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Why Mexico's aerospace manufacturing sector is so hot

WHY MEXICO'S AEROSPACE MANUFACTURING SECTOR IS SO HOT

Mexico's aerospace industry is red hot and still heating up. As recent as 2007, Mexico had 150 manufacturing facilities, producing $2.7 billion in airplane parts. That number grew to 260 plants in 2011, with exports topping $4.3 billion. Mexico's impressive five-year growth curve is still ramping up, and some Mexican officials are expecting an aerospace sector revenue of $12 billion by the year 2020.

Growth like that seen in Mexico's aerospace sector isn't the kind of thing that's possible in all markets, but the timing is right and the stars are aligned for the country to make economic strides. Strong advancement in production of both medical devices and in the automobile industries might get more attention in the press, but Mexico's aerospace sector isn't just poised for success - it's already taking off.

Mexico isn't going it alone
The North American aerospace industry is united to grow together. U.S. plants still house final production, but new models and innovative advancements are also being designed in Canada. Meanwhile, Mexico is increasingly stepping up to provide infrastructure, engineers and low-cost labor to manufacture components.

"Mexico's aerospace sector isn't just poised for success - it's already taking off."

Bombardier, for instance, is now conducting all structural work on the Learjet 85 at expanded plants in the state of Querétaro. And foreign investment from North American trade partners continues to pour in to Mexico. Americas Quarterly, a policy journal for the western hemisphere, reports that foreign direct investment in the aerospace industry this year is projected to hit $1.4 billion.

It's easy to point to the North American Free Trade Agreement (NAFTA) as the source of American aerospace success. While critically important, NAFTA isn't the only force propelling the industry. There are also regulatory advantages to manufacturing in Mexico. There are 36 aerospace parts factories in Chihuahua City alone, and Non-Mexican companies own most of those plants -  a trend that is unique by global standards. Part of what makes outside investment attractive for U.S. companies is bilateral trade agreements that waive specific and onerous inspection processes. These agreements protect producers from duplicative testing requirements.

Aerospace is paying off
Mexico has long been a source for high volume, low-cost manufacturing labor. The country's prominence in the automotive industry is a direct result of access to those workers. However, recent investments in education and workforce development are generating an increasing number of high-tech and highly educated engineers and skilled laborers.

Reports show that high-tech manufacturing industries have large employment multipliers, meaning that each individual high-tech job generates the need for additional, indirect workers to support them. That's good news for Mexico, a country with a young population moving into the labor pool. Each aerospace engineering job stands to generate as many as 15 additional indirect jobs. Mexico's workers are gaining experience, and U.S. manufacturers stand to benefit from those advances.

The Mexican aerospace manufacturing sector has grown tremendously with an extra 110 manufacturing facilities built between 2007 and 2011.Mexico's aerospace manufacturing industry has grown rapidly in the last several years.

What we can expect
All signs appear to point toward continued growth in Mexican manufacturing and the aerospace industry as a whole. Americas Quarterly states that 35,000 new aircraft are required to meet demand over the next few decades. American companies will need access to flexible infrastructure and technical facilities that can meet the rigorous qualifications standards necessary to fill the demands of a hungry aerospace industry.

Trade partners who understand Mexican labor markets and regulatory landscapes are a key component to nearshore success. Free trade and intellectual property concerns with competing labor markets leave Mexico with an ideal opportunity to grow into a partnership role in the North American aerospace sector. Now is the time to develop relationships and secure investments in Mexico's booming economy.

The Offshore Group: You manufacture ... We do the rest.

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When:
18 – 20 October 2016

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