Many US manufacturers are expressing renewed interest in Mexico manufacturing, noting Mexico’s strong economy and growing labor force. While the recent US election cycle has cast the issue of moving manufacturing to Mexico into the public dialogue, executives and stakeholders for many manufacturers still in the US are wondering what has drawn others south of the border and if nearshoring may also be right for them.
Executives’ Awakening Interest in Mexico Manufacturing
The world has been shifting towards a regional model of commerce, and US companies rely on Mexican manufacturing more and more to enable them to compete on a global scale. This has been highlighted by recent events and news creating renewed interest in Mexico manufacturing. This Latin American country is experiencing notable growth.
Reuters recently reported that multinational companies are interested in opening operations in Mexico, with a 20% rise in inquiries in June of this year. Specifically regarding North American companies, according to recent data from Alix Partners, nearly a third of manufacturing companies are interested in nearshoring to Mexico. While security and crime were a serious concern in past years, executives are now more interested in the cost and benefits of relocating. According to a shelter company in Tucson, they have experienced a 40% rise in inquiries from US companies hoping to relocate or expand into Mexico since last year.
What Companies See in Mexico
US and multinational manufacturing companies are drawn to Mexico for a number of reasons but interest is primarily based on profitability and proximity. Not only are executives attracted by shorter supply lines, smaller inventories, proximity to production, and working in the same time zones; they also cannot overlook the booming Mexican economy. For the past two years, the Mexican economy has grown at approximately 2.5% annually, and this trend will most likely continue. In fact, due to recent reforms in Mexico, the Organization for Economic Co-operation and Development (OECD) is predicting Mexico’s GDP growth will reach 3% next year.
These all combine for an extremely attractive climate for foreign investment. US companies show increasing interest in Mexico manufacturing and are putting their money where their mouth is. In 2015, foreign direct investment (FDI) flowing into Mexico totaled about $21.5 billion USD. The current federal administration has gone to great lengths to increase FDI. Over his 6-year term, President Peña hopes to attract a total of $150 billion USD in FDI by with educational programs, reducing corruption, and improving competition. Due to these and other factors, the 2016 A.T. Kearney Foreign Direct Investment Confidence Index ranks Mexico at number 18 in the world. The United Nations Conference on Trade and Development (UNCTAD) ranks Mexico at number 10 for total FDI investment.
When companies foreign to Mexico consider the pros and cons of such a decision the services of a Shelter Company can reduce the confusion and accelerate progress in such a decision. A qualified shelter company is able to assist such a company with establishing operations in Mexico with ease removing the mystery of cross border commerce. The Tecma Group of Companies has specialized in providing such shelter services to its clients for over 30 years and currently employs over 7,000 qualified employees serving the needs of our clients.