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News Article

The Time to Manufacture in Mexico Is Now

By Alfonso Núñez | Fri, 03/25/2022 - 10:46

Mexico has long stood as the manufacturing ground for international countries looking to make use of bountiful resources, a convenient location and an ample source of talent. As Latin America’s main exporter of medium and high technology, according to Claudia Estevez, Executive Director, AMPIP, many companies are looking to enter the territory to expand their operations. However, the endless opportunities in the industry do not make the landing process any less complicated.

 

Despite Mexico having an offering of around 550 industrial parks, according to Estevez, real estate for manufacturing companies in the country is becoming harder and harder to secure due to the high demand, said Salomón Noble, General Director, Intermex, a company focused on facilitating successful establishment of operations in Mexico through real estate and administrative services. Companies are looking for buildings they need as early as the next day and cannot afford to wait seven to nine months for an alternative to be built. Partners like Intermex can offer support in this area, as well as in finding the right talent for companies, translating their needs to the Mexican environment.

 

Shelter services help to define the right candidate profile for the company, preselecting them to fast-track the process. “Job descriptions are key in this process. These need to be tropicalized to the Mexican reality so the right person can be found at the right cost,” said Noble. Once the candidates are pre-selected, preference is given to those closer to the manufacturing site to reduce transportation costs and the company’s overall environmental impact. “This also leads to a reduced turnover,” said Noble.

 

According to Alan Russell, President and CEO, Tecma Group, the environment in Mexico is ever-changing and has never been more challenging than it is today. There is an exhausting process behind operation certification, making it imperative that companies get help to participate in this environment, particularly as Mexico’s manufacturing opportunities are at one of their best moments after the signing of USMCA. Having the right partner is key for companies to be able to ramp up their operations without worrying about peripherals. “Mexico’s manufacturing scene is as challenging as any other country where a company is not yet present. Our key value is that we are not experienced in automotive or textile industries; our experience is in working in Mexico,” said Russell. “Our clients are focused on delivering their products on time. Everything else happening in the background is our responsibility.”

 

Another hurdle faced by companies is the challenge of forming longstanding relationships with the government due to the limited time administrations may have in office. “Companies have to keep in mind whether a local government is starting or ending its administration, as that impacts the possibility for long-term relations,” said Eduardo Infante, Vice President, Aguascalientes Industrial Cluster, and Deputy Minister of Investment for Economic Development, State Government of Aguascalientes. Having a partner like a shelter service company can be of great use in these situations, according to Infante, as these companies are in charge of building relationships with each administration, taking that burden away from manufacturers.

 

This does not mean that different political parties are not willing to work together for the sake of expanding business in the country, however. “The role of the public sector is key in attracting further investment,” said Infante. Aguascalientes, along with nine other state states governed by the opposition, have worked together to replicate the promotion efforts of bodies like ProMéxico, trying to replicate the success of the Bajio area as an investment destination. “We realized that collaboration was missing, which is why we worked on the Invest in Mx initiative to highlight our similarities and boost the country’s competitiveness.”

 

Logistics solutions are also an imperative aspect of international manufacturing. Unfortunately, while the pandemic brought countless opportunities to the e-commerce world, it has brought significant challenges to international shipping. From COVID-19 variant lockdowns to the congestion of Asian ports and the impact of the Russian invasion of Ukraine, logistics partners are seeing a wide array of challenges to solve. According to Victor Benavidez, Country Manager, TIBA, the pandemic transformed the role of logistics partners, from service providers to actors with a strategic role in the establishment of business strategies. While companies may already have relations with global logistics providers, having a local partner that knows the intricacies of the country can be crucial to ensure quality and efficiency in operations. “Efficiency and reliability are key elements in today’s business. Building these relationships with local providers can be another advantage offered by shelter-like services,” said Benavidez. “This local experience and interaction can bring quick wins to the company.”

 

“Mexico has a great reputation, from a legal framework perspective, regarding the automotive industry. There has never been a better time than now for companies to come and establish here,” Russell said. Through contractual arrangements typically with a shelter company, international clients usually do not even need to have presence in Mexico to have a successful manufacturing operation. “Reputation conquers all and the Mexican government has a reputation of supporting business. Today is Mexico’s day,” said Russell.

 

There are still challenges to tackle in the form of infrastructure, as well, particularly as demand increases. Vacancy is worrying in some areas like the Bajio and industrial zones at the Mexico-US border like Juarez, according to Noble. Infante highlights the lack of water and energy availability in certain areas as a hurdle that could potentially hinder the industrial sector’s success. “We are at risk of losing investments earmarked for Mexico should we not be able to meet this demand,” he said. Most recently, López Obrador’s energy reform has become a new roadblock to the industry. Uncertainty remains while the bill gets voted and there are lingering issues regarding CFE’s transmission capabilities. “Generation is not the issue as there is currently more supply than demand. The problem is carrying that supply to where it is needed and resources are being allocated to other project instead of addressing these issues,” said Noble.

 

Yet, panelists do not see it passing due to the direct opposition to USMCA commitments and for leaders like Russell, the future looks promising. “The global realignment is creating the greatest opportunity for Mexico in history. Mexico is the darling of the manufacturing industry and we just need to seize the opportunities,” said Russell.

Alfonso Núñez Alfonso Núñez Journalist & Industry Analyst