News, Insights and Best Practices for Manufacturing in Mexico

Mexico one of the best emerging markets for manufacturing

14 Jul 2014

Category: Manufacturing in Mexico

Mexico is being called a "champion" among the current emerging markets - both in Latin America and beyond - according to Global Trader, a news site for international investors. Global Trader applauds Mexico's sound reformation strategies and its handling of development in the manufacturing sector so that companies from foreign markets can come into the country and begin manufacturing in an environment conducive to international business growth.

According to Global Trader, Mexico has learned much from previous recessionary periods during the '70s, '80s and '90s. During the 2008 financial crisis, it handled itself well, and it came out of that global recession in a better position to offer inexpensive labor solutions for companies that wanted to expand out of the U.S. for their manufacturing needs.

Mexico is an exporting leader
As a result of so many companies moving to Mexico and building maquiladora factories, Mexico has become one of the major exporters to the U.S. Mexico ships over $280 billion in goods and services to the U.S. every year, according to the source. That is 2.6 times as much as Brazil, Russia, India and South America combined when comparing exports to the U.S.

Part of the reason for Mexico's dominating the market for exports to the U.S. is the North American Free Trade Agreement, which allows for tariff-free shipment of basically any goods sent between the three North American countries. This includes shipping across the sea as well as across terrestrial borders. The country has also joined the Pacific Alliance, which allows for inexpensive shipping to Colombia, Chile and Peru, and it is in negotiations to join the Trans-Pacific Partnership, which would allow Mexico to move goods cheaply across the Pacific Ocean to nations in Asia.

Mexico exports a wide range of products, from automobiles, domestic appliances, aerospace parts and even entire airplanes. There is a huge range of industries that are currently manufacturing in Mexico, expanding the job market for the local economy and making money at the same time, according to Global Trader.

Mexico gaining ground slowly but surely
NASDAQ reported that Mexican industrial production rose in May for the fifth month in a row, due to manufacturing increases. The total expansion for the first five months of the year totals an average of 1.2 percent. Unlike Brazil, Mexico is not in danger of stagflation, a dangerous economic state in which inflation joins with a decrease in overall production. Instead, Mexico is taking its time to grow into a country that offers more and more solutions for foreign manufacturers.

Of all the industrial sectors, manufacturing grew the most in May, and carried much of the weight behind Mexico's growth in production output. Year over year, Manufacturing in Mexico grew by 3.6 percent. The automotive industry in particular is doing very well. Auto production has expanded by 7.4 percent to 1.5 million units through June of 2014.

"Mexico's manufacturing sector continues to outperform in a year that is shaping up to be OK but not great for manufacturers globally," said Bill Adams, senior international economist at PNC Financial Services. "It bears repeating that close links to the U.S. auto industry, proximity to U.S. customers and consumers, and wages that compare favorably with China and other major emerging market export-oriented manufacturing economies have been steady tailwinds to Mexican manufacturing since the global recession."

It is time to invest in Mexico
Wealth Daily recently reported on some of Mexico's recent good fortune. For example, China has become more expensive for production than Mexico, particularly for U.S. companies that can take advantage of Mexico's proximity to the U.S., along with NAFTA. In fact, Mexican exports to the U.S. have tripled since NAFTA took effect about 10 years ago.

According to Wealth Daily, Mexico is becoming a "global manufacturing and trading platform," making it one of the best places for a company to build a factory and create a maquiladora. A maquiladora is a specially designated factory often used by foreign companies. While requiring that most of its products be shipped outside of Mexico, the government also incentivizes maquiladoras with tax breaks and overall financial help.

Those wanting to take advantage of these opportunities should contact an offshore shelter company. These companies make it their business to help manufacturers expand to other countries. Shelters cut through the red tape and help companies find the best places to build factories.


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