Advantages of Manufacturing in Mexico
The offshoring advantages of manufacturing in Mexico are vast, which is why the country has become one of the largest manufacturing economies in the world. While open trade and proximity to the U.S. are both clear selling points, the draw to Mexico goes much further than those qualities alone. From electronics to aerospace and automotive manufacturing, a wide variety of industries are making the strategic decision to tap into Mexico's resources and highly competitive environment. There are five main advantages of manufacturing in Mexico companies should consider when weighing their options:
1. Mexican Cost Advantage
One of the primary benefits of manufacturing in Mexico is tremendous cost savings the country provides to businesses. Mexico boasts highly skilled, dependable labor that is 80 percent cheaper than the cost of the U.S. Moreover, companies there have access to modern infrastructure that is affordable. In fact, the average cost of real estate in the U.S is $9 per square foot. In Mexico, this overhead expense is far cheaper, averaging $4.74 across five major manufacturing cities. Overall, the operating costs are far lower, which is why expanding to Mexico is such a smart decision.
2. Manufacturing Economies
Aside from the fact that the country's close proximity to high-demand markets means manufacturers have the opportunity to export products easily and cheaply, businesses operating in Mexico have access to a wide pool of customers within various industries. As the fifth-largest exporter of computers, the sixth-largest aerospace supplier and the eighth-largest automotive manufacturer, companies have the opportunity to do business with a growing base of OEM's and Tier 1 companies that want a local supply of goods.
3. Workforce Demographics
The demographics that define Mexico's workforce and community make manufacturing possible in the country. Mexico's population has a median age of 26, compared to 37 for the U.S., and a total labor force of 47 million people. More importantly, though, is the fact that while Mexico's labor is cheap, its workers are also qualified. Currently, 115,000 engineers graduate annually, there are 3 million citizens enrolled in post-secondary education and the country boasts a 93 percent literacy rate.
4. Market Diversification
As Mexico opened up its borders to trade when it signed on to the North American Free Trade Agreement, its economy became diversified, which welcomed new business there. Mexico's robust economy, culture and environment help business balance risk effectively.
5. Ease of Entry
The advantages of manufacturing in Mexico may seem too good to be true, but the reality is, expanding to the country is not that difficult because ease of entry is one of the main benefits for doing business there. Due to the similar culture and language, strategic location between the U.S. and Latin America, favorable business climate and access to shelter services through the maquiladora system, launching an operation in the country is simple.