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Nestle building another factory in Mexico

A view at the Nestle logo in a gray coloring.
06 Feb 2014

Nestle is building a $350 million manufacturing plant in Mexico as part of its larger $1 billion investment in the region. It plans to invest that billion dollars over the next five years, according to the Daily Reporter. This is part of what Nestle is calling its commitment to operating in Mexico.

The plant will be built in Ocotlan, West Mexico, and produce infant formula.

Nestle has declined to disclose the plant's capacity "for competitive reasons," according to the article.

"The investment  is an example of Nestle's commitment to Mexico, and our long-term vision in a market with high growth potential," said a spokesperson to Daily Reporter about the new plant.

Nestle will also build a pet food factory in Silao, and it will expand its cereal factory in Lagos de Moreno. The products are intended for consumption in Mexico and Latin America as well as abroad in the U.S.

The new construction will create approximately 700 direct and 3,500 indirect jobs.

Mexico a strong prospect for outsourcing
Many companies like Nestle are taking advantage of opportunities in Mexico. Some of them are using shelter programs to ease the transition into a foreign country. The shelter company does the work involved with logistics, transportation and fulfilling government regulations, while the manufacturing company builds its factory and begins doing business.

One company that made the move to Mexico did so because of problems with its factories in China, according to Inc.com. Because China is so far away, it can be difficult to control for quality or (in the case of the above company, Hoopnotica) intellectual property infringement.

"I made the mistake of not going to China to take action faster," Melissa Palmer, CEO of Hoopnotica said. "Now I can zip down to the factory in a day."

Mexico had been losing to China in manufacturing for years, but now that pattern is reversing due to the rising value of the Chinese yuan, along with the costs of overseas shipping and competition with domestic Chinese factories, according to the article. Chinese wages are rising at 14 percent annually, which means that it will cost about as much to operate there as in America in a very short time.

Because of the North American Free Trade Agreement, goods that come from Mexico enter the U.S. duty free. It is also known for its intellectual property laws, according to the article.

Mexico's share of the U.S. import market was 14.4 percent in 2013, according to Inc. Magazine.

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