The Long-Term Value of Shelter Services as Mexico Takes Top U.S. Trading Spot

Tension between the U.S. and China has been on the rise for years. Between a history of unenforced intellectual property protection and retaliatory tariffs, it all hit a turning point during the shutdown of the pandemic. As a result of the continuing complications, many U.S. manufacturers who had been operating in China for years had begun moving their operations to Mexico.

Global companies like GM, Kia, and a slew of others have paved the way for new factories to be built. According to Bloomberg, foreign direct investment in Mexico is notably up by more than 40% in 2023. And, as a result, China has ceded its manufacturing leadership position to Mexico, as Mexico takes the top spot as the main trade partner with the U.S.

This switch in positioning hasn’t occurred since the enactment of the North American Free Trade Agreement (NAFTA) in 1994, and those who take advantage of the nearshoring benefits can be part of this historic shift. Since the revamping of NAFTA to become the United States-Mexico-Canada Agreement (USMCA), the idea of “friendshoring” has become the newest trend.

North American leaders are capitalizing on the opportunity and promoting the trade bloc to keep manufacturing in Mexico as the preferred option over China. There’s been a significant surge in automotive, aerospace, and medical device manufacturing, and the increase in semiconductor production has put Mexico ahead. However, leaders eager to take advantage of this strategy should implement the right support to reach their long-term goals.

Providing Shelter Services Support to Manage the Surge of Production

An increase in foreign production makes shelter services in Mexico all the more important. Without an established strategy or knowledge of what’s required, it can cause foreign companies to lose time and money before even getting started.

Since manufacturing in Mexico can’t begin without securing a facility, site selection is the first necessary step. The industrial parks in Mexico nearest to the border are the ones most in demand due to their proximity to the U.S. And consequently, high demand means there’s also a high price to follow.

A shelter service company can create a customized site selection analysis and provide multiple options based on a manufacturer’s unique needs. They can help identify viable facilities with easily accessible transportation in various parts of the country. However, Tijuana and Mexicali remain the most competitive, especially for manufacturers who are exporting to the U.S. Though lease rates may be higher compared to other areas, they are still the best option due to lower transportation costs.

In addition to site selection, shelter services in Mexico also include HR and recruiting, taxes and accounting, and trade compliance, among other necessary administrative tasks that are necessary when moving operations to Mexico. This availability of local expertise and experience is invaluable to streamline production setup and maximize opportunities associated with manufacturing in Mexico.

With the support of a shelter services company, U.S. and other foreign companies can significantly save on costs, launch production quickly, and maintain long-term success. Having a proven roadmap of success makes the transition smoother and allows manufacturing leaders to focus fully on production.

For more information about how shelter services can benefit your operation in Mexico, including securing an optimal site, contact IVEMSA today.

Source:
https://www.bloomberg.com/news/newsletters/2023-09-12/mexico-seeks-to-sustain-manufacturing-boom-big-take