Last Updated on June 26, 2023
There are many negative perceptions associated with the phrase "Moving manufacturing to Mexico": poor working conditions, sweatshop factories, low quality goods flowing across the border, and the loss of American jobs. Most misconceptions about manufacturing in Mexico are based on false assumptions. Because NovaLink is committed to the growth and satisfaction of the clients we serve who manufacture in Mexico or will manufacture in Mexico in the future, we want to dispel some of these misconceptions.
Low-quality products: Some people believe that Mexican-made products are of lower quality, but this is not necessarily true. Mexico has a well-developed manufacturing industry with many modern facilities and skilled workers. The Maquiladora, a young and talented worker population with a mean age of 26 years, has demonstrated the capacity to construct sophisticated products for manufacturing in Mexico. Because the lower cost of production, an assumption is made that the goods must also be poor quality, but this far from the truth: Mexican workforce, because of the high rate of education and skill in production, have expertise comparable to that of U.S. employees.
Labor exploitation: There is a common misconception of manufacturing in Mexico that Mexican workers are exploited and work in poor conditions, but this is not entirely accurate. While some factories may have poor working conditions, many Mexican manufacturers are committed to providing safe and fair working environments for their employees. The new United States-Mexico-Canada Agreement (USMCA) contains provisions that change corporate arbitration rules and require more stringent enforcement of Mexican labor laws.
In addition, USMCA has promoted higher wages. In Mexico, for example, export firms employ one in five workers; these workers are paid 40% more on average than those in non-export jobs. Firms with foreign direct investment employ nearly 20% of the labor force and pay 26% more than the domestic average manufacturing wage.
For an employer to avoid fines or lawsuits, it is essential to have a thorough understanding of the Mexican labor law. Labor law in Mexico is protected by a number of statutes and regulations. These are the most important regulations that govern working conditions and the relationship between employers and employees.
Lack of technology: Another one of the misconceptions about Manufacturing in Mexico is a belief that Mexico lacks the technology and infrastructure necessary to produce high-quality products, but this is far from the truth. Mexico has a robust manufacturing sector with access to the latest technology and modern facilities. According to the International Trade Administration, "Mexico is among the five largest importers of advanced manufacturing technology globally. This sector has grown exponentially since 2020 as companies have started nearshoring to Mexico. Through their adoption of AM tools, Mexican manufacturers are investing in the technological advances needed to remain and stay ahead of the competition. "
Limited capabilities: Some people believe that Mexican manufacturers are limited in their capabilities and can only produce simple products, but this is not the case. Mexico is capable of producing a wide range of products, including complex and high-tech goods. This is the most unfounded misconception about manufacturing in Mexico.
There are literally dozens of industries enjoying success in Mexico; according to Statista, growing industries in Mexico include electronic components manufacturing, medical device manufacturing and especially automotive manufacturing. Every major automobile manufacturing in the world, including companies from Japan and Europe, have manufacturing operations in Mexico. Chrysler, GM, Ford, BMW, Toyota, Nissan, Audi and Volkswagen all currently have assembly in Mexico plants. According to the International Trade Administration, over one million people in Mexico work for the automotive industry, making Mexico the sixth-largest passenger vehicle manufacturer in the world.
Mexico is falling further behind China: Mexico’s relative competitiveness with China, as a source for U.S. markets, has also received a boost from challenges in China, such as the recent trade tariffs coming from the United States. In recent years, China’s manufacturing wages have been rising absolutely and relative to increases in its productivity. Labor unrest has burst out across China, a phenomenon formerly unknown in the country. This has prompted shifts in manufacturing out of China to low-wage Southeast Asian nations and, for more sophisticated products, to Mexico. While China and other Asian exporting countries are benefiting from the collapse in ocean freight rates, Mexico continues to maintain strong logistical advantages: Geographic proximity, shorter transit time, time zone alignment, accessibility, free trade, cross-border logistics investments (particularly in road and rail), and strong political and social ties with the U.S.
