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mexico manufacturing, benefits of mexican manufacturing, mexico us economies

The US Benefits of Mexican Manufacturing

mexico manufacturing, benefits of mexican manufacturing, mexico us economies

Since the passing of NAFTA in the 1990s, the economies of Mexico and the US have grown increasingly interdependent. Although Mexico and the US are sometimes painted as economic competitors in political rhetoric, with the loss on the part of one reflecting a gain on the part of the other, the benefits of Mexican manufacturing cannot be overstated.

Primary Benefits of Mexican Manufacturing

Mexican manufacturing benefits the United States in numerous ways. This is illustrated especially in the automotive sector, in which both countries work together on the same vehicle preparing it for export (often to US markets). High levels of vertical specialization are reflected in the value chain for an automobile which typically crosses the US-Mexico border eight times before it is finished. This and many other benefits are created by a unique partnership in which Mexico attracts global investment and then enlists the aid of US workers to create value. Below is a partial list of these benefits:

  • US-Mexico trade is valued at approximately $1 billion USD per day.
  • The total value of goods and services sold to Mexico annually is estimated at $2.3 trillion USD according to the Brookings Institute.
  • This supplier relationship supports over 11 million jobs.
  • Nearly half of all US states sell $1 billion USD to Mexico per state annually.
  • A more open oil market in North America reduces oil prices for the region.
  • Regional trade overall increased from $290 billion USD at the signing of NAFTA in 1994 to present levels of $1.1 trillion USD. This was partly driven by Mexico’s significant growth levels.
  • 40 cents of every dollar spent on imported goods from Mexico goes to US workers who produced much of the inputs used in those goods.
  • The US sells more to Mexico than to all BRIC countries combined.

The US-Mexico Regional Partnership

The world is becoming increasingly global and interdependent. And a strong North-American partnership is crucial to competing on such a scale. The unique partnership between the US and Mexico has proven to be invaluable in competing and very beneficial for both countries. The benefits of Mexican manufacturing are apparent for the US, which in turn benefits Mexico with a vast consumer market and technological expertise. With a combined total of over 50 free trade agreements with major economies in both Asian and Europe, the regional cooperative is a formidable competitor on the global scene. The benefits of Mexican manufacturing on both Mexico and the US must not be overlooked.

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Mexico’s Part in a Global Manufacturing Hub

mexican manufacturing, manufacturing hub, mexico manufacturing hub

In an increasingly interdependent and regionally minded world economy, Mexican manufacturing growth, coupled with the rise of an increasingly educated US workforce, is propelling the North American region to prominence as a global manufacturing hub.

Regionalism and Mexico

Mexico’s advantages are attractive in and of themselves. But the Latin American country is also forging an alliance decades in the making that allows for what may soon become a huge, North American, economic structure that allows the two countries to compete as a regional player on a global scale. This partnership can present the single most significant player on the global market, making for a global hub for manufacturing for export. Each has something unique to offer the regional partnership:

  • Mexico provides inexpensive manufacturing labor.
  • The US provides knowledge assets.

It could be said the two economies are so intricately linked across many dimensions so as to be considered almost a single unit. Automobiles manufactured in the North American region have their parts cross the border approximately eight times during the manufacturing process. In fact, 40% of the value of US imports from Mexico comes from the US. This reflects a high level of vertical specialization and partnership between the North American partners. There is a general trend for labor-intensive jobs to flow south into Mexico while design and engineering, etc. tend to flow into the US. Mexico and the US share many things to form a unique partnership that mutually benefits both countries, including:

  • Foreign direct investment (FDI)
  • Joint ventures
  • New sales and distribution offices
  • R&D facilities

Mexican Manufacturing

The regional USMEX economic unit that is forming has the potential to transform Mexico from a mere manufacturing country to the manufacturing base of the next global manufacturing hub. The US and Mexico have been joined as production partners in an increasingly regional global marketplace since the signing of the NAFTA. And since that time, Mexican manufacturing has grown steadily. And while China was the global manufacturing hub and offshoring partner of choice in the 1990s, Mexico is rapidly becoming the new home for manufacturers all over the world.

