Why U.S. Manufacturers Are Operating in Mexico Now More Than Ever

In the 1960s, U.S. manufacturers began operating in Mexico as part of its maquiladora program. Their success from the beginning has solidified the trade partnership between the two countries to where it is today. Since then, the U.S. has become Mexico’s largest trading partner with goods and services totaling over $614 billion.

Now, as it’s done in the past, U.S. leaders are looking to Mexico again to support the current spike in microchip production. The CHIPS and Science Act of 2022 was enacted to advance U.S. manufacturers as leaders in semiconductor production worldwide. In coordination with Mexico, the goal is to reshore technology components from Asia and focus on new manufacturing and chip investment opportunities.

Mexico is an optimal choice as it’s already proven strategically helpful to U.S. manufacturers when saving on costs for labor-intensive industrial processes. The incentives of the most recent legislation are the latest reasons why companies should move operations to Mexico. Here are other benefits U.S. manufacturers can consider.

Read more: FAQ on Manufacturing in Mexico.

1. USMCA Rules of Origin

The USMCA was officially enacted in 2020 and provides U.S. manufacturers incentives for nearshoring to Mexico. Part of the trade agreement’s key achievements was the focus on the rules of origin and origins procedure.

Under the USMCA, 75% of auto content is required to be made in North America. Therefore, U.S. manufacturers have been preserving and reshoring their vehicle production from China to Mexico. This was already part of a key strategy due to the reliability of Mexico’s supply chain and infrastructure, particularly when compared to China’s manufacturing delays in the days of the pandemic.

2. Workforce Availability

U.S. manufacturers have notably struggled to hire for industrial roles. By 2030, 2.1 million manufacturing jobs are projected to go unfulfilled. Today’s workers do not have the skills necessary (and/or do not want) to work in manufacturing.

Whereas, in Mexico, the industrial workforce remains a strong advantage. The local government continues to invest in specialized training programs and higher education, which benefits U.S. manufacturers needing to recruit workers. Plus, labor rates in Mexico are a fraction of the cost for similar jobs in the U.S.

3. Close Proximity to the U.S.

The geographical location of Mexico makes it ideal for U.S. manufacturers. They are able to save on transportation and travel costs, receive on-time delivery, and keep quality oversight close to home. Also, since many U.S. manufacturers operating in Mexico share the same time zone as their headquarters, it’s easier to communicate during business hours.

4. Mexico Shelter Company Support

A unique advantage for U.S. manufacturers is working with a Mexico shelter company. A shelter company handles site selection, permits and licensing, and the administrative responsibilities necessary to set up an operation.

Meanwhile, the manufacturer maintains complete control and ownership over all production, processes, materials, and equipment. Working with a shelter company also saves time and money while minimizing the risk and liability U.S. manufacturers face when operating in a foreign country.

As the world continues to be driven by new technologies and innovation, every competitive advantage counts. IVEMSA provides cost-effective shelter services to get U.S. manufacturers up and running quickly and efficiently.

Learn more about the benefits of moving operations to Mexico and how our team can help you. Contact us today.

Sources:

https://ustr.gov/countries-regions/americas/mexico

https://fortune.com/2023/01/10/biden-chip-manufacturing-mexico/