Intellectual property concerns: In contrast to the Chinese, Mexico takes intellectual property rights very seriously and has implemented new guidelines and laws to ensure that the rights of intellectual property are protected.
The USMCA revised the original NAFTA to provide 21st-century legal protections. In addition to recognizing the benefits of effective intellectual property protection to the North American economy, the USMCA also included provisions to strengthen Mexico’s IP policy framework.
As defined in Chapter 20 of the new trade agreement, The USMCA provided for an improved variety of regulations regarding intellectual property. The chapter includes protection for trademarks, trade secrets, and online copyright enforcement. Together, the past 25 years have created a clear competitive advantage for Mexico and a roadmap for the protection of intellectual property in Latin America.
With the implementation of some of the USMCA’s intellectual property commitments, Mexico’s score in the 2022 IP Index improved. In fact, Mexico received only a 12.38% overall score out of a possible 100% in the inaugural edition of this Index in 2012.
In the most recent edition in 2022, Mexico demonstrated a noteworthy improvement in the Index. The US Chamber of Commerce issued an overall score of 58.98%.
Misconceptions About Manufacturing in Mexico: Outdated or Inaccurate Information
In conclusion, there are many misconceptions about manufacturing in Mexico, but it's important to remember that these views are often based on outdated or inaccurate information. Mexico has a thriving and sophisticated manufacturing sector that is capable of producing high-quality goods with the latest technology and modern facilities. By overcoming these misconceptions and recognizing the capabilities of Mexican manufacturers, companies can tap into a wealth of opportunities and benefits that Mexico has to offer. By doing so, they can enhance their global competitiveness and achieve success in a rapidly changing and increasingly interconnected world.
FAQs about Misconceptions of Manufacturing in Mexico
Q1: Is it true that manufacturing in Mexico is only suitable for low-skilled labor-intensive industries?
A1: No, it is a misconception that manufacturing in Mexico is limited to low-skilled labor-intensive industries. Mexico offers a skilled and diverse workforce across various sectors, including automotive, aerospace, electronics, medical devices, and more. It is capable of supporting high-value manufacturing processes and advanced technologies.
Q2: Are all Mexican manufacturing facilities outdated and lacking modern infrastructure?
A2: No, not all Mexican manufacturing facilities are outdated or lacking modern infrastructure. Mexico has made significant investments in its manufacturing sector, resulting in state-of-the-art facilities equipped with advanced machinery, technologies, and production processes. Many companies have modernized their operations to meet global standards.
Q3: Are intellectual property concerns a significant issue when manufacturing in Mexico?
A3: While intellectual property concerns exist in various parts of the world, it is a misconception to assume that intellectual property is not adequately protected in Mexico. The country has strengthened its legal framework and enforcement mechanisms to safeguard intellectual property rights. Many manufacturing companies in Mexico prioritize IP protection to maintain trust and competitiveness.
Q4: Do Mexican manufacturers struggle with meeting quality standards and delivering on time?
A4: No, it is a misconception that Mexican manufacturers struggle with meeting quality standards and delivering on time. Mexican manufacturers have demonstrated their ability to meet and exceed international quality standards through certifications, process improvements, and a strong commitment to customer satisfaction. They also implement efficient production systems to ensure timely delivery.
Q5: Is it true that nearshoring to Mexico is not cost-effective due to hidden expenses and logistical challenges?
A5: No, it is a misconception that nearshoring to Mexico is not cost-effective due to hidden expenses and logistical challenges. While it is important to consider factors like transportation costs, tariffs, and regulatory compliance, Mexico's cost advantages, such as lower labor costs, reduced shipping expenses, and proximity to major markets, often outweigh the associated expenses, making nearshoring cost-effective.
As a manufacturer in Mexico, NovaLink employs a unique approach that transcends the traditional model of shelter production. More than just the location of your manufacturing, we would like to become a partner in your manufacturing in Mexico. You will be able to relocate or initiate manufacturing for your company in Mexico in a low-cost labor environment with very little delay or up-front costs. Find out how we can help you by handling the manufacturing process.