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Long considered an outsourcing destination of choice, the advantages of Mexico have been propelling manufacturers ahead of the competition for decades. But at no time has this been truer than now.
Mexico has much to offer companies that manufacture for export, and the benefits have resulted in many companies leaving Asian countries to “nearshore” just south of the border. From cost considerations to export access to the quality of labor, the industrial environment in Mexico is such that producers in the US and other countries can outpace their competition, lowering costs and boosting flexibility.
We will explore the five most significant advantages of Mexico and how these key value points impact manufacturers, both global leaders and growing companies.
When outsourcing the manufacture of your proprietary goods to another country, one of the first considerations must be IP or intellectual property protections. What rights do parent companies have? How are patents and copyrights enforced? Is the country’s IP protection framework a liability or an asset?
Mexico’s history of protecting intellectual property for manufacturers dates all the way back to 1832. In the next century, Mexico’s 1943 patent law went so far it was actually criticized for providing “exaggerated protection.” Mexico’s IP protections have always been a top priority.
These protections have been gradually updated over the years and brought in line with international norms through treaties like NAFTA and USMCA. However, Mexico’s current IP protections are codified in the Federal Law for Protection of Industrial Property or “Ley Federal de Protección a la Propiedad Industrial.” This 2020 law provides some of the best protections to creators and producers of any industrialized nation. Some of its provisions include:
Because Mexico is a next-door neighbor, it provides an immense advantage to US manufacturers in easier management and faster time to market for their products.
In managing Mexican operations, US executives do not have to make calls to overseas factories late at night or fire off an urgent email and hope for a response the next day. They can manage typically within the same usual business hours they’re already accustomed to. And for on-site supervision, a trip to Mexico is often just a quick plane trip or even car ride across the border.
Likewise, lead times to US markets are much shorter than with manufacturing overseas. Shipping times are measured in days, not weeks. And companies can respond to changing demand much faster because of it.
Far from being a third-world economy, Mexico is a thoroughly developed nation with strong infrastructure to support competitive engineering, fabricating, assembly, design, and sophisticated manufacturing for virtually any product in the world.
And Mexico continues to invest in infrastructure to maintain this competitive advantage. All the advantages of Mexico are accessible to US manufacturers, because the country is thoroughly linked by extensive railway systems, international cargo ports, thousands of miles of safe highways, and highly modern air travel.
Further, telecommunications in most industrial areas resemble the US. High speed internet and mobile phone service are not a problem. Their electrical grid is highly dependable. And their industrial parks provide safe and convenient locations for collaboration, innovation, and production on massive scales of economy.
While Mexico offers companies numerous benefits for manufacturing, those goods have to be sold on the global market to matter. And this means export. Fortunately, Mexico is literally the most free-trade connected country on the planet.
The Latin American country boasts 14 bilateral and multilateral free trade agreements (FTAs) with over 50 countries. This opens up more than 60% of the global market to preferential trade for products made in Mexico. These agreements vastly minimize the tariff and duty exposure for companies that leverage this unique benefit of manufacturing in Mexico. And Mexico has now become the 12th largest export economy in the world.
Perhaps among the most enticing advantages of Mexico is its immense cost savings. And the primary savings manufacturing companies enjoy there is the low-cost, skilled labor. Of course, everyone knows China’s labor costs have made them a popular outsource destination since the 1990s. But what many people don’t realize is that is no longer the case. China’s labor costs have been rapidly rising.
The cost benefits of manufacturing in China that were so promising in the 90s have evaporated. Yet in the same time period, wages in Mexico have remained relatively stable, growing at a modest and very predictable pace. At this point, the average manufacturing wage in Mexico is about $3/hour, just under China’s average and substantially lower than the US average of $24/hour.
But opening up a maquiladora in Mexico offers other cost savings, too. Some of these include:
These represent the top five advantages of Mexico for competitive manufacturers. But companies who leverage the manufacturing potential of this hard-working and modern country regularly find more. If you’re interested in discovering some of these advantages for your company, talk with one of our Mexico experts to find out more.