Manufacturers Need Central Mexico for Expansion Efforts

Commentary by Doug Donahue
According to this piece in Packaging Business Review, Sonoco, the largest manufacturer of molded foam components and packaging, recently announced plans to invest up to $10.5 million to open a new manufacturing facility in Celaya, Guanajuato Mexico. The facility will produce molded foam products for medical, automotive, appliance, aerospace and industrial markets.

Sonoco is making this investment in order to serve customers in both the US and Mexico. Thus Mexico is not just a source for low-cost labor but also a growing market for US manufacturers.

Sonoco’s move is another example of a manufacturer that wants to get closer to Mexican consumers. This is similar to Entrada’s expansion into central Mexico’s Baijo region. Like Sonoco, we feel that Baijo shows promise not just for cost-competitive labor but also due to a solid manufacturing tradition and strong presence of suppliers in the region. Baijo is a big reason Mexico is outperforming the BRICs for offshore manufacturing.

Many of Entrada’s clients see Mexico as a platform to manufacture products for South America as well. Products manufactured for export into South America require a higher content of Mexico input than those for export into US or Canada under NAFTA. Thus companies looking to grow in South America need a Mexican presence and the abundance of suppliers in Baijo are a strategic necessity.

Sonoco’s and Entrada’s expansion into Mexico’s interior is part of a trend exhibited not just by US manufacturers, either. Japanese and European companies are moving into Mexico’s interior, benefiting from low-cost operations and plentiful labor, while also strengthening their backdoor into the US market – making them more competitive with US manufacturers in the process. The message? US manufacturers that aren’t already set up in central Mexico need to get down here too.

Source: Packaging Business Review:



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