Companies have long known the benefits of manufacturing in Mexico, but over the past decade, the advantages have grown more compelling. Mexico offers a strategic advantage for those that want to reduce production costs while maintaining quality. It boasts low labor rates and a skilled workforce, plus a pro-business environment and participation in multiple international trade agreements, including the USMCA.
Meanwhile, Mexico invests heavily in its manufacturing industries, with programs designed to entice U.S. and other foreign businesses (IMMEX/maquiladora) and to educate and train its workforce in engineering disciplines and technical trades. And through the country’s unique shelter manufacturing program, IVEMSA can help companies maximize cost savings of manufacturing in Mexico while reducing their legal risk and liability.
Throughout the years, Mexico manufacturing has increasingly become the favored trade partner over China due to incomparable benefits such as better logistics, closer proximity to the North American market, lower costs, greater labor availability, and multiple free trade agreements.
Each of these competitive advantages, in addition to advancements in technology and supply chain has increased the amount of foreign direct investment into Mexico and the level of growth achieved by today’s leading global manufacturers.
Mexico’s established infrastructure has instilled confidence in U.S. and other foreign manufacturers, remaining largely operable and intact even during economic downturns, including the COVID-19 pandemic.
The close proximity between the U.S. and Mexico makes it easier for manufacturers to reach their North American audiences faster and more conveniently compared to Asia.
Industrial leaders benefit from reduced costs on labor, transportation, and building leases when manufacturing in Mexico without compromising operational capabilities, production quality, or delivery time.
Mexico has avoided the industrial labor shortage experienced by the U.S., China, and other trade countries and continues to support a robust, highly skilled workforce.
The enactment of the USMCA further incentivizes trade among the U.S., Mexico, and Canada due to favorable provisions regarding original automotive content and intellectual property
Mexico’s shelter program, active border and international transportation options, plus its reputation for producing quality goods are among the many benefits which make manufacturing in Mexico an excellent option.
Companies can save up to 50% on labor costs when they move their operations to Mexico. Plus, they benefit from a 48-hour work week for increased productivity without incurring additional wage expenses.
Mexico invests fully in its technical development. Universities and trade schools graduate over 110,000 engineers a year and partner with foreign manufacturing companies to create specialized training programs.
Though industrial leaders have the option of contract manufacturing, most find Mexico’s IMMEX maquiladora program the more favorable way to operate. Each has its own advantages and can be simplified with the help of a shelter.
China was once the default option, due to its cheap labor and large-volume production. However, trade conflicts between the U.S. and China, in addition to Mexico’s competitive advantages have led many to transition to Mexico manufacturing instead.
Bringing operations closer to home through nearshore manufacturing is part of a long-term strategy for many North American manufacturers. It allows them to benefit from faster, more convenient shipping, easier travel and communication, and favorable trade agreements.
One of the notable benefits of manufacturing in Mexico is the shelter program. The shelter program reduces risk and liability for foreign companies by serving as its legal entity. Under the shelter, all permits and licenses are secured and all administrative responsibilities are handled. These include HR and accounting, trade compliance, and legal services.
Meanwhile, manufacturers can solely focus on day-to-day operations while maintaining complete control over their processes, property, and production. The shelter option also offers a quick start-up time, with a typical timeline of three to four months, compared to the six or seven months it takes to launch production as a standalone entity.
Partnering with a shelter is the safest and most effective way to do business when manufacturing in Mexico and has been part of a successful strategy for many of the world’s largest companies.
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A maquiladora is defined as any foreign-operated factory in Mexico that manufactures and exports products. The IMMEX maquiladora program offers foreign manufacturers a significant tax-saving benefit by exempting the 16% value-added tax (VAT) on all temporarily imported goods, materials, and equipment.
The application process for approval into the IMMEX maquiladora program can take weeks, if not months. This means manufacturers are susceptible to paying the 16% VAT until licensed. However, by working with a shelter, foreign manufacturing companies automatically receive this tax-saving benefit, in addition to a full suite of services necessary for production.
Since shelters maintain all required permits and licenses, they ensure companies operating under them are in full compliance and receive all the advantages that come with it.
Learn more about how IVEMSA can help your maquiladora >
Manufacturing is a key part of Mexico’s economy and has continued to grow over the years. This development has generated a steady supply of industrial talent for roles such as machinists, welders, production managers, and quality control inspectors, among others. Though there are various types of manufacturing in Mexico, most exports fall into one of these main sectors:
Aerospace
With soaring growth and a large concentration of the main global aerospace leaders already located in Mexico, aerospace manufacturers can rely on the local supply chain and industrial talent to expand their production.
Lower labor costs, convenient access to suppliers and assembly plants, and USCMA original auto content regulations have encouraged more automotive manufacturers to explore the benefits of Mexico manufacturing.
Mexico remains a main hub for electronics manufacturing and delivers strong intellectual property protection through the USMCA and other free trade agreements for many of the world’s leading brands.
Medical device manufacturing in Mexico has been one of the strongest sectors due to the secure infrastructure, prime location with proximity to the main life science hubs in the U.S., and highly skilled employees necessary to uphold stringent compliance regulations.
Many tech companies are seeking Mexico-based partnerships to support growth and increase foreign direct investments in information technology due to the availability of IT talent at a much lower cost.
Mexico’s strong supply chain gives companies access to general manufacturing roles, such as plastics molding/injection, precision assemblies, metal work manufacturing, CNC machining, product design, and engineering services, to integrate into sectors and projects as needed while minimizing labor costs and promoting transportation efficiency.
Get checklists to guide you through the process of setting up a shelter or stand-alone entity in Mexico, covering everything from the initial set-up to finding a site to preparing for trade compliance. Our Quick Guide will give you an idea of the differences between setting up a shelter vs. a stand-alone entity.
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