Shelter Program. This initiative, rooted in the maquiladora system, streamlines the establishment of foreign businesses in Mexico.

The program's appeal is multifaceted. Mexico's cultural and linguistic similarities with its North American neighbors, its strategic position bridging the U.S. and Latin America, and its business-friendly environment all contribute to making the entry smooth. The Shelter Program further eases this transition, providing comprehensive support and services, ensuring that launching operations in Mexico is not just feasible, but also advantageous.

6. Mexico's Free Trade Agreements

Mexico has more Free Trade Agreements (FTAs) than any other country in the world – which makes it a strong exporter to countries around the globe. More than 50 countries are partnered with Mexico in global agreements that reduce barriers to trade, which encourages the transit of goods and services worldwide. In fact, with 14 FTAs, Mexico has access to over 60% of the world’s gross domestic product and boasts agreements with countries in Europe, South America, and Africa among others. Want to learn which countries benefit from doing business in Mexico? Get our comprehensive list of Mexico’s free trade agreements here, as well as details about each agreement.

Is Mexico right for you?

In conclusion, the myriad advantages of manufacturing in Mexico position it as a top choice for global businesses. If you're contemplating launching or broadening your operations, don't miss out on this golden opportunity. Reach out to a Tetakawi expert today, and let us guide you in transforming your vision of manufacturing in Mexico into a successful reality.