News, Insights and Best Practices for Manufacturing in Mexico

Utah, international firms investing in Mexico

11 Apr 2014

Category: Automotive Manufacturing, Politics & Regulations

Utah has joined a host of other border states in forming closer ties with Mexico through business investments, according to El Economista, a Mexican website devoted to the Mexican and international economy.

Similar to Mexico, Utah had faced difficulties during the recession, with severe unemployment that Utah Gov. Gary Herbert managed to reduce unemployment and improve the economy so greatly that it became rated the No. 1 place for business and careers, according to Forbes.

In a recent conference showcasing the investment opportunities available in Mexico, Herbert explained that the best way for any entity like a company, state or even nation to grow is through diversification. Utah itself is one of the most diverse states in the U.S., with 130 different languages spoken. Additionally, 16 percent of the population is Hispanic. Latinos have played a major role in shaping Utah and making it a great state.

The same formula that diversification and hard work equals success can be applied to Mexico to make the nation even wealthier than it is now, according to Herbert. The keys to economic expansion are offering competitive taxes, establishing regulations that boost education and talent and developing a proper energy sector.

The governor advises the companies of Utah to expand to Mexico, where he hopes they will lay down roots that will further the growth of their own business and improve the economy in Mexico, so that everyone will benefit.

International companies expanding to Mexico
Another group that wants to invest in Mexico is KraussMaffei, an international manufacturer based in Munich, Germany. The company specializes in making machines that are used to create plastic parts for various industries. Recently, they sold a molding press to a Mexican pipe maker that is being shipped from overseas and will arrive within five months.

In a recent interview, Emilio López, the managing director of the Mexican branch of KraussMaffei, said the subsidiary has been growing exponentially since its introduction to Mexico.

Rival company, Engel Holding GmbH, has also been performing well. Although the company is international, with businesses located worldwide, it makes a great profit in Mexico by following the expanding auto industry, which generates 60 percent of its revenue.

"When you speak to automotive industry suppliers they say they're growing at 15 percent a year," said Héctor Moreno, managing director of Engel. "This year and next [Engel's] growth will be in the [Mexican] auto industry."

Therefore, the company will continue to increase its profits, growing along with automotive manufacturing.

KraussMaffei is doing at least as well as Engel.

"We've not seen any easing off in the market," said López. "The sales are coming from automotive, construction and packaging and they're strong. We've also sold a lot of machinery in the home appliance sector."

Car production reaching record numbers
Car production in Mexico reached record numbers in the first quarter of 2014, according to the Wall Street Journal. Exports have also risen to an unprecedented high due to U.S. demand.

According to the Journal, the auto industry accounts for 4 percent of Mexico's gross domestic product and for 20 percent of the manufacturing sector. The major automakers there are all from overseas or the U.S.

In total, the number of light vehicles sold in the first three months of 2014 was 774,631 - an increase of 6.5 percent year-over-year. March's growth alone was 16 percent higher than 2013. These numbers were likely spurred by the change to the Easter holiday, which falls in April this year, as production across industries typically falls during Easter.

Exports reached 606,204 vehicles, which is an increase of 8.6 percent over last year. The shipments in March were 13 percent higher than the year before.


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