Advantages of Manufacturing in Mexico in 202101.22.21
2020 was a year like no other, causing all industries, including manufacturing, to pivot and adapt to a new normal. As companies continue to rebuild, reconfigure, and expand their operations, the reliance of manufacturing in Mexico is increasingly advantageous due to the evolution of what’s been built and strengthened over the last several decades.
The U.S. has experienced a recent shift in presidential power with a new administration but is still experiencing ongoing trade conflicts with China and challenges caused by Covid-19. Although these changes lend their fair share of disruption to the economy, there are positive days ahead. Policies under the new Biden presidency promise investments in new technologies, an improved focus on favorable economic partnerships, and securing the history of success of manufacturing in Mexico.
Keeping Production Close to Home As New Technology Emerges
The Biden administration promises a $300 billion investment in research and development (R&D) and breakthrough technologies. This includes electric vehicle technology, 5G, and artificial intelligence, all of which will create jobs in America and a greater opportunity for manufacturing in Mexico. While R&D has largely remained stateside, the advantage of nearshoring to Mexico helps companies get their products to market in an efficient and cost-effective way. This is primarily due to the quality of talent and less expensive cost of labor Mexico offers.
Read more: Mexican Manufacturing Cost Sheet.
Another commitment under the Biden administration is to tighten domestic content rules for the U.S., as well as honor the enforceable rules of origins and origin procedures under the United States-Mexico-Canada Agreement (USMCA). These focus on increasing regional value content, including a provision requiring 75 percent of auto content be made in North America. Keeping production efforts close to home also aligns with confronting foreign governments, particularly China, with regards to intellectual property theft and trade conflict. Over the years, China has increased tariffs, increased labor costs, and has battled with U.S. companies regarding intellectual property, cybersecurity, and other factors that put trade and political relations at risk. These issues have been ongoing, causing uncertainty, and leading many manufacturers to reconsider where they set up operational facilities.
Additionally, with the travel and business restrictions in place due to the pandemic, it’s devaluing the relationship between the U.S. and China even further. Meanwhile, Mexico is already the number one trading partner over China and remains a key player headed into the new year.
Ally-Shoring via Shelter Services for Economic Growth
The idea of ally-shoring, which favors economic partnerships between countries that share values and strategic interests, is how many market analysts and businesses are hoping to strengthen economic national security in the U.S. following the strain of the pandemic. Though there are other viable foreign trade options, one of the many benefits of implementing manufacturing in Mexico as part of your strategy is the close proximity between Mexico and the U.S., which provides access to same-day delivery.
With the distribution of Covid-19 vaccinations underway, travel and in-person restrictions may soon be lifted, particularly across the border before other international exchanges, such as travel to and from China. Furthermore, U.S. manufacturers that want to set up operations in Mexico have the unique advantage of partnering with shelter service operators. Many find it challenging to navigate the protocols and legalities required to begin and expand manufacturing. Shelter service operators streamline the setup and shoulder the legal and financial responsibility that covers all areas of operation.
Alternatively, manufacturers that choose to work as a standalone entity face a difficult learning curve and a prolonged timeline, which can push a project out months from the initial goal. The benefits of working with a shelter services provider result in savings of time and money with the experience and expertise of those who have established relationships in Mexico. These are valuable when it comes to ensuring customs compliance, permit acquisition, and other necessary requirements needed to operate in Mexico.
Access to Influx of Skilled, Cost-Effective Labor
Another key advantage of implementing manufacturing in Mexico is the access to technically proficient labor. Unfortunately, Covid-19 caused job loss across the U.S. and Mexico, with small businesses and contractors taking the biggest hit. However, the adaptability of Mexico’s workforce has resulted in even greater access to skilled and experienced manufacturing employees who have now joined the formal economy of full-time workers. This is in addition to the tens of thousands of technical graduates already emerging every year and stability in terms of Mexico labor rates.
Furthermore, Mexico already has existing factories and a history of success in helping U.S. and other foreign manufacturers expand globally. In the midst of ongoing change, it’s beneficial to have foundational solutions in place. The advantages of the high-quality, lower cost of labor Mexico delivers, favorable trade agreements, and the proximity between the two countries have always been in place and join the new opportunities for growth expected under a Biden administration.
By partnering with a shelter services company, manufacturers can evaluate and decide which is the best route for them regarding manufacturing in Mexico.
To learn more about Mexico manufacturing solutions and how they can be customized to fit your specific business needs, contact IVEMSA today.