Many U.S. businesses are quickly expanding to Mexico to take advantage of the country's nearshoring opportunity and lower production costs. Mexico is perfect for U.S. manufacturers because it has a shorter supply chain than offshoring overseas and its workforce is highly skilled in fabrication and assembly. In fact, the Mexican government is actively seeking always to improve the country's infrastructure and energy policies, making it the ideal offshoring destination for U.S. businesses. But will Mexico become a gateway for manufacturers to expand into Latin America as well?
Mexico may link the US with Latin America
There is no doubt that Mexico is a premier offshoring area for U.S. businesses, but what about its southern brethren? According to CIO Insight, Latin America may become an offshoring destination for Mexico-based operations due to strong economic growth in the region. So many factors go into the offshoring process, but CIO Insight suggested increasing government stability and democracy in countries like Colombia and Chile may encourage manufacturers already established in Mexico to take certain aspects of their production process a little farther from home. According to Businessweek, positive economic changes in the region have caused many businesses to think about Mexico as a bridge into the Latin American market.
While many Latin American countries may not be as advanced in manufacturing as Mexico, growing safety and stability in the region may encourage businesses to use Mexico as a home base south of the U.S. border. Yet, the farther from the U.S. a company goes, the longer the supply chain becomes. One of Mexico's chief advantages over other offshoring destinations is its close proximity to the U.S. Mexico is also instituting a plan that would improve its railways and roads to make it easier for manufacturers to transport their products back to the U.S. With these infrastructure improvements, Mexico may be a ready link between the U.S. and other Latin American countries.
According to Offshore Magazine, certain Latin American countries like Peru are starting to improve their shipyards and manufacturing operations. The source reported ventures on the Pacific coast of Peru and Columbia are quickly being enhanced. Yet these advancements are causing costs to rise, which may lead manufacturers to keep their offshore operations closer to the U.S. in Mexico.