Challenges of Manufacturing in Mexico
Despite its many advantages, manufacturing in Mexico still comes with its challenges. Fortunately, any difficulties that may arise can be overcome, and the Mexican government is heavily invested in ensuring ease of entry and operation for all businesses. There are seven main challenges companies may deal with, but with the help of a shelter services partner and careful planning, none should obstruct a productive operation there:
As a rapidly developing country, crime is one of the main security issues manufacturers may have when considering expanding to Mexico. However, conditions in the country have improved tremendously over the past decade. The reality is that Mexico has a much lower violence rate than many Latin American countries and the narcotics trade is decreasing. While organized crime and violence are still issues, these tend to be localized and other forms of crime are fairly low. Additionally, many major Mexican cities are actually safer than U.S. cities including Detroit, Oakland and Chicago.
2. Human Resources
The No. 1 human resources challenges manufacturers in Mexico face is federal laws surrounding severance pay. Further, labor unions, the recruiting process, and attrition and absenteeism are issues businesses must manage effectively.
Manufacturers in Mexico may also encounter logistical challenges including routes that run north and south, restrictions that prohibit tractors from transiting the border and slower rail service. However, the logistical benefits far outweigh the disadvantages. Mexico has excellent ocean ports, access to major airports, a modern road system and close proximity to both supply and customers.
4. Raw Materials
Occasionally, manufacturers in Mexico will have difficulty accessing raw materials, but the country is investing in making these necessary goods easier to come by. Additionally, open trade and efficient supply chains make it simple to import necessary items for manufacturing purposes. Further, the Maquiladora system saves companies money importing required goods.
Financing rates are higher in Mexico than in the U.S., and most banks only offer options to businesses that have been in operation for at least three years. Manufacturers can overcome this challenge by working with their home bank.
Only recently did Mexico become a major economic hub for North America. As a result, the country is still working out some of its bureaucratic kinks. There is typically less leeway for error, but with research, preparation and effective partnership, manufacturers can easily overcome this challenge.
7. Cultural Differences
As would be the case for manufacturing in any foreign country, there are certainly cultural differences businesses will face when expanding there.