For decades, manufacturing in Mexico enjoyed a competitive edge and offered innumerable benefits to US companies that wanted to function close to home. The shift of manufacturing in India to nearshoring to Mexico is considered a major strategy.
From structure to the supportive programs, here are some reasons companies can benefit from manufacturing in Mexico.
Because of the rich history of manufacturing in Mexico, the place has stable networks that extend all over the country and US companies with consistent operations going on over the years with the industries growing. The US is the biggest source of FDI to Mexico, offering 42.5% of Foreign Direct Investment in 2021.
With operational activities in various specialized industries, a major supply chain in Mexico works as a major attraction for companies. China experienced a poor supply chain, delays, and other challenges that poorly affected production. Manufacturers need stability to secure their future operations. The benefits of a dependable manufacturing structure put Mexico in the limelight as an amazingly viable option.
Free Trade Agreements
Mexico enjoys 13 trade agreements with 50 nations. It involves the USMCA that reinforced the trade relations between Canada, Mexico and USA. It mitigated all the trade barriers between the three nations and delivered better incentives for US companies to set up manufacturing units in Mexico. The USMCA also adds powerful intellectual property laws and rules with fines in case of violation.
Inflation has increased all operational costs. But manufacturing in Mexico offers you cost-saving benefits and a higher strategic advantage. For producing companies in the US, the closeness between US and Mexico reduces the transportation expenses and delivery timelines.
Another reason companies are moving to Mexico manufacturing in 2022 is the shortage of industrial workforce in other countries. Most companies cannot find an efficient, reliable, skilled industrial workforce.
Also, the US and China workforce charge higher wages, making recruiting employees in Mexico a cost-effective option. The country is consistently investing in the education and training of its citizens and has developed a robust and skilled workforce offering services at highly cost-effective rates.
Industrial economies of scale
Mexico is ideally known for housing several industrial parks. The industrial park in Mexico is located in such a way to offer maximum benefit to the manufacturing companies. As more companies with similar needs locate near it, the demand is growing. It brings easy access to utilities, training, shipping, freight and other services. Industrial park Mexico houses automotive, aerospace, medical and electronic companies.
The Shelter and IMMEX program
Two major benefits of manufacturing in Mexico include shelter setup and IMMEX suite, which work simultaneously. A shelter program reduces the risk of foreign producers working in Mexico by working as their legal advocates. They manage all their administrative jobs to set up a facility and help a company run in less than 3 months.
When working under a shelter, companies enjoy the benefits of the IMMEX program. It helps foreign companies to temporarily import production items and skip the 16% VAT till the goods are finished and exported.
These are some benefits that companies can still enjoy in 2022.