The reasons for this shift are myriad. Mexico offers global manufacturing several key advantages:

  • More free-trade agreements than any other country in the world
  • Low, stable labor costs while Asian labor costs rise rapidly
  • A large and growing labor pool
  • Relatively low energy costs
  • Shorter supply lines, faster delivery, reduced transport costs, and proximity with the largest consumer market in the world
  • Very strict IP laws, allowing excellent protection for hi-tech and other industries
  • Ongoing investment in an educated and highly skilled workforce

Chinese Manufacturing Moving to Mexico?

By Adina Moloman

Chinese and other Asian countries are joining in the growing trend to invest in manufacturing in Mexico. New investments or expansions are announced regularly for companies in Europe, South America, and around the world – and now Asian countries like China are seeing manufacturers make the switch. Why are they moving to Mexico?

Reasons Chinese Manufacturing is Moving to Mexico

The manufacturing boom in China has slowed down dramatically, and Chinese companies are seeking for alternative methods of increasing efficiency and productivity to impact the bottom line. Like companies from around the globe, Chinese companies are achieving just this simply by moving to Mexico. The top reasons driving this move include:

  • Free Trade Agreements: Mexico is uniquely positioned as an export base due to their 40+ free-trade agreements (FTAs) in place with countries around the world. Mexico is also a signatory to the NAFTA and TPP.
  • Reforms: Mexico has made great progress in recent years in overhauling its transportation and energy infrastructure, commercial-law regime, energy sector, and labor laws.
  • Labor Advantage: While China’s labor costs are rising, Mexican productivity is rising steadily. Wages have remained stationary during this recent period and are now lower than those in China.
  • Proximity: Mexico shares a border with the largest consumer market in the world. Furthermore, Mexico is highly integrated with the US economy, providing unique positioning for partnership with US industry for those companies in China moving to Mexico.

A Mexico-China Partnership

China is only the latest in a wave of foreign countries with manufacturing companies moving to Mexico, but the country is pushing to make it count. Frequent news are routinely announced of yet another Asian company choosing to produce in Mexico. China’s Hisense Co. announced they were doubling their Mexican investment earlier this year, for example, and several other electronics brands are following.

Due to the benefits of moving to Mexico previously listed, China has recognized its mutual goals and complementing assets with Mexico, and is pushing for a partnership. Mexico is has been very friendly to their efforts. In fact, just two years ago, Mexican President Enrique Peña Nieto made a highly visible trip to China to meet with the Chinese president and discuss ways Mexico could help their “strategic partner.” The two manufacturing countries have much in common. For example, while China imports most of their energy, Mexico is a net exporter of petroleum. Due to this budding partnership, we are likely to see continued movement into the Latin American country from China and her Asian neighbors.

medical device, medical device manufacturing, tijuana manufacturing

Tijuana Medical Device Manufacturing Growing

By Adina Moloman

Mexico has a well-established memedical device, medical device manufacturing, tijuana manufacturingdical-device manufacturing industry, but growth trends in Tijuana and Baja California are growing at exceptional rates, resulting in new investment and optimism for the Latin American country’s economic future.

Tijuana Leading Baja in Medical Device Manufacturing

While Mexico has facilities manufacturing medical devices throughout the state of Baja California, Tijuana stands out as the clear leader within the region. The border city is 44 of the 69 medical device plants in the state. And Tijuana alone employs nearly 42,000 workers in the industry, within a state that employs approximately 54,000 in medical device production.

For three decades, the border town has been an active player in the industry, and now hosts numerous companies producing innovative and vital products ranging from artificial respirators to catheters to catheters to electronic devices. Some of the world’s leading companies supplying medical devices to the world take advantage of Tijuana’s ideal manufacturing and business climate, from Augen to CareFusion to Flextronics to Lancer Orthodontics. And this list is growing rapidly.

  • Foreign direct investment (FDI) certainly reflects this strong growth, and new investments in Tijuana are announced regularly. A couple of the more recent foreign investments announced for the medical device industry in Tijuana include:
  • French firm, Essilor, is currently putting the finishing touches on a new production facilities.
    Greatbatch Medical has invested US $35 million for the purpose of moving three additional production lines to the region.

