When manufacturers consider moving or expanding production they often look outside the United States to reduce overall costs and increase margins. While offshore China was a top destination for such activities for many years, manufacturing in Mexico is now considered the most cost-effective location for manufacturing.
Mexico Cost savings can be found at every level of operation; from an abundance of highly-skilled and low labor costs, next-door transportation and logistics savings, to reduced or no-tariff import/export on manufactured goods. Add the strong cultural ties, ease of doing business, stress-free travel for operational oversight, low-cost industrial real estate and a pro-manufacturing government, the benefits of production in Mexico are plentiful and within reach for every sized company.
Mexico is ranked 38 under the "ease of doing business” category, surpassing all the BRIC countries including Costa Rica (58), China (84), Brazil (116), and India (130), according to the World Bank’s annual report “Doing Business 2016,” which compares business regulations for domestic firms in 185 countries. This represents a marked improvement of Mexico’s rank of 48 in 2012. Manufacturing in Mexico is inexpensive, easy and accessible.
How Do Mexico Manufacturing Labor Compare to the US?
Mexico has an abundant highly-skilled, low-cost labor pool catering to the Aerospace & Defense, Electronics, Medical Device, Automotive & Parts, Cleantech and contract manufacturing industries. With an over 257,000-strong manufacturing workforce in the state of Baja California, Mexico alone, finding talent for your production can’t get any easier.
The wages in Mexico are dramatically less than in the United States and 14.6% less than China, according to a KPMG study. Mexico, for the most part, has remained stable in its labor rate averaging anywhere from 1.85 to $2.25 per hour.
Something else to consider is the hours an employee works per week, the US has a 40-hour work week and Mexico has a 48-hour work week. Let’s take a look at an example of a company with 100 employees and compare labor rates to see just how cost-effective it is to manufacture in Mexico.
Annual Labor Cost Comparison: Mexico vs. US:
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BEST LOCATION FOR MANUFACTURING
So Close You're Practically in the United States
For global manufacturing companies seeking to reduce costs there is no location in the world that is closer than Mexico. Location factors are important to manufacturers planning for transportation, logistics and time-in-transit costs to get their product to market.
At North America’s southern end, Mexico has next-door access to the United States and Canada. Along with cargo ships for transporting goods, “NAFTA Corridors” and highways connect ground transportation from Mexico to all of North America, allowing products to be moved quickly and just-in-time. Compared to overseas locations like China where transportation can take nearly 30 days by container ship, shipping costs as well as time-in-transit becomes an all-too-critical consideration when manufacturers are operating in a different country.
In Baja California, the northern border cities of Tijuana, Mexicali, and Tecate, all have a long history of trading and manufacturing. Each city has its unique benefits. Mexicali is home to Honeywell, Gulfstream and UTC Aerospace Systems. Over 119 companies call Tecate home which is known for its electronics, medical device, ceramic and plastics manufacturing industries. Over 19 million televisions are manufactured in Tijuana each year where FOXCONN and Samsung, amongst others, have resided for years.
NAFTA & FREE TRADE IN MEXICO
All Manufactureres Welcome!
The North American Free Trade Agreement (NAFTA) is now in its 22nd year and is the world’s biggest success story for international trade agreements. Under NAFTA, the United States, Canada and Mexico, 99% of imports are duty-free with the remaining 1% benefiting from preferential-duty. Additionally, under the Manufacturing, Maquiladora and Export Service Decree, the IMMEX Program allows for goods, raw materials and components to be imported into Mexico on a temporary basis, duty-free and VAT-free, as long as they are returned abroad within the established timeframes (most are 18mos). For the aerospace industries, aircraft and aircraft parts are also free of tariffs.
INDUSTRY EXPERTISE & EXPERIENCE
If it Can Be Made in United States, it Can Be Made in Mexico
Mexico’s westernmost state of Baja California has become a manufacturing powerhouse for manufacturers from all over the world in the Aerospace & Defense, Medical Device, and Electronics industries. Boasting a 50-years long history, cities like Tijuana are burgeoning hubs for manufacturing activities. For example, the Tijuana Economic Development Council has announced that Tijuana is now the top exporter of medical devices in all of North America as well as the #1 exporter of auto parts to the US.
Tijuana Industries Snapshot: