Global CEOs See Manufacturing In Mexico As Next Big Investment
December 27, 2012
Companies from around the world that are trying to reduce production costs and improve profitability begin shifting capacity away from China, Europe, Canada and the United States to their Mexico manufacturing facilities along the U.S. border. Over the past two years, new investment for the sole purpose of Manufacturing in Mexico for exportation to the United States has more than doubled from 2009 and 2010.
San Diego, CA, December 27, 2012 – Manufacturers from many industries, including consumer products, medical device, aerospace, electronics, industrial and even renewable energy are beginning to realize Mexico’s potential to cut production costs and increase profitability. While the single largest advantage of manufacturing in Mexico is the significant reduction in direct labor costs, more companies are finding they can also take advantage of a highly educated labor pool for indirect positions, including engineers, designers and various levels of management. This reality is shifting the mindset of many executives who once viewed Mexico as a place to assemble simple products but now see it as a possible location for their North American headquarters.
Mexico is a signatory to some forty (40) free trade agreements with other countries, which often translates to a reduction or complete elimination of taxes and duties on raw materials. The most significant free trade agreement in place is NAFTA, which includes the U.S. and Canada. NAFTA enables the transfer of most raw materials to and from these three countries, almost as if there was not a border. Given Mexico’s geographical proximity to the United States and its history of protecting intellectual property, it is clear why Fortune 100 companies are more comfortable with the idea of manufacturing in Mexico than in Asia.
Mexico also offers a number of technological advantages. The IT infrastructure in the country meets US standards. Educated and experienced IT staff is readily available for simple to extremely complex projects. The telecommunication lines in the country are efficient and fast, too. On the logistics front, Mexico has constructed a number of new highways throughout the country, making road transport more fluid and easily assessable to border crossings and ports.
With over 40% of Mexico’s population comprising of youths, the country has a large base of workers when compared to the U.S. Additionally, labor wages in Mexico are up to 80% lower than in U.S. based factories and a 48-hour workweek is typical in many cities. For many years, China was regarded as a hub for low cost manufacturing but it was reported recently that with wages increasing in China, factory labor costs in Mexico and China are now on par. With wage inflation in China up about 250% in 4 years, compared to 25% in Mexico over the same period, Mexico offers a more stable environment for companies to grow.
The low turnover and stable disposition of foreign-based manufacturing units in Mexico are some other reasons why CEOs are considering manufacturing in Mexico.
However, companies new to the regulatory climate and culture in Mexico may initially find it a challenge to set-up and operate. These companies often choose to outsource the administration and compliance management of their facilities to companies such as North American Production Sharing, Inc. (NAPS). These companies, often referred to as “shelter companies,” help mitigate the risk of expanding into a new country, while often reducing the cost of doing it alone.
About NAPS (North American Production Sharing, Inc.)
Established in 1991 with its headquarters in San Diego, CA, NAPS is the premier provider of outsourced administrative and compliance management services in Mexico. With over 50 factories under management, NAPS understands the challenges of manufacturing in Mexico and provides early stage, start-up and on-going management services in Import / Export, Accounting, Human Resources Environmental Compliance, Health & Safety, Security and any other administrative function for a factory.