News, Insights and Best Practices for Manufacturing in Mexico

The Mexican maquila industry more popular than ever

15 Apr 2014

Category: Manufacturing in Mexico

The maquila industry in Mexico is beginning to overtake the popularity of Chinese and other Asian offshoring industries, according to the Albuquerque Journal. The source cited the rising costs of production and shipping in Asia as one of the reasons for the shift to Mexico as a site for nearshoring. Additionally, Mexico is much closer to the U.S., which allows for faster delivery of products.

These advancements in Mexico are not only benefiting countries' economies. America's cities along the border are also seeing local economic improvements. For example, in New Mexico, companies are building up large facilities so that they can supply products and services to the maquila industry in Mexico.

"We're seeing a steady 're-shoring' of industry investment from China to Mexico that's creating huge opportunities here for everything from manufacturing and transportation to warehousing services and technology-related enterprises," said New Mexico Economic Development Secretary Jon Barela. "We believe a wide array of businesses can flourish along the border as the maquila industry continues to grow."

Why companies are reshoring to Mexico from China
According to the article, transportation costs are more expensive than ever, and they continue to rise. Additionally, China's economy is getting stronger, which is raising the cost of manufacturing there.

Some of the industries that have begun migrating to Mexico from China include aeronautics and automotives. Other companies that have begun expanding to Mexico are companies that build custom projects with sharp deadlines. The proximity to the U.S. means that shipping the finished products is much easier than shipping from China. There is also little chance of paying a tariff, because nearly all tariffs between Mexico and the U.S. were removed after the two countries signed the North American Free Trade Agreement along with Canada.

Mexico is trading with companies around the world
Other countries are also taking advantage of Mexico's low wages and easy access to the U.S. Ireland has plans to increase its trade with Mexico by 1 billion euros, according to the Irish Independent. Mexican Finance Minister Illdefonso Guajardo will meet with 150 business people in Ireland for the Mexico-Dublin Business Conference that is set for May 1 and 2.

Currently, trade between Mexico and Ireland is 1 billion euros, but the lord mayor of Dublin, Oisin Quinn, plans to double that number over a period of five years. The deals planned to take place during the meeting between Irish and Mexican business people is expected to total up to millions of euros.

"We want to position Dublin as an ideal gateway into the 500 million people in Europe," Quinn said.

Israeli companies also investing in Mexico
Another company that plans to take advantage of increasing opportunities that stem from companies offshoring to Mexico, The Arad Group, has acquired a controlling stake in Cicasa, a leading manufacturer of water meters.

"The acquisition of Cicasa is in line with the international expansion strategy of the Arad Group," said Gabi Yankovitz, CEO of the Arad Group. "The deal will increase Arad's revenues and the group will gain a strong foothold in the fast expanding Mexican market and the large Latin American market."

The Arad Group also specializes in water meters, and companies leaders plan to sell Arad products alongside Cicasa products in Mexico. Because Mexico is expanding its infrastructure to the support the increased number of factories that have come from other countries, it requires a great deal of equipment such as meters and pipelines to improve its ability to deliver fresh water.

Companies that wish to take advantage of Mexico's inexpensive but effective labor, along with its proximity to the U.S. in order to build factories there might benefit from an offshore shelter that would take care of the red tape and expedite the process of expansion.

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