Overseas manufacturing has always been a topic of debate, and now many businesses are steering away from offshoring and bringing their operations back to North America. Thanks to the significant advantages it offers manufacturers, Mexico is usually the country of choice.
Here are seven strong reasons why you should consider doing business in Mexico.
1. Free Trade Agreements
Today, Mexico has a total of 13 free trade agreements (FTAs)—more than any other country in the world. These FTAs connect Mexico with 50 different countries, offering manufacturers significant opportunities for massive growth in addition to bolstering the Mexican economy.
One of the most advantageous FTAs, especially for U.S.-based manufacturers, is the United States Mexico Canada Agreement. The USMCA, an updated version of the North American Free Trade Agreement, strengthened the trade relationships between its member countries and added more beneficial regulations around digital trading, labor, and intellectual property. Furthermore, the USMCA eliminates the majority of tariff and nontariff barriers to trade, allowing for the smooth flow of goods and products.
Other FTAs include:
- The Trans-Pacific Partnership
- The Mexico-EU Free Trade Agreement
- The Pacific Alliance
- The Japan-Mexico Economic Partnership Agreement
2. A Diversified, Stable, and Growing Economy
While the 2008 recession came down hard on the rest of the world, Mexico and Australia were the only two countries that managed to go relatively untouched. This has led to ongoing stability and is largely due to the fact that Mexico has a highly diversified economy. The country is home to an abundance of specialized industries, many of which have developed strong, vertical supply chains.
Mexico is already the second-largest economy in Latin America after Brazil, and it only continues to grow. Much of this growth comes from increased foreign investment in the industrial sector, which currently makes up between 25% and 35% of Mexico’s GDP. More and more foreign companies are deciding to expand to Mexico as they shift away from traditional offshoring in order to form more resilient supply chains.
Even with this growth, Mexico offers manufacturers opportunities to corner the market for their unique goods or products and reach millions of new consumers.
3. Strong IP Protections
Protecting intellectual property (IP) is perhaps more important than ever for many businesses, but unfortunately, many countries do not have robust IP laws. Mexico, on the other hand, has strong IP regulations, many of which come from international treaties.
The USMCA, for example, made Intellectual Property Rights (IPR) one of its core focuses. Some of its most important provisions include Trade Secrets, which places criminal penalties on the theft of confidential business information with commercial value, and Ex-Officio Authority, which allows customs officials to seize goods that violate IPR.
4. Reliable Infrastructure
Mexico has a long history of manufacturing, so there is already a robust infrastructure network in place, including railway and highway systems that cover the entire country and extend into the United States. Today, as foreign companies invest more in the country’s manufacturing, the Mexican government has placed a renewed focus on developing the nation’s infrastructure.
5. The IMMEX Program
Global manufacturers are drawn to Mexico because of the country’s IMMEX program. This program allows foreign manufacturers to import materials and components tax- and duty-free, as long as all finished goods are exported out of Mexico within a certain time frame.
In addition to its cost-saving benefits, the IMMEX program also gives businesses the chance to operate under a shelter manufacturer. When a foreign manufacturer works with a shelter company, the shelter company serves as the legal Mexican entity. This significantly reduces the time it takes for the foreign manufacturer to scale its operations. In some cases, it takes as little as 30 days to get started. In addition, the foreign manufacturer is able to outsource the administrative tasks and maintain full control over production processes.
6. A Favorable Exchange Rate
As of January 13th, 2022, $1 is equivalent to 20.39 Mexican pesos. Though lower than a peak in 2020, this rate has remained relatively stable over the past five years. This means manufacturers looking to move their business to Mexico will have greater purchasing power and can reliably reduce costs.
7. Other Benefits
Other key advantages of doing business in Mexico include:
- A strategic geographical location
- A skilled workforce
- Low labor costs
- A reliable electrical grid
- Prominent manufacturing industries
Ready to Take Advantage of the Vast Business Opportunities in Mexico? Here’s Why You Need NAPS.
Mexico is the ideal place to expand your manufacturing operations, but navigating a foreign environment without any support can end up costing you. With complete administrative and compliance management services, in addition to decades of experience in Mexican manufacturing, we ensure that your business gets up and running quickly and is set up for long-term success.
Contact NAPS today to learn more about our services in Mexico and how we can help you grow your business.