Growth Drivers

Currently, the value of manufactured for the medical device industry in Mexico sits at an impressive $1.5 billion USD. And according to a recent study, this output will reach more than $2.1 billion USD by 2020. Tijuana and the state of Baja California lead the nation when it comes to the manufacture of devices and products related to the medical and healthcare industries, but they are not alone in propelling Mexico forward on this front. The other regions also contributing to Mexico’s success in medical device manufacturing are:

  • Chihuahua
  • Jalisco
  • Mexico City and the State of Mexico
  • Morelos
  • Nuevo Leon
  • Tamaulipas
  • Sonora

There are several factors driving this continued growth in Mexico, from low energy costs to low labor costs to the country’s enviable trade agreements in place with much of the world. And in Tijuana and Baja California, the growth drivers include:

  • Baja California’s low logistics cost
  • The region’s low labor rates
  • Tijuana’s proximity on the border to the vast consumer market in the US
  • Rising production costs in other areas
Manufacturing in Mexico

S- 40 Freedom aircraft manufactured in Baja California

Manufacturing in MexicoBy Adina Moloman

Sources: SEDECO, aerospace-technology.com, spectrum.aero

Spectrum Aeronautical located in Carlsbad, California, a leader in design and manufacture of private and commercial aircraft is planning on building a new facility at the Silicon Border Science Park in Mexicali, Baja California and manufacture in Mexico their S- 40 Freedom light business jet.

The Governor of Baja California via a press release announced the news. During the Mexican Aerospace Fair at the Baja California pavilion of the event was presented the S- 40 project and the investment plan.

The great deal for Baja California aerospace sector is that S- 40 Freedom light business jet will be the first aircraft totally manufactured in Mexico, which will bring great economic impact into the region and will attract or create more Mexico Manufacturing aerospace suppliers.

The total investment regarding the establishment of the Spectrum Aeronautical de Mexico plant is around $300M US over a three-year period. Spectrum S-40 project is being financed from private Capital, development bank financing and government incentives.

The Baja California plant will complete with the necessary certification requirements from DGAC, FAA and other European certification entities.

S- 40 Freedom is a twin-engine mid-sized business jet, whose prototype was under development as of March 2012. The Californian aerospace company is well known for working with advanced composite technologies and for the collaboration with technology leaders like GE Honda Aero Engines, Honeywell, Williams International, etc.

The Californian company is using a combination of carbon fiber and epoxy in order to reduce the empty weight of the S-40 jet by 40%, compared to conventional aircraft built of aluminum.  The Mexican plant future employees will be well trained to use the fiber technology for the airframes in order to improve robustness, avoid corrosion and optimize drag in-flight.

This jet has also an aerodynamic design and will accomplish more fuel efficiency compared to conventional business jets.

Maquiladora Sector

Advanced manufacturing forum in Baja California

Mexico ManufacturingBy Adina Moloman

Source: http://ammeetings.com/mexico

Over the past few years, the Mexico Manufacturing Industry has evolved from a more labor-intensive set of assembly processes to a more sophisticated set of information-technology-based processes (known as advanced manufacturing processes) at least in a few key sectors such as automotive, electronics, medical and aerospace. The advanced manufacturing in Mexico, particularly in Baja California is still in its early stage but definitely there is an increase in automated and data-intensive manufacturing processes that are replacing the traditional processes used so far in production plants located in Baja California.

The advanced manufacturing in Baja California is composed of efficient, productive, highly integrated, tightly controlled processes across a large number of manufacturers and suppliers with different technical skills from a wide spectrums of areas such as: Mechanical &Metals, Innovative Materials, Robotics, Tooling, Plastics, New Processes/ Factory of the Future; Recovery/ Recycling, Services, Electronics and electrical; Engineering and Design Centers; Nanomaterial and Nanotechnology; New Factories/ New Buildings, Surface Treatments. In fact all these areas are to discuss at the Advanced Manufacturing Meetings Baja California.

