Global Companies Choose to Locate Facilities for Manufacturing in Mexico

By Doug Donahue

Many companies have chosen to locate at least some of their manufacturing operations in Mexico. Whether for automotive, aerospace, durable goods, audio componentry or the like, manufacturers of all sizes are realizing the benefits of nearshoring all or some of their production in Mexico.

Mexico is the America’s second-largest export market and third-largest trading partner. This high level of traffic helps result in economies of scale – clearly one of the reasons that large multinationals are turning to manufacturing in Mexico. Obviously low labor costs are another, as American manufacturing workers could make five to six times more than their Mexican counterparts (according to a 2010 US Bureau of Labor Statistics study “International Comparisons of Hourly Compensation Costs in Manufacturing”).

Mexico’s nearby location to final consumption markets in US and Canada gives provides an additional cost savings to companies that are manufacturing in Mexico. Such firms can leverage Mexico’s strong interior infrastructure, and excellent rail, road and air connectivity into and out of the US when they establish a presence in the country.

But successful multinational companies wouldn’t choose to establish manufacturing in Mexico based strictly on cost savings alone. The presence of a highly educated and well-trained workforce makes Mexico an attractive destination too. Since December 2006, the Mexican government has launched over 70 institutions of higher education and has helped more than 30 existing institutions to expand their student enrollment. This is in response to a growing need for engineers and technicians in Mexico, a need the government is eager to meet.

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