USMCA, Renewed Interest in Mexico Set to Spark Aerospace IndustryBy Jorge Ramos Zwanziger | Tue, 06/15/2021 - 09:28
Q: How has demand for industrial workspaces changed with the pandemic and how has that affected JAVID LLC’s business model?
A: Before the pandemic, Nogales’ manufacturing industry employed 52,000 people but the government-mandated shutdowns reduced that number to less than 12,000 working employees. The reopening was not as fast as we saw in other countries like the United States. A facility that had 200 employees was allowed maybe 25 to 50 on-site. The Maquiladora had to ensure all workers maintained a two-meter distance from each other and wore face masks to contain the spread of the virus, among other requirements. We received numerous inspections from the Ministry of Health and the Ministry of Labor to ensure we adhered to those regulations.
Gradually, we pushed for an increase in our workforce and we are now back to normal with a very limited amount of people working from home. These restrictions have changed everything in our business model, including how we communicate with investors, how we sell Mexico, and how we attract new businesses.
Q: What are your expectations regarding the growing nearshoring trend and its impact on manufacturing and aerospace operations?
A: There were other events that took place last year besides COVID-19, as I know COVID-19 was a major event in everyone’s lives. Some of these included the starting of the new NAFTA known as USMCA and the trade war between the USA and China. With both of these things going on, last year, I received numerous phone calls from companies wanting to expand into Mexico. Though, we were not able to help all of them. Their focus was more on Subcontracting/Contract Manufacturing and finding vendors to make their products in Mexico, which in China they developed and prepared themselves to handle. In Mexico, finding a subcontractor provides certain challenges. Now, however, things are starting to change and businesses are studying different options. Some may open a small 20,000ft2 facility with a few employees in Mexico. We are receiving numerous calls and my goal is to have one or two clients a year on average. This year, we expect three or four.
Q: How will the USMCA impact the development of the aerospace supply chain?
A: Some companies are looking into Mexico because of the USMCA; others are producing in China and have to deal with long delivery times and sometimes their products are not 100 percent accurate. These clients would rather bring production closer and have full control over it. With the USMCA and the renewed interest in Mexico, I can see the aerospace industry just booming. When aerospace suppliers start moving into Mexico, the sector will see more competition, which in turn will increase supply and demand. Suppliers are coming for many reasons, but now in Mexico, there is more support for aerospace companies, and maybe even lower prices.
We are pushing for the nearshoring and ally-shoring trends, which benefit all parties. Mexico will have more employees paying more taxes. Local manufacturers will expand and grow. Maquiladoras will also start growing as they acquire more suppliers. Though the US is not sending its entire production, only parts of it. Why? Perhaps companies in the US believe that Mexico has limited supplies, talent, or quality. As Mexico receives additional suppliers, these companies might realize they can produce more in Mexico and it would be beneficial for them to move their operations from the US, Malaysia, or China.
Q: What advantages does the state of Sonora offer as an investment destination and how has JAVID LLC leveraged those advantages?
A: Sonora is now facing a complicated situation. Since last year, the government has been unable to subsidize or provide any type of assistance to companies because all its resources are being used to fight COVID-19. Though, the government was helpful in providing training. Sonora is in a great location, between Mexico and the US, and with a (+/-) US$26 billion port of entry. Sonora is also the top producer of copper and gold in Mexico.
Sonora’s advantages include its great location: within a few hours, your product will cross into the USA, and many products from Sonora can reach California, Oregon, New York, and Washington in less than 4-5 days. Once it crosses the border it can reach interstate highways that and spread across the USA and North America very quickly. The state also has a good relationship with Arizona. The close relationship between both states has led us to call it the Mega Region. Arizona is also working to bring businesses to Sonora as the US state is highly pro-trade.
Sonora is also the aerospace capital of Mexico. We have more support and full aerospace companies than any other state.
Q: What are the biggest challenges that foreign companies face when they enter the Mexican manufacturing industry?
A: If they come under Javid’s shelter scheme, they have nothing to worry about. Mexico, just like any other country, has a lot of red tape in the form of government restrictions, environmental, fiscal, customs requirements, and numerous permits. The two major challenges are the language barrier and addressing the local regulations. Countries have completely different rules on how to open a business and operate. What is okay in the US might not be okay in Mexico. JAVID takes care of all those things for companies new to the country.
Q: What are Javid LLC’s growth expectations in the short and long term?
Q: We now have 27 customers and by the end of the year we want to have at least two or three more. We want to expand into new locations and enter a new city or state within the next year or two. If countries are different, states are too. We would love to go to Tijuana or Mexicali. Many companies want to open a maquiladora in Tijuana with 20 to 30 employees. If you have an office in Tijuana, you will attract business from California. JAVID LLC is not just focused on Sonora, either. We can shelter companies in any state. But we are looking into opening offices in other locations such as Guadalajara or Saltillo.