The first advanced manufacturing forum in Baja California will take place in Tijuana, September 28-30, 2015, at the Baja California Convention Center.

The event consists on pre arranged meeting for the supply chain, procurement, suppliers and contract manufacturers that will attend the event, and not to mention Conference and Workshops given by industry professionals with scientific, industrial, technical and sale backgrounds.

The main industrial sectors participants at the event are automotive, medical, aerospace and applied electronics, represented by 300 corporations OEM’s and Tier 1 suppliers from 15 countries.

Participants at the event might take into considerations the business opportunities in important areas that the Baja California industry is offering: High precision machining
, Heat treatment
, Anodizing, 
Castings and forges
, Harnesses manufacturing
, R&D
, Structure design
, Metal structure manufacture
, Aluminum extrusion
, Sheet metal, among others.

Manufacturing in Mexico

The energy reform applied in Baja California

Manufacturing Mexico ManufacturingBy Adina Moloman

Sources: PWC, Tijuana EDC

The private sector’s participation in the power industry in Mexico started a little more than 20 years ago with legal reforms that allowed private entities to participate in the generation of power, but the electricity was sold only to CFE. The transmission, sale and distribution of power were services exclusively provided by the Comisión Federal de Electricidad or (CFE). There are four ways to generate electricity in Mexico: CFE’s own plants, independent and small producers that deliver their power to the CFE, and self-supply, cogeneration and exportation.

The recent Mexican Energy Reform has lead to a larger share of private investment in electric power generation, through the potential opening of the market. There is another possibility and that is to establish bilateral contracts with consumers. The new Energy reform mentions the participation of private electricity generators, regardless of the state’s control over the National Electric System. This has a direct implication on the financial benefits of the end user companies with their nearshoring operations.

Right now we are talking about the diversification of generating sources and an open competition. For instance, before the energy reform in Baja California there existed only two private electricity producers for the local market and also for the neighbor state California.

Baja California adopted at the end of 2014 the Electricity Self-Supply Industry Program, where was possible negotiations with the electricity producing plants a scheme to achieve energy cogeneration in order to obtain low rates for the local industry.

According to this program it was generating energy savings of up to 50% of the service cost on peak-hours for the companies located within the state.

Recently was concluded the pilot phase where a private company Intergen and Mexico’s Federal Energy Commission (CFE) did supply low-cost energy to 16 companies operating in the state. Intergen, a multinational company had reduced electricity fees by 45 to 50% during peak hours. CFE at the same time allowed use of its electricity network infrastructure by Intergen in order to provide the service directly to end-users.

The challenge starting this year is to implement this program to a larger scale to the Mexico Manufacturing Sector and for the foreign investors choosing to manufacture in Mexico and to allow the development of bigger projects by private entities, under different schemes, from sources such as wind, solar, hydro and geothermal, of which Mexico has an abundant supply.

Maquiladora Industry

Taiwan and Netherlands wants to invest on energy projects in Mexico

Mexico ManufacturingBy Adina Moloman

Sources: Maquila Portal, Financial Time;

The Mexico Manufacturing sector is improving faster than the Mexican economy overall.  The growth expectations were high since the Mexican government was working on ambitious structural reforms. A two percent economic growth for this year is feasible, though the expectations where much more higher.

The opening of petroleum and natural gas industry in Mexico is arousing interest in international investors, including some from Taiwan and Netherlands.

As we must guess, the opening of the energy sector is considered positive in the eyes of foreign investors. Recently, foreign transnational companies from countries like Taiwan and the Netherlands are interested on investing in Mexico in projects related to sustainability and renewable energy sources.

According to the General Director of Taiwan Economic and Cultural Office in Mexico, there is a clear interest of Taiwan on areas such as renewable and green energies, as well as in the transportation sector and hydrocarbons exploration and exploitation. He recently pointed-out that Taiwan has one of the most important cargo fleets, in addition to building high tonnage ships, so they are willing to invest in oil transportation, as well as in containers design and also do the manufacturing in Mexico.

