Mutual Commitment to Strong Investment Encourages British Companies to Expand into Mexico
July 01, 2019
There’s no doubt about it, the United Kingdom is eager to invest in Mexico. British influence is showing up in British double-decker buses in Mexico City, a distinct UK presence in Mexico’s booming art scene, and a sudden surge of gas stations from London staple BP.
More than that, the two countries’ shared commitment to strengthening their economic relationship is setting the stage for more UK-based companies to invest in Mexico.
Shared commitment to trade and investment
Representatives of the United Kingdom and Mexico have a strong history as economic partners, and both countries have expressed ongoing commitment to strengthening trade and investment. In 2017, the United Kingdom ranked as Mexico's 17th trading partner worldwide, and fifth among European Union member states. From 1999 to 2015, trade increased by 129% to USD $4.32 billion. UK investment in Mexico amounted to USD $10.14 billion from 1999 to June 2016.
During a speech in 2018, Graham Stuart, the Parliamentary Under-Secretary of State at the British Department for International Trade, commented, “Mexico is rightly seen by the British business community as a modern country with a dynamic economy boasting, among other assets, a young and growing population with an extremely high talent base. … There is wide recognition that more can be done to tap into Mexico’s resource base and markets, and to help Mexican firms explore opportunities in this country.”
While both countries have faced their share of regulatory uncertainty in recent months — in Mexico with the replacement of NAFTA and in the UK with the ongoing negotiations around Brexit — both countries have expressed an ongoing commitment to strong trade with one another.
In 2016, the Mexican Secretariat of Economy and the UK Minister of State for Trade Policy lay the groundwork here by establishing a framework for working together following the United Kingdom’s exit from the European Union. To develop their bilateral relationship following Britain’s departure from the EU, the two countries have since launched an informal trade dialogue through which they discuss how to ensure that the preferential arrangements that the UK currently enjoys with Mexico remain in place.
As Stuart commented, “We are unwaveringly committed to expanding our trading relationship, building upon the personal, cultural and business links that already unite the UK and Mexico to create a more prosperous future for both our nations.”
Britain’s largest brand continues Mexico expansion
This strong political relationship means that Mexico is ready to incentivize British investment in its robust manufacturing industry. UK-based companies, in turn, find Mexico to be a cost-effective and forward-thinking manufacturing center from which to launch exports throughout the Americas.
Such was the case for the UK’s largest manufacturing brand, Unilever, which has maintained a strong presence in Mexico for nearly 50 years. In 2012, the company opened a new plant in Morelos to serve as the North and Central American manufacturing hub for many its leading deodorant brands Axe, Dove and Rexona. The new plant was the first step in a USD $500 million investment through 2015.
Unilever CEO Paul Polman commented at the time, “The Americas is a very important region for Unilever, and Mexico is a key part. We have a long history in Mexico, and we have a strong commitment to its future, its growth and economic development.”
The company continues to expand, investing an additional USD $7 million in 2018 in projects that drive innovation, improve logistics, and reduce its environmental impact.
Complex parts made with confidence
Aerospace engineering is another key British manufacturing sector, and Mexico is supporting its development as well.
The UK aerospace industry is the largest in Europe and second only to the U.S. Mexico has major plans to support this sector. Estimates from Mexico’s Strategic Plan for the Aerospace Industry (2010-2020), coordinated by the Mexican Ministry of the Economy, predicts Mexico will crack the list of the top ten aerospace exporting countries in the world by 2020, making it a particularly attractive site for sourcing well-crafted components.
The aerospace industry is spread throughout Mexico, with Baja California, Sonora & Nuevo Leon being the areas with the largest concentrations of aerospace corporations. British firm Rolls-Royce began strengthening its supply chain in Sonora back in 2012, and has localized many of its suppliers in Guaymas, Sonora.
At the same time, UK-based Shimtech Industries Ltd. expanded its composites division with a component fabrication and assembly facility in Hermosillo, Sonora. The 81,000-square-foot facility features two massive autoclaves for curing composite wing and fuselage structures. The biggest autoclave —a whopping 50 feet long by 12.5 feet wide — became the largest autoclave in the Mexican supply chain. The unique equipment is being used to make lightweight components to improve fuel efficiency for the Boeing 787.
Much like the aerospace industry, the pharmaceuticals manufacturing market also benefits from Mexico’s blend of highly skilled technical workers and low costs for production. UK giants GlaxoSmithKline and AstraZeneca both have strong manufacturing footprints in Mexico.
AstraZeneca calls the Mexican pharmaceutical market one of the most attractive international markets. Within this market, the company says it sits at the third place among the most important laboratories.
Strong future ahead
As Mexico sees new certainty in manufacturing with the passage of the U.S.-Mexico-Canada agreement, it is gaining strong attention from many foreign investors. The region may become a particularly critical partner for the UK as it seeks stable partnerships to support it following the eventual Brexit outcome.
A strong partner, as British companies well know, is critical in driving investment success. Reach out to Tetakawi today to drive your success story.