The Entrada Group, a leading shelter operator providing services to international manufacturers, has just released a whitepaper explaining why the credibility of Mexico's manufacturing sector has moved up in global ranks and why increasingly more European manufacturers are using Mexico as a manufacturing platform to service north America. Paul Pilkauskas, a former Foreign Service Officer in the US Department of State, is its author.
According to the report, Mexico has become an increasingly attractive destination for automotive, aerospace, medical devices, electronics, and other industrial goods manufacturing.
The 1994 North American Free Trade Agreement (NAFTA) between the United States, Mexico and Canada eliminated a majority of tariffs, customs charges and import and export restrictions on the movement of goods traded among the three countries. Furthermore, Mexico's labor force is relatively inexpensive though highly experienced in manufacturing.
As a result, hundreds of international companies have made big investments in Mexico. For instance, Germany's Volkswagen produces its Jetta model exclusively in its Mexico plant. Electronics manufacturers such as LG have set up operations in Mexico due to rising wages in China, and the latest trend in foreign investment has been from the aerospace industry, where 238 aerospace companies have taken advantage of the highly skilled labor force by establishing operations in the country.
"Smaller European suppliers to larger OEMs in the North American market are also taking advantage of Mexico's strengths by using reputable business models, such as 'Shelter Services' providers who manage all administrative and legal infrastructures, and recruit a skilled and dedicated workforce, while also providing production facilities and managing all aspects of the industrial park," explains Pilkauskas.
The report also points out that Mexico's proximity to the US is a significant and growing advantage to those who are supplying to the North American market, as it allows for the immediate landing of a product and just-in-time delivery, which is much harder to implement from Europe, China or India. Producing in Mexico therefore allows European companies to establish a manufacturing presence in North America at a lower cost, in a US dollar cost zone within an established local supplier base.
"Orders can be filled in half the time that is generally experienced when sourcing from China," adds Pilkauskas.
On 29 September, Paul Pilkauskas will present the insights shared in this whitepaper at the 12th European Automotive Congress in Madrid Spain.