Highs and Lows of Mexico Manufacturing

March 28, 2013

Manufacturing in Mexico has had its highs and lows throughout the last decade. The manufacturing sector flourished when Mexico signed the North American Free Trade Agreement (NAFTA). U.S companies began to see the benefits (mainly cheap labor costs) and began to shift operations down to their neighboring country.  Mexico manufacturing was unstoppable with an overall 9% growth of U.S manufactured goods imported from 1994- 2001. However, Mexico wasn’t the only country capitalizing on free trade agreements and low-cost wages and its productivity began to slowly decline as the China machine engaged. In 2001, China joined the World Trade Organization and Manufacturing in Mexico began to seriously decline.

Recognizing the need for a new strategy, Mexico began a campaign to attract a more sophisticated manufacturing base, including Aerospace, Medical Device and Consumer Electronics. Interested in the balance between low-cost labor, speed to market and protection of intellectual property, these industries expanded into Mexico. Over the last decade, Mexico continued to invest in its technical and engineering schools to support these new companies. In 2012, Mexico graduated more engineers than the United States and that trend continues to grow.

Mexico has completely transformed its manufacturing base and, in many ways, is now more competitive than China. The Mexican economy is booming. The country’s GDP has risen 4% and the middle class is flourishing. The government isn’t holding back either. President Enrique Pena Nieto, and his team, is continuing to find ways to make his country a lucrative game changer.

According to a recent report released by the World Bank, manufacturing in Mexico was ranked as the top destination for global operations. It’s location and profitability makes it alluring for all companies, especially those with a U.S. market base.

Mexico manufacturing has taken a turn in a positive direction. It is proving to be the location of choice for businesses to establish operations from call centers, packaging, manufacturing and customer support services. With the aid of shelter services such as North American Production Sharing, Inc. (NAPS), companies are able to focus on their production, while their shelter partner handles all of the administration and compliance management.