According to the Minister-Counselor of the Netherlands Embassy in Mexico, Dutch companies KLM, Unilever and Heineken are working on green solutions. Not to mention that Shell is very interested on working with Mexico and its energy companies on international projects, with the idea to create new investment opportunities and to promote an energy infrastructure based on shared best practices and smart technologies.

Mexico is one of the top recipients of FDI among emerging economies in the world. As for the origin of this FDI, the United States (US) and the European Union (EU) represent the most important sources of investment in Mexico. At an individual country level, Netherlands is the third investor in Mexico, while Taiwan is among the three Asian countries with the largest investment in Mexico, together with Korea and Japan.

Mexico Maquiladora Program

Baja California- in an effort to attract more aerospace investment

Mexico ManufacturingBy Adina Moloman

Sources: http://www.ila-berlin.de; MEXICO NOW, SEDECO

Baja California is the main export hub of high-value, knowledge-based services and manufacture for the aerospace sector in Mexico. The state and its promoters are making a constant effort to attract more aerospace investment to manufacture in Mexico specifically to the Norther Baja California region.

Recently a delegation group from Baja California assisted at the ILA Berlin Air Show that took place May 20-25, 2014 at the all-new purpose-built Berlin Expo Center Airport. The ILA Berlin Air Show held every two years (first held in 1909) belongs to one of the largest trade fairs worldwide, the longest-running show of its kind in the world.

This year the five-day trade fair included more than 200 aircraft ranging from futuristic concepts to old models, was attracting around 230,000 visitors with 1,203 exhibitors from 40 countries. The event was focusing on strategically market developments and trends and was hosting some 60 conferences and meetings, workshops, etc., becoming an international meeting point of the aerospace industry, science, politics, international space agencies and the military actors.

Baja California delegation was present inside PROMEXICO stand at ILA Berlin 2014, working together for being the focus of many visiting delegations, civil and military decision-makers.

On the other hand back home Baja California Aerospace Cluster leaders are about to receive in June a French delegation – made of six companies – in looking for Mexico Manufacturing aerospace suppliers and other business opportunities in the region. The names of the transnational companies aren’t unveiled yet but the expectations are big.

The Baja California cluster leaders are also informing that there are currently eight French aerospace companies installed at Tijuana, which employ 350 people and plan to invest US$150 million in 2014 mostly in expansion projects.

New business is attracted to Baja California since there is a constant commitment of industry, academia and government to create a high competitive and attractive destination in terms of innovation and operational efficiency within a certified ecosystem.

Mexico Manufacturing

OEM growth plans for their Mexican operations at the northern border

Mexico ManufacturingBy Adina Moloman

Source: The Canadian Press

The Mexico Manufacturing sector is composed from hundreds of OEM’s and their suppliers with a variety of consolidated productive sectors, which are constantly being on the lookout for new business.

New business keeps coming to Mexico’s border with the United States from Tijuana BC to the Gulf of Mexico. Canadian power sports vehicle manufacturer BRP Inc., will announce plans to invest $55 million at the northern border, to expand production of its Can-Am all-terrain vehicle.

The new production facility, with production planned for the second half of 2015 is expected to employ some 900 people by 2015. The project of a 500,000-square-foot site is expected to be completed by the end of 2017.

BRP, that manufactures Ski-Doos and off-road vehicles opened its first manufacturing facility in Mexico, in Ciudad Juárez, in 2001. This first facility, which employs 1,250, is manufacturing in Mexico the Can-Am and side-by-side vehicles. A second manufacturing plant started more complex operations involving new composite technology for fiberglass, was installed in Querétaro, in 2012, and employs around 700.

BRP is the former recreational products division of Bombardier Inc.

For instance, Bombardier’s decision to locate in Queretaro in 2006 gave a huge impulse of Mexico’s aerospace industry, especially in this city. Since then was registered a constant influx of other big companies, whether OEMs or major suppliers. In Queretaro alone, Aernnova, Eurocopter, Meggitt, CFM, Messier-Bugatti-Dowty, Precision Castparts, and AE Petsche have all decided to open manufacturing facilities to stay close to Bombardier.

This was just an example of how Mexico has recorded production growth between 15% and 20% annually in the last ten years, according to the Ministry of Economy.

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