Mexican States: Finding the Best Fit for Your Business Operations
STORY INLINE POST
After a year of unprecedented sociopolitical and economic changes, the balance of global supply chains has shifted and offshoring has become a less attractive option. Companies in North America are increasingly looking at nearshoring as an alternative to continue growing, and Mexico is the top manufacturing option for the region. According to the country’s Ministry of Economy, the region received slightly under US$32.15 billion in foreign direct investment (FDI) during 2022, an increase of 29.5 percent versus 2021.
Mexico presents considerable advantages for manufacturing operations. Beyond lower labor costs, the country boasts a highly specialized labor force, efficient transportation systems, and tax-free trade reinforced by the USMCA agreement. For Canada and the US especially, the extent of shared borders, highway routes, and railroads allow for stronger supply chains that are less likely to suffer from bottlenecks when compared to other logistical routes. Furthermore, the geographical proximity, shared culture, high rates of bilingual workers, and similar time zones, allow for better communication and logistics across borders. All of these elements make Mexico the most appealing option for North American enterprises to reshore.
Once the decision to move operations to Mexico has been made, one question remains: which state is the best option for your company? While some areas are particularly well-equipped for manufacturing and other specific industries due to the presence of industrial parks and access to strategic logistics locations, others are well known for their technical knowledge and incentives for innovation. To ensure the success of your company, it is essential to know what areas of Mexico can provide benefits for your specific needs.
One of the preferred areas for investment is Mexico City, which attracted 32 percent of FDI in 2022. As the country’s capital and the heart of its economic activities, Mexico City offers a lot in terms of potential markets and specialized talent. It is the most populated region in Mexico with close to 22 million inhabitants. Additionally, the fast-paced and innovative spirit of the region makes it ideal for entrepreneurship, especially in IT and software development. As of 2022, there are 992 startups in the tech industry, and the sector continues to expand, with an influx of highly skilled workers, both native and foreign, with a strong preference for hybrid and remote employment.
For efficient transportation and significant real estate benefits, Nuevo Leon could be a good alternative. Attracting 8.7 percent of the total FDI in 2022, this state is known as the “industrial capital” of the country. It boasts not only a convenient proximity to the US border, but also vast infrastructure that amounts to 52 percent of the total industrial space in the country. As of early 2022, it is home to 78 industrial parks and has ongoing projects for at least 14 new logistical centers.
Although it centers on the manufacturing, automotive, and logistical sectors, the northern region has also seen a rise in e-commerce over the past few years. Its local universities have established strategic partnerships with companies to provide well-trained candidates with high technical knowledge. This makes it a popular choice for US companies looking to reshore, since components and subassemblies can be easily produced in Nuevo Leon with technical precision and then transported across the border with minimal processing times and costs.
Another strong option is Jalisco, which attracted 7.5 percent of FDI. Its capital, Guadalajara, has been called the Silicon Valley of Latin America. More than 700 tech companies have invested in the city, including HP, which has been present in the region for over 40 years. The city stands as a hub for innovation and technological entrepreneurship. The Mexican Competitiveness Institute (IMCO) has ranked the state as No. 1 in both innovation and patent applications as of 2022, and Guadalajara alone currently employs over 79,000 highly trained specialists in the tech sector.
In 2021, the Jalisco government launched a Network of Innovation and Entrepreneurship centers, which established nine locations for creative coworking across the state as well as various initiatives to provide training, encourage startups, and foster technological innovation. The state is planning to invest around US$680 million in water infrastructure, highways, new industrial parks, and education to satisfy global supply chain demands. With Guadalajara reporting nearly 2.8 million square feet of new industrial space, the region has become increasingly attractive for foreign companies .
Guanajuato is another option for investment, receiving 5.2 percent of the country’s total FDI. This state is a manufacturing powerhouse, reporting 10 percent growth in the auto parts sector over the past year. It’s the country’s leading state in the production of light vehicles, and the fourth-most prolific for auto parts manufacturing. Companies like Ford, Mazda, and Toyota all operate in the region, and even more companies, such as Kasai and Pirelli, have recently established it as a site of operations.
Guanajuato is also known for its infrastructure. The Guanajuato Internal Port (GIP) is a logistical hub for more than 18 countries and provides privileged access to both local and international markets. Thanks to a state-of-the-art “dry port” with its own customs office, the GIP lowers transportation costs and delivery times. This has already attracted large investments from countries like Japan, who’s companies currently occupy about 60 percent of the GIP.
This wide array of states represents only a small fraction of the benefits Mexico has to offer to foreign companies. The country is highly qualified for a variety of sectors, from manufacturing to high-tech and e-commerce, and offers the talent to back up these ever-developing industries. The benefits of its infrastructure cannot be overstated, as supply chains grow through investment in warehouses, highways, and industrial parks. Mexico is an excellent partner for North American companies, not only because of the benefits afforded by the USMCA, but also through the many pro-business incentives enacted by local governments and international organizations. Regardless of the industry you’re in, if you seek logistical ease and more efficient and profitable operations, Mexico might just be your best choice.
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