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Latin America becoming the hub for manufacturing and technology

A view at a headlight of a car that was manufactured in Mexico.
18 Mar 2014

Latin America is becoming a popular destination for companies considering offshoring advantages, according to Chartered Global Management Accountant (CGMA) magazine. Popular places include Costa Rica.

According to public accountancy network BDO, which conducted the research, 57 percent of the jobs that respondents plan to offshore will go to Latin America. Places like China and India are becoming less popular because costs there are rising, according to the article. Twenty-seven percent of those surveyed overall said they would move their manufacturing overseas, but in the tech industry, this number jumps to between 40 and 45 percent. In fact, 59 percent of offshoring operations are manufacturing orientated, with 54 percent including research and development, and 41 percent involving IT services and programming.

Additionally, companies are beginning to reduce their offshoring plans, with only 5 percent planning to offshore in the near future. In 2013, that number had been 16 percent.

"The pace of jobs leaving the U.S. has slowed down," said Aftab Jamil, a BDO partner. However, he adds that companies that are already offshoring will likely continue their overseas operations.

One such company that is moving to Mexico and Costa Rica is Covidien, which will end production at its plant in Argyle, N.Y., and move operations to the two countries. Many of the employees are relocating offshore in order to continue working for the company.

Countries from outside the U.S. are taking advantage of expanding to Mexico
Two other companies that are building in Mexico are Nissan and Daimler, Japanese and German carmakers, respectively. They've recently decided to form a joint venture as equal partners that will built upmarket cars in Mexico for Mercedes-Benz and Infiniti, according to International Auto News.

The source estimated that the automakers might use a common vehicle platform in order to build cars of different models in the same plant. Although this is coming from inside information that International Auto News managed to acquire, it would seem that the two companies plan on building in Aguascalientes, northeast of Guadalajara.

Nissan, Mercedes and French auto manufacturer Renault have all formed agreements since 2010 in order to share plants, vehicle architectures and engines for small vehicles.

"No decision has been made," a spokesman for Daimler replied, in reference to the agreement. "We don't comment on speculation."

Mexico has many benefits for building cars, including low wages and its proximity to the U.S., where there are many exporting opportunities. Companies that might wish to try nearshoring might seek an offshore sheltering company to ease the transition. Such a company would help find an appropriate location in Mexico and handle all logistics.

The Offshore Group: You Manufacture ... We Do The Rest.

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