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Can Mexico Meet the Human Talent Challenge?

By Manuel Montoya - CLAUT Cluster Automotriz de Nuevo León
Director CLAUT

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By Manuel Montoya | Director - Thu, 01/12/2023 - 11:00

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After the pandemic, there are two phenomena that have caused the arrival of new investment in Mexico (and the state of Nuevo Leon), which are the USMCA and nearshoring. Just in the first half of 2022, US$27 billion in direct investment was legislated. The end-of-year projection for foreign investment is that we will reach(hopefully) the investment range achieved during the best times for FDI attraction in Mexico.

The trade war between the US and China as well as the supply chain disruption that occurred during the pandemic have caused large transnationals to bring back the production that they took to Asia years ago. As such, they started looking for suppliers in the region, specifically in Mexico, which opened a great opportunity for Mexican suppliers, especially SMEs. Our challenge is to make them capable of capturing all the business that is being generated. The challenge for these companies that have already mastered their technology is how to finance growth.

One issue with the nearshoring phenomenon is the aging of the population in most developed countries. As a result, there are not enough young people to take over the jobs that their parents and grandparents had, just as there are no well-structured immigration programs that allow these industries in developed countries to capture young people for operational and technical jobs. Today, we see people over 50 years of age on assembly lines and very few young people. Certainly the automation of processes and the use of robots are facilitating the substitution of labor, but this will never be enough to surmount the problem.

In some countries and regions, they are no longer reporting unemployment but rather a percentage of unfilled vacancies; for example, the Canadian province of Quebec reported a 6.2 percent rate of unfilled vacancies in the first half of the year. The unfilled vacancies mean that plants must reduce their production, leaving equipment and even plants under capacities. This is another reason that companies are looking to migrate production to countries like Mexico where we still have young people available for manufacturing. 

Together with the advantages of the regional integration resulting from the USMCA and nearshoring, there is a great opportunity for Mexico to attract investment due to the availability  of young people. The demographic bonus  in Mexico is estimated to be around 10 to 12 years. Countries like China no longer have a demographic bonus, which is why costs and the availability of labor have increased a great deal in other developed countries, which have spent years dealing with population decline. This will not be reversed without an organized and focused immigration policy.

Another trend that we are seeing, together with the movement of business toward our country, is the arrival of new engineering centers. The same labor shortage phenomenon afflicting plants and factories also exists with design engineers in the automotive industry. This reflects the aging of the automotive industry workforce in developed countries. The same engineers have been working in the industry since the 1990s, and young people are no longer attracted to engineering careers, and even less so if they are connected to manufacturing. Other, more attractive, better-paid industries are attracting young talent. Mexico, on the other hand, graduates 100,000 engineers a year. These are young people who have the desire to make a career in the main manufacturing industry in Mexico. Now,  they also have the opportunity to design from conception to the commissioning of components and vehicles. 

An example is the Engineering Center for autonomous vehicles that ZF is building in Monterrey. It will be an innovation and development center that will support all ZF’s operations around the world and it is at the forefront of the technological change that the industry is experiencing. In our cluster, we already have 20 companies, between OEM and Tier 1, that have an engineering center in the region. There are other regions, such as the State of Mexico, Queretaro or Jalisco, that also have engineering centers that support the automotive industry.

In Mexico we must have public policies that encourage collaboration as occurs among the clusters in an effort to develop young talent at all levels of the organization. Let's hope that 2023 will be a key year in which we can consolidate the great opportunities that the USMCA and nearshoring are bringing to Mexico. May the automotive industry continue to be the engine of the Mexican economy and spearhead for technological development that leads us to offer both manufacturing and mindfacturing to the world!

Photo by:   Manuel Montoya

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