Just a few short decades ago advanced manufacturing in Mexico was no more than an aspiration.
At the time of the signing of the North American Free Trade Agreement by Mexico, the US, and Canada in 1994, Mexico was widely recognized as a venue most aptly suited for the non-complex assembly of low-mix, low design and minimally engineered content products. The existence of advanced manufacturing operations in the country was not commonplace back then. As a result of Mexico’s mastery of manufacturing processes, and its progress in ascending the global value chain over the last several decades, this characterization no longer applies. Increasingly, the presence of advanced manufacturing in Mexico is more common than not. Complex technical operations and production processes are no longer the exception in the maquiladora industry, but are increasingly becoming the rule.
China vs. Mexico: A comparison still worth examining
Low wages was Mexico’s primary draw in the 1990s, and before. Many companies moved south of the border to take advantage of competitively priced assembly labor. With China’s ascension to the WTO, companies responded by shifting operations to that populous, emerging country in pursuit of even lower labor costs. While China, in many respects, has remained a low-cost assembly hub, advanced manufacturing in Mexico has come of age.
As a result of Chinese economic policy, and of sometimes volatile, cumbersome and costly logistics considerations, China’s labor costs are no longer the draw that they once were. Wages earned by the country’s manufacturing laborers have moved close to and, in some areas of manufacturing, have overtaken those of their Mexican counterparts. More importantly, however, is that the total cost of ownership in China has exceeded that of Mexico in most instances. The “world’s factory” has become a more expensive place to do business. As advanced manufacturing in Mexico further establishes its presence, the country’s place in the global division of labor becomes more secure.
When Mexico was known for inexpensive labor and assembly, things were much different than they are today. As advanced manufacturing in Mexico becomes a permanently embedded feature of the nation’s economy, the differences between the Mexico of decades past, and the Mexico of today come into sharper focus:
- Today’s Mexico has greatly benefited from infrastructure investments dedicated to road improvements, rail expansion, and aviation infrastructure enhancements.
- Present day Mexico has invested in vocational training centers and universities, and is currently graduating 230,000 engineers a year.
- Mexico today has greatly modernized and streamlined customs procedures and mechanisms.
- Mexico has made recent and difficult efforts to crack down on cartels, resulting in a dramatic reduction in crimes rates in the last two to three years.
- Mexico today has literally hundreds and hundreds of high-tech plants in industry clusters around major metropolitan areas, populated with highly trained and qualified professionals.
- Mexico is now a major source for sophisticated, manufactured US imports, such as automobiles, aerospace products and components, appliances, cell phones, gaming consoles, and computers.
The Future: More expertise and improved infrastructure is on the way
With an increasingly skilled labor force, improved infrastructure, and better ports and customs procedures, many companies are shifting operations to or expanding operations in Mexico. Of particular value to companies investing in Mexico is the critical geographic proximity that makes it easier to manage engineering and quality control functions from anywhere in North America.
Another indicator that there is increasing, widespread recognition that advanced manufacturing in Mexico is proliferating at a robust pace is the recent announcement by UBM Canon and UBM Mexico that the Advanced Manufacturing Expo Mexico will be take place from November 15-17, 2016, at the Centro Banamex in Mexico City. UBM Canon has a long history of producing advanced manufacturing events. The upcoming Mexico City program will feature hundreds of exhibitors in high-tech industries. as well as will offer a range of updated educational sessions on the latest trends in
technology, product design, and manufacturing. The hosting of an advanced manufacturing in Mexico event is no longer the surprising rarity that it may have been just a few short decades ago.