News, Insights and Best Practices for Manufacturing in Mexico

The state of Mexican manufacturing and exports

10 Sep 2013

Category: Manufacturing in Mexico

The common American perception of Mexico is incorrect, according to Bloomberg Businessweek. Rather than an impoverished or desperate nation, Mexico is instead a country full of skilled workers and prosperity. Indeed, its unemployment rate is currently lower than 5 percent.

Much of Mexico's success is owed to the manufacturing industry. According to estimates by the Boston Consulting Group, manufacturing exports could add $20 to $60 billion annually to Mexico's GDP over the next five years. Manufacturing in Mexico is an ideal way to reduce manufacturing costs - as of last year, average costs of production dropped below those in China. Boston Consulting Group estimates 2015 will see Mexican manufacturing costs 6 percent lower than China's, and 20 to 30 percent lower than those in Europe and Japan.

Mexico's exports
Part of Mexico's success in exporting the products of manufacturing comes from the fact that it has 44 free trade agreements, more than any other country in the world. The familiar North American Free Trade Agreement is only one of them, and they extend across the world. Though approximately 75 percent of Mexican exports go to the U.S., the potential for these goods to meet a much larger global market is strong.

Economic growth in Mexico also depends in large part on global companies deciding to manufacture there. Manufacturing in Mexico has plenty of benefits in terms of cost and location, and manufacturing hubs exist where entire products can be made and finished from scratch within one industrial park. The cost savings this represents in terms of transportation and supply chain logistics are significant.

The business case for manufacturing in Mexico
Boston Consulting Group predicts the industries in which global manufacturers will engage most often in Mexico include transportation goods, computers and electronics, appliances and machinery.

"These industries have relatively high labor content, stringent logistical requirements, and strong existing manufacturing clusters in Mexico," according to BCG senior partner Eduardo León.

Labor is cheaper in Mexico than the U.S., and logistical requirements are easier to fill. Proximity to the U.S. solves possible supply chain issues that may arise in other countries, and the existence of manufacturing hubs can help even more with such concerns.

Companies with an interest in reducing manufacturing costs and exploring outsourcing alternatives should seriously consider expanding to Mexico. All economic indicators point to this decision being a wise one. Working with a Mexico shelter company can help organizations navigate any obstacles or intricate procedures they may encounter, and help them secure prime real estate and high-quality labor as well.

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