News, Insights and Best Practices for Manufacturing in Mexico

The case for Guadalajara as an industry hub

05 Sep 2013

Category: Manufacturing in Mexico, Politics & Regulations

A white paper prepared by Global Delivery Report on doing business in Guadalajara, Jalisco, examined the safety and business value of investing in the thriving Mexican city. While much media coverage about Mexico is devoted to drug cartels and other crime, Guadalajara is a safe place to conduct business. It also offers other features of great value to companies that wish to offshore manufacturing. As an outsourcing alternative, ​nearshoring production to Mexico can be a sound business choice.

Personal safety in Guadalajara
According to research by the Mexican government, homicide rates dropped 13 percent in the four months in 2012 into 2013 after President Peña Nieto took office year-over-year. This points to the current administration's crime policies having an immediate positive effect. There are certainly concerns among investors and companies related to the safety of doing business in Guadalajara, but it is worth noting crime is decreasing across Mexico. The area specifically is congenial to secure living, with the homicide rate falling well below that of several American cities like New Orleans and Cleveland, according to the report. Former president Calderón estimated 90 percent of those people effected by drug-related violence in Mexico were themselves in the drug trade, as well, which indicates global businesses have little to fear from conducting peaceful manufacturing operations in the country. Furthermore, no international business has ever been the target of violence in Mexico, according to research conducted by Global Delivery Report. None of Mexico's 10 most dangerous cities in 2011 are located within 100 miles of Guadalajara, and none are in the state of Jalisco either.

The business case for Guadalajara
Quality of life in Guadalajara is remarkably high. The number of American expatriates in Mexico doubled between 2000 and 2010, and a significant proportion of them have chosen to settle in Guadalajara. It is a picturesque town that can support international events and conferences, and the cost of living is low. In addition, it is already a center of manufacturing and industry. It is the Silicon Valley of Mexico, leading the way in exports of high-tech products. All these factors combine to make Guadalajara an extremely congenial place for foreign companies to do business.

Mexico itself is ideal for many manufacturers. According to the Economist Intelligence Unit's "2013 Business Risk Rankings," doing business in Mexico is safer than China or India, which are themselves popular destinations for outsourcing and offshoring. It is also no more risky than Brazil. However, unlike these other countries, Mexico is very close to the U.S., which can reduce manufacturing costs through shortened supply chains and ease of delivery once products are completed. Mexico has free trade agreements with more than 50 countries, according to the CIA World Factbook. It is a hospitable environment for capitalism and actively works to bring in global businesses.

Guadalajara's local government provides incentives to those looking to become manufacturers in Mexico through such programs as the Jalisco Fund for Business Development and the Program for the Development of the Software Industry. On average, it takes only 14 days to establish a business in the city, thanks in part to how open the local government is to foreign investment. Furthermore, Jalisco boasts a talented pool of workers in all sectors, including information technology and computer sciences. Labor is relatively inexpensive, in contrast to the Silicon Valley area of the U.S. Shelter companies can help firms take advantage of this potentially short set-up time and can recruit top local talent.

Considering Guadalajara for a new plant?
Businesses considering expanding to Mexico may wish to contact shelter companies. These firms can provide support in navigating the country's processes and practices, from acquiring real estate to managing worker's compensation.

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