10 Reasons to Consider Mexico Manufacturing

Mexico manufacturing has been a core strategy for U.S. and other foreign manufacturers for decades. Though recently, it has increased in popularity due to significant economic changes. Many U.S. operators are considering nearshore manufacturing for the first time to save costs while meeting aggressive market demands.

Global manufacturers producing everything from electric vehicle parts to semiconductors have found a place in Mexico for good reason.

Here we outline 10 reasons why operators are considering manufacturing in Mexico under the shelter program.

1. Labor Availability

Though competitive, Mexico’s labor availability is one of the most enticing reasons nearshore manufacturing remains critical to foreign production. Employee scarcity has been an ongoing concern for U.S. manufacturers as the industrial labor shortage continues. Millions of workers are vacating manufacturing roles due to retirement or in search of positions in other industries. This has left a significant gap in jobs needing to be fulfilled, which Mexico’s workforce can supply.

2. Industrially Skilled Workers

Since manufacturing is Mexico’s top industry, the country continues to invest in educating and developing workers for various manufacturing roles of all levels. Mexico also often partners with global brands to create unique training programs to help with production. This gives workers the specific skills and training they need and ensures companies have the labor necessary to support their efforts, a scenario benefiting all parties involved.

Read more: How Mexico is answering the labor shortage in the U.S.

3. 48-Hour Work Week

In addition to the lower cost and greater availability of industrial labor in Mexico, there is also a higher production output. Mexico recognizes a 48-hour work week compared to the standard 40-hour work week in the U.S. This makes an impactful difference when working against strict deadlines and immediate market delivery expectations. The additional time allows U.S. and other foreign manufacturers more productivity while still saving on costs.

4. Geographical Location

Another competitive advantage of nearshore manufacturing is proximity to the U.S. market. Moving operations to Mexico saves on transportation costs and prevents delayed timelines from receiving overseas shipments. It makes more economical sense to choose the closest delivery route, which means the proximity between the U.S. and Mexico is ideal. Additionally, when outsourcing production, companies have largely depended on China to supply low-cost goods. However, for technical industries like aerospace, automotive, and medical device equipment, it requires a greater attention to precision and quality.

5. Hours of Operation

Complementary time zones are part of the advantage of manufacturing in Mexico versus manufacturing in China. In many cases, the time zone is the same or within a few hours of each other between U.S. headquarters and Mexico manufacturing facilities. Whereas, the time zone discrepancy between the U.S. and China is well over a full business day and requires advanced planning to visit sites, schedule communication, and receive timely responses.

6. Range of Free Trade Agreements

Mexico also maintains favorable trade relations with countries around the globe. It maintains 13 free trade agreements with 50 countries, including Japan, Israel, and countries part of the European Free Trade Area and European Union. Mexico also participates in the Pacific Alliance, a trade bloc formed by Mexico, Chile, Colombia, and Peru. This is in addition to the USMCA which provides incentives for the U.S., Mexico, and Canada to maintain trade within North America.

7. Favorable North American Political Ties

Furthermore, with regard to trade blocs, comments from all three North American leaders at the recent Leaders’ Summit solidifies the strong political relationship and economic ties between the U.S., Mexico, and Canada. Government leaders are focused on nearshore manufacturing in Mexico as the preferred alternative to operating in China. They seek to alleviate dependence on China and strengthen relations among allies to preserve the industrial future of their respective countries.

8. IP Protection

When products require a patent and other intellectual property protections, there is more structure and guidelines assumed in Mexico. Per the USMCA, there is greater oversight and violation enforcement to protect companies building new technologies and products in Mexico. This has encouraged U.S. manufacturers operating in China to consider nearshore manufacturing since historically, there have been trade problems involving IP theft over the years.

9. IMMEX Program

A unique benefit of manufacturing in Mexico is the country’s IMMEX program. Formerly known as the maquiladora program, it’s the way foreign manufacturers operate in Mexico. As part of the program, U.S. and other foreign manufacturers are exempt from the 16% value-added tax on importations. This provides valuable tax savings on all temporarily imported goods, equipment, and machinery. To automatically reap this benefit rather than waiting for IMMEX/maquiladora certification approval, which can take several weeks or months, manufacturers can partner with a Mexico shelter company.

Read more: Basics of the IMMEX program.

10. Shelter Program

The shelter program itself provides numerous benefits for nearshore manufacturing. Those who choose to work with a Mexico shelter company minimize legal exposure. The shelter serves as the operating entity and is responsible for all compliance measures, including maintaining permits and licenses necessary to operate. Additionally, the shelter program provides impactful cost-saving opportunities across all areas of the operational process. This includes lower costs on cross-border transportation rates, currency exchange, software platforms needed to support your business, customs brokers, and local suppliers and services.

Let Our Shelter Services Company Help with Your Business Goals

When manufacturing in Mexico the most common route is to partner with a Mexico shelter company, particularly for those who are setting up foreign operations for the first time. It provides an expert resource to guide the process and ensure the transition is as seamless as possible.

The experience and industry knowledge of a shelter proves invaluable to get a manufacturer up and running within three to four months versus the six or seven months it takes without the help of a shelter. If nearshore manufacturing is part of your business goals, our team of experts can help.

Contact IVEMSA today to learn more about how our shelter services can benefit you.

Source:

https://www.trade.gov/country-commercial-guides/mexico-trade-agreements