Whether your business is in need of greater capacity or just wanting to cut costs, chances are, you’ve considered outsourcing. Yet, however popular Asian destinations may be, Mexico’s advantages for business emerge as an attractive alternative.
In this article, we’ll discuss why so many US companies are turning to Mexico to give their business a strategic advantage and what some of the primary benefits are. As global competition increases and economic factors exert downward pressure, it is vital to consider every potential improvement and advantage to remain competitive and profitable.
For years now, US companies seeking a competitive edge have been repeatedly turning their gaze southward to Mexico. And why not? Since the dawn of NAFTA, this Latin American country has offered US manufacturers incredible opportunities. Amidst the challenges faced at home, Mexico continues to provide unique advantages and benefits for savvy businesses willing to think outside the box.
Unlike the US and other popular locations, Mexico follows the German labor model, fostering a highly-trained workforce through academia-industry partnerships. This synergy results in a robust pool of specialized engineers graduating annually. And this labor supply stands in stark contrast to the current US labor shortage dilemma.
But it’s not just skills; it’s economics, too. Mexico boasts a manufacturing-centric economy, offering US producers state-of-the-art facilities and infrastructure for a fraction of the cost. Leveraging these advantages allows businesses to manufacture for export duty-free to the US. The entire Mexican economy is built around international business and manufacturing.
As fewer Americans seek out manufacturing jobs, and as training workers for highly specialized roles becomes more costly and impractical, Mexico stands out as a strong alternative. And there are many reasons this is so. In fact, there are several reasons businesses thrive in this country. And below, we’ll discuss five of these most significant of Mexico’s advantages for business.
Mexico’s closeness to the US is one of Mexico’s greatest advantages for business. American manufacturers nearshoring there enjoy swift transit times, easy oversight, closer supply chains, minimized risk, and better direct communication with plant management.
The geographical adjacency and efficient transportation links mean Mexican shipments can span the US in just 1-4 days — unlike the 3-5 weeks from Asia. This agility allows companies to maintain leaner inventories, cutting transportation costs and enhancing overall supply chain resilience.
Proximity becomes a key ally in achieving heightened supply chain agility, ensuring that businesses can adapt and thrive in a rapidly evolving market environment.
Mexico’s strategic advantage lies not only in its geography but also in a web of free trade agreements. Their commercial focus is amplified by Mexico’s participation in at least 14 free trade agreements, like the USMCA, granting seamless access to global markets. These agreements span Latin America, Europe, and the Asia-Pacific region, providing free-trade access to over 50 countries and approximately 60% of the world’s gross domestic product.
This break from traditional trade barriers propels businesses into a realm of expanded opportunities and reduced tariffs, fostering an environment where US manufacturers can thrive. The strategic symphony of trade agreements positions Mexico as an international manufacturing hub, offering American businesses not just proximity but a passport to a world of economic possibilities.
Another of Mexico’s advantages for business is its deep pool of affordable skilled labor. Unlike the US, Mexico boasts a skilled labor force at a compelling low cost. This stems from Mexico’s dedication to cultivating a highly-trained workforce through industry-academia partnerships. While the cost of labor is rising rapidly in other countries, the cost of labor in Mexico remains relatively stable.
As a result, Mexico’s skilled labor pool offers a practical blend of expertise to US businesses without the hefty price tag. This strategic advantage not only trims operational costs but also enhances the competitive edge for US manufacturers globally. Companies find themselves aligning with the cost-effectiveness of Mexican talent, making it a pivotal element in the operational playbook.
Whenever a company establishes operations in a foreign country, there are always concerns about theft of intellectual property. Fortunately, Mexico stands as a robust ally for US companies in the realm of intellectual property (IP) protections.
Among global competitors, Mexico’s legal framework provides a striking and solid foundation for safeguarding innovation. Mexico’s alignment with international IP standards and its 16th global ranking for IP protections reinforces this point.
This strategic positioning not only underscores Mexico’s commitment to fostering innovation but also serves as a crucial asset for US companies navigating the intricate terrain of global business. With a focus on clarity and tangible data, Mexico’s IP legal framework becomes a reliable cornerstone, offering US businesses a secure and advantageous environment for the protection of intellectual capital.
Perhaps the most powerful of Mexico’s advantages for US business is their IMMEX program, which allows foreign companies to operate maquiladoras or factories not subject to most duties or tariffs. This key strategic advantage offers US manufacturers substantial benefits and savings. IMMEX’s reduced or eliminated duties and taxes, coupled with streamlined customs procedures, enhances operational efficiency.
And the system benefits both countries, too. Approximately 40% of inputs in Mexican-made products originate from the US, supporting American industry. Maquiladoras offer flexibility in location and product diversity. Notably, cost savings result from reduced shipment costs, streamlined startups, lower skilled labor expenses, and significant tax savings.
In an era of global competition, these advantages position Mexico’s maquiladoras as a strategic asset for US businesses across numerous industries. And combined with the country’s other strategic benefits, these options help US business stay viable and successful in an increasingly competitive landscape.
