Mexico has become a cheaper site for manufacturing than China, according to Forbes. The business magazine also cited many other reasons for expanding to Mexico in order to compete in the global market.
For companies that sell their product mostly in the U.S., Mexico is an excellent site for building a maquiladora. The maquiladora is a special type of factory with the maquila designation. This means that Mexico gives it special tax write-offs and other incentives. Local governments have also been known to help maquila factories with finding employees and training them. The tradeoff is that maquiladoras must export their products out of Mexico.
But the benefits of the maquiladora system for a company that is already selling products to the U.S. are many. For example, Mexico is very close to the U.S., so the cost of shipping is low, and there are many options for moving goods - either by boat, truck or airplane. According to Forbes, a truck can pick up goods from Mexico and deliver cargo anywhere in the U.S. within 24 hours due to Mexican and U.S. infrastructure.
Mexico has trade agreements around the world
Forbes reported more than 80 percent of Mexican exports are manufactured goods. As such, the country has been working hard to form trade agreements - some of them, such as the one uniting all three of the North American countries, Canada, Mexico and the U.S., require no tariffs at all on most goods. The country is constantly forming new ties and working hard to ensure that it remains competitive.
Additionally, its economy is moving at a slow, steady pace. China's economy is moving quickly, and this makes manufacturing more expensive there, but Mexico is ensuring that it stays inexpensive and continues to be a go-to source for manufacturing. One way it does this is by taking its time to build a strong infrastructure. Another way it does this is by keeping its schools full of students who are being trained in the skills that foreign companies need to continue making their products at a fast, effective pace in order to keep up with the global economy.
Mexico's auto industry is helping the U.S.
Mexico's economy is closely tied to the U.S. economy. One example of this is that transportation of cargo by boat has been steadily increasing because many companies are using Mexican boats to ship their cars and trucks to U.S. ports of call, according to JOC.com. This is improving the U.S. economy as well as the Mexican economy. Additionally, the focus on Mexico is making routes and ports of call that are beneficial to Mexican trade more popular.
"While [car companies] might have [previously] shipped a Honda from Japan to the eastern U.S. [via the Panama Canal], now they may be shipping it from Mexico - from Veracruz or Altamira to Tampa, or maybe Houston or maybe Mobile," said Michael Robinet, managing director of IHS Automotive Consulting. "They are no longer using the Panama Canal to get that vehicle to the eastern U.S., but are now using rail and going through the Gulf of Mexico."
Kia building Mexico plant
Another example of Mexico's expanding automotive industry is Kia's decision to invest $1 billion in a factory in Mexico, according to USA Today. The company's new factory will be able to manufacture 300,000 new cars every year for the North American and Latin American market.
The company is working hard so that it can finish this factory within two years, compared to the usual three years it takes to get a factory going. According to Kia, one of its major advantages is building factories quickly in locations that help save the company money, USA Today reported.