Long-Term vs. Short-Term Benefits of Nearshoring Manufacturing to Mexico

Nearshore manufacturing in Mexico has been a popular way for businesses to expand internationally. The close proximity to the U.S. market has helped to reduce labor costs, transportation fees, and delivery times compared to other countries, particularly China.

However, it’s important for companies to commit to a long-term growth strategy. It’s rare for foreign manufacturers to return and try again if their initial production attempt fails.

Fortunately, Mexico shelter manufacturing offers both long-term and short-term benefits to consider, though to ensure a seamless transition, partnering with a shelter company is the best way to go.

Long-Term Benefits: Cost Savings, Favorable Trade

A long-term mindset is necessary to be a strong presence in the market. Mexico provides an excellent opportunity for U.S. and other foreign manufacturers who want to diversify their portfolios and stay close to an American audience. Additional advantages include:

Cost competitiveness

Nearshore manufacturing in Mexico offers several cost-saving benefits, including reduced labor and transportation fees. Manufacturers can also get products to the U.S. market quicker, helping them to stay competitive.

Furthermore, when working with a Mexico shelter company, there’s an infrastructure in place that allows manufacturers to save on permits and license fees, as well as administrative department setup and management.

Qualified labor

America is experiencing a shortage of skilled workers qualified for the growing number of manufacturing roles needed. Meanwhile, it’s difficult to oversee the production quality of workers in China.

Alternatively, the steady availability of Mexico’s technical talent has continued to support the growth of global manufacturers across all sectors and job types. Plus, the proximity to the U.S. provides travel convenience for project manager oversight.

Free trade agreements

Mexico maintains 12 multilateral trade agreements providing preferential trade access with 44 countries. This includes the USMCA, which favors trade between the United States, Mexico, and Canada and institutes requirements regarding original content and intellectual property protection within the trade bloc.

Risk reduction

By diversifying a manufacturing portfolio, it reduces the risk of maintaining sole reliance on one production area. Though many manufacturers are moving operations from China to Mexico, others are actively operating in multiple countries to stay agile and competitive.

Short-Term Benefits: Tax Advantages and Shelter Support

Though long-term, Mexico shelter manufacturing is a smart investment, there are many short-term benefits manufacturers can experience right away. These are:

Reduced logistics costs and wait times

The proximity between the U.S. and Mexico allows for shorter wait times compared to China. In some cases, same-day or next-day delivery is possible.

This time savings is further impactful when considering the extraneous transportation costs from China to the U.S., which counteracts any potential cost savings on labor that may apply.

More competitive lease options

As industrial space becomes more scarce and lease prices go up in the U.S., there’s a better chance of finding a competitive lease in Mexico.

As part of its site selection services, a Mexico shelter company can help narrow down plant options based on budget and production needs, and create a comparison matrix of buildings that will work best.

Access to IMMEX program benefits

U.S. and other foreign manufacturers with IMMEX program approval and VAT certification avoid the 16% VAT on all temporarily imported goods, materials, and equipment required for production. Under the shelter model, this benefit is available on day one.

Availability of shelter services

A Mexico shelter company handles all the administrative responsibilities a foreign manufacturing company needs to launch production. It’s the best short-term entry model, as it reduces risk and exposure to legal authorities, though it also has a long-term advantage.

Once there is a better understanding of how Mexico shelter manufacturing works, a shelter company can help manufacturers continue as a standalone entity.

Our team is here to support your short- and long-term production goals and help you experience a seamless transition. Jumpstart your manufacturing success in Mexico by exploring the benefits of working with IVEMSA.

Contact us today.