The Mexican Aerospace Sector is Projected to Enter the World’s Top Ten in 2020
Industry watchers project that, during the coming year, the Mexican aerospace sector will break into the top ten in the world in terms of sales of parts to the global industry.
Reaching this landmark is concrete evidence that Mexico’s workforce of engineers and specialized technicians is among the best available in the world.
According to the country’s Ministry of Economy, the Mexican aerospace sector currently ranks in the 15th position globally. Ranking in the top ten in 2020 is expected to move Mexico past other top industry producers such as Brazil and Spain. Also, in 2020 it is expected that the Mexican aerospace sector will be the source of 110,000 jobs and will be responsible for the creation of between 30 percent and 35 percent of the nation’s engineering positions. Exports are expected to climb above US $12 billion. Additionally, it is anticipated that 50 percent of the inputs utilized by the Mexican aerospace sector will be produced by domestic suppliers.
In a further effort to grow the industry in Mexico, the nation’s Ministries of Economy and Defense have collaborated to develop a “strategic aerospace industry” program. Both entities seek to act in order to leverage the competitive advantages that are inherent to the Mexican aerospace sector, as well as to promote its growth in order to benefit the broader national economy. Presently, Mexico exports 87 percent of its aerospace parts production to the United States. Mexican aerospace sector manufacturing firms are also looking to expand their share of export sales to other important industry markets such as France, England, Germany, and Canada.
The strategic aerospace program has revealed that the Mexican aerospace sector has several immediate needs. These include a greater participation in international programs that provide access to new technologies and markets, the further development of skilled human capital, an expanded access to financing, the development of a specialized and reliable supply chain, the implementation of favorable rules and regulations, the initiation of new capital investments, greater incentives for growth, and strengthened ties between academia and industry.
The Mexican aerospace sector can learn from the experience of others
Mexico can learn by observing the actions of countries such as Spain, Brazil, and Canada. These nations have created strategic institutional programs focused on the development of their aerospace sectors that provide clear and concise guidelines for both domestic and foreign investors. In addition to this, they have taken firm legislative measures to commit sufficient funding from their federal budgets to specifically support aerospace industry development. Beyond these measures, they have formulated and implemented industrial policies aimed at growing the domestic market for their industries’ production.
In order to make its aerospace sector competitive in the global market, Mexico must support the formation of industry-specific technology and development centers (design and testing), as well as support regional industry cluster development. Mexico can also further its progress in capturing international aerospace market share by specializing in certain services and products in the global aerospace supply chain. In light of these actions, the Mexican government has set several targets for its country’s aerospace industry for the year 2020. Principal among these is the integration of domestic firms into 50 percent of the Mexican aerospace industry’s supply chain.
The Mexican aerospace sector will continue its growth and development trajectory
The Mexican Federation of Aerospace Industries (FEMIA) projects that the average national growth of the sector will be 11 percent between the years 2020 and 2023. However, the pace of this expansion is expected to decrease to approximately 7.6 percent during the years 2024 to 2037. This will be due to a concentration of aerospace production demand in Asia that will begin in 2025.
FEMIA believes that three principal factors that will have the most effect on the growth of the Mexican aerospace sector over the next several years include:
- The implementation of the United States-Mexico-Canada free trade agreement;
- The Mexican government’s support of its National Supplier Development Program;
- The decrease in the rate of growth of the Mexican aerospace sector beginning in 2024 with the increase in demand for industry production in Asia.
The Mexican Federation of Aerospace Industries also points to structural factors that will support Mexican industry growth going forward. Among these are a:
- Favorable geographic location
- Sophisticated and high-quality workforce;
- High level of value chain integration;
- High level of industry competitiveness at the international level;
- Cost structure that is approximately 16 percent lower than that found in the United States;
- Network of international free trade agreements that are extensive in scope.