Global markets are constantly changing, but in recent years we have seen this pace of change increase at unprecedented rates. While logistics have also evolved to enable rapid and coordinated transit of goods, rising fuel prices and the recent trade war against China are forcing importing countries to seek goods as close as possible, a phenomenon known as nearshoring.
In this context, Mexico’s manufacturing industry has gained significant attention, as it has a strategic location, a favorable business environment, as well as facilities for foreign companies to enter or expand their businesses.
Mexico: a strategic location in North America
The United States of America has the largest domestic market in the world. The World Bank estimates that in 2022, its approximate GDP was $25 billion dollars, approximately 25% of global GDP. Mexico, while much smaller in terms of GDP at $1.4 billion dollars the same year, still ranks as the 14th largest economy in the world. Despite this great distance in terms of the size of their economies, they have something in common: a 3,000-kilometer border.
Even nowadays China and other south-Asian countries are very competitive in terms of prices, but Mexico’s strategic location has resulted in the last couple of years in a nearshoring surge. According to Bloomberg, citing the Mexican Ministry of Economy, foreign investment in Mexico rose 48% in its first quarter (in comparison with the same period last year). This is no surprise, for it is a logical option in the nearshoring global boom and the recent trade war with China.
In this context, Mexico’s manufacturing industry has a global advantage that is difficult to overcome.
The Mexican Business Ecosystem: First World Class
What are the challenges of nearshoring in Mexico? Aside from its strategic location, Mexico has a stable economy in terms of inflation and a skilled labor force that benefits companies seeking to establish their businesses in North America. And not just this, in 2020, Mexico, the United States, and Canada signed the USMCA (United States–Mexico–Canada Agreement), a significant update to the 1994 commercial treaty NAFTA (North American Free Trade Agreement). The government’s efforts to create the right conditions for business to allow economic development have shown great results in recent years.
These conditions create a lot of business opportunities in Mexico. This is confirmed by the hundreds of automotive; electronics; medical devices; aerospace; and many other manufacturing industries that have settled in Mexico since the 20th century, but more are coming and at a never-before-seen pace.
Facilities for global companies: all set for you
Not only is the ecosystem ready at the moment, but Mexico has plenty of experience and normative guidelines that allow global companies to settle here. In Baja California alone, there are more than 150 contract manufacturing companies (such as Foxconn, Bose, Samsung, Medtronic, Toyota, Sanyo, and Hyundai, among others).
For example, maquiladoras in Mexico offer very attractive manufacturing solutions, for they usually have fiscal benefits and also offer shelter programs, where they set up and manage the operations of foreign companies in the country. These shelter programs provide legal structure; regulatory compliance; facilities and infrastructure; recruitment and HR; import/export assistance; administrative support; and compliance reporting, among other services.
If you want to start doing business with Mexico’s manufacturing industry, particularly in the Cali-Baja region, Tijuana EDC offers a wide variety of services, such as business consulting; site selection; strategic industrial alliances; and initial recruiting support; among others. If you are interested in legally conforming a company in Mexico or other business models, contact Tijuana EDC’s expert team.
