Manufacturing in Mexico getting ahead of other emerging markets
January 23, 2015
Manufacturing in Mexico is picking up as data shows that production is gaining steam in the new year, according to Barrons. Part of the reason is the country offers great offshoring incentives. In fact, while China is beginning to suffer from the increasing price of shipping goods and the cost of paying workers, Mexico is becoming attractive because production is less expensive in the country versus many other nearby places, shipping is easy via land or sea, and moving goods between any of the three North American countries is tariff-free.
"Weakness in China and last month's currency crisis seems to have tipped Russia into recession," said Jason Tuvey, emerging markets economist for Capital Economics, according to Barrons. "Manufacturers in Mexico continue to benefit from strong growth in the U.S., the country's largest trading partner. In contrast, there was a sharp drop in the Emerging Europe PMI to a five-month low … concentrated in the region's largest economy, Russia."
The incentives for building a maquiladora in Mexico Mexico offers many offshoring advantages over other countries such as Russia or China. For one thing, it is very close to the U.S., and because of the North American Free Trade Agreement, there are no tariffs on goods sent between any of the three countries. In theory, someone could ship products to Mexico, have them partially built there, and then move the goods north to the U.S. where production can be completed and the items would then be sent to different markets as necessary.
"Mexico offers many advantages over other countries such as Russia or China."
A great way to begin building in Mexico is to become part of a maquiladora operation. This is a special factory built on property designated for foreign companies to begin manufacturing products. Those who choose to do this must ship their goods out of Mexico, but the benefits in return include tax incentives and special government assistance.
In fact, the Mexican government very much wants U.S. and international companies to build there, as it helps the economy grow. The country's laborers are hard workers, and there isn't much of a union system in place. Much of the relationship between Mexican workers and U.S. factories can be handled very simply with the help of offshore groups. Mexico has provided college education for its citizens and worked with companies to create training programs at local schools where laborers can learn how to operate specialized machinery. Much of the production in Mexico is becoming very advanced. Even products as complex and strictly controlled as medical devices are being built in the country, according to Med Device Online.
Building medical devices in Mexico Jim Pomager, editor in chief of Med Device Online recently discussed the benefits of manufacturing medical devices in Mexico. He explained the many of the incentives for building in Mexico have to do with the so-called soft costs, such as inexpensive shipping and the ease of transporting goods quickly across the border.
"Sometimes medical device OEMs neglect to factor in all the soft costs," said medical device manufacturing consultant Mark Bonifacio. "They focus on the fact that the vendor in China is charging $1.00 while the one in Mexico is charging $1.10, but if the landed cost from China is really $1.16, it's actually better to get it in Mexico."
Manufacturing in Mexico is becoming a better option for many industries, and those who make the transition can benefit quickly. Remember that offshore sheltering companies can help with this transition by providing counseling and advice about location, government red tape and hiring local workers.
Thinking about manufacturing in Mexico? Download this ebook to move your due diligence forward and improve your probability of success.
Start your journey into Mexico today!
50+ Questions to ask before expanding into Mexico
Thinking about expanding into Mexico? Step 1 of your due diligence process is answering all of these questions. Over the last 33 years, thousands of companies have used this guide to accelerate their expansion into Mexico.
Start Your Mexico Strategy Today!
Talk to a Tetakawi expert to discover how your company can succeed in Mexico.
Get The Tetakawi Insights Newsletter
Sign up and stay informed with tips, updates, and best practices for manufacturing in Mexico.