What Mexico’s Economic Growth Could Mean for Manufacturing

October 6, 2021

Economic activity around the world saw, and is still seeing, the negative impacts of COVID-19, and Mexico is no exception. However, despite the largest drop in GDP since the Great Depression, Mexico’s economy has experienced unprecedented growth.

While some have been slow to pick up, many sectors that are export-related, such as manufacturing, have been performing better than they were before the pandemic. Much of this growth comes as a result of the United States economy’s significant recovery, which has helped to drive the demand for these exports. Mexico also experienced various waves of lockdowns, like most other countries, but the effect of these lockdowns was much less severe than expected.

While it will take a while before the economy reaches pre-pandemic levels again, the unexpected growth has helped manufacturing in Mexico pick back up and begin to continue as the thriving industry it was before.

Impacts on Manufacturing

Infrastructure Investment

In 2019, the Mexican government announced that it would be investing in various infrastructure projects over the following four years. Although these projects were put on hold throughout most of 2020, they are now back underway and will likely fuel Mexico’s already thriving manufacturing industry.

One of the most ambitious projects is the creation of the T-MEC Corridor, a privately-funded series of construction projects including 300km of rail infrastructure in Mexico. This new rail will connect with existing infrastructure in the United States and stretch up to Canada, with the goal of creating an integrated supply chain.

Existing Policy

Helping to keep markets open and strengthen supply chains, the USMCA has supported economic stability throughout the COVID-19 pandemic. As North American countries are emerging from what appeared to be the worst of it, this free trade agreement has become a catalyst for the recovery of manufacturing with provisions like a high de minimis level, which supports cross-border trading for small and medium-sized businesses.

Mexico’s IMMEX companies experienced temporary closures, and as a result, companies in both Mexico and the United States had to quickly adapt, taking on added expenses and a damaged bottom line. As vaccine efforts continue, IMMEX businesses are ramping up again. While there are long-term pandemic effects that cannot be immediately resolved, the continued success of Mexico’s IMMEX program may make manufacturing in Mexico even more appealing for manufacturers and encourage foreign investment in the industry.

Workforce Mobility

As companies across the globe rethink their approach to workforce mobility in the face of a changing landscape, the easing of lockdowns and travel restrictions allows for more job mobility than the country has seen since the beginning of the pandemic.

This increased mobility of Mexico’s skilled workforce, in combination with heightened demand in the United States for Mexico’s manufacturing exports, has helped to drive the recovery of manufacturing. Now that workers can more easily travel, train for and seek new jobs, manufacturers will more likely have the resources to resolve disruptions to their operations as they rethink their workforce strategy and supply chain in the face of a changing landscape.

Manufacturing in Mexico with NAPS

Mexico has a long history of manufacturing, and while the COVID-19 pandemic slowed the industry, it has not changed its resilience. In the face of the pandemic, the benefits of manufacturing in Mexico have perhaps become more apparent than ever. To experience these advantages, including the low labor costs and the numerous free trade agreements, many companies turn to shelter service providers like NAPS for administrative and compliance support. Contact NAPS today to discover what we can do for you.