Is My Business a Good Fit for Mexico?

Last Updated on July 5, 2023

You have a great idea for a company, along with a great product, that you are sure the public is going to love.  Like many businesses with great ideas, your company is faced with a seemingly giant hurdle: getting your product manufactured and out to the public.  To overcome this hurdle, you may want to consider having the manufacturing for your product done in Mexico to become a more lean and cost-efficient organization. This is a good idea, as the benefits of doing Mexico manufacturing are numerous: inexpensive labor, quality production, spacious factories, low-cost startup and proximity to your markets in the United States just being a few. Yet, before your company begins the transition of business manufacturing to a nearshore partner like NovaLink, one should consider all the factors and advantages in getting the production started and most importantly; whether your manufacturing business is a good fit for Mexico.

The Mexico Advantage

Just as many US corporations such as Ford, Nike, Patagonia and Eddie Bauer have realized, moving manufacturing to Mexico is an advantage not only for American companies, which can save costs and use a greater portion of their profits for research and product development, but also to the American consumer, which can afford to purchase products manufactured in Mexico at a premium rate, which manufacturing countries in other companies across the Pacific such as China and India are unable to provide.

Combine this with a large, educated and inexpensive labor force and you begin to understand why Bloomberg believes that Mexico is a “Global manufacturing power...which makes it more attractive for companies to locate or expand plants there.”

The labor force most commonly used in Mexico, The Maquiladoras, is one of the most attractive benefits of Mexico manufacturing.  Maquiladoras are capable of manufacturing high-quality products across a wide variety of industries: Textiles, Electronics, Aviation/Automotive and Furniture are all industries in which the Maquiladoras excel in producing high-quality products.

Is My Business a Good Fit?

Yet, not all products that may be manufactured are a good fit for Mexico.  Simple products that require little labor, skill, assembly, innovation or that can be automated are generally not a good fit for manufacturing in Mexico.  When it comes to Manufacturing in Mexico vs China: if a machine can do most of the work, then it may make more sense to manufacture in the United States or across the Pacific in China.

Mexican manufacturing is not suited to factory-line labor: assembly in Mexico or hand-customization products, such as sewing or cutting fabric or a skilled, trainable workforce, such as electronics, is also better suited to Mexico.

How quickly you need your product to your markets can also play a large role: if getting products made and out to markets quickly and efficiently is not a problem (although few companies would say this is true) then perhaps moving production across the Pacific to China, where the turnaround time can be almost three times compared to Mexico, might be an option for you.

Simply put, if you could benefit by moving your manufacturing processes across the Pacific to India or China, then you can benefit from moving them south to a nearshore partner such as Mexico. Very few products that require skill currently being made in the Far East can also be made in Mexico as well.  In addition, you gain the benefits of proximity, time zone, ease of access, lead times and customization of product and scheduling when you outsource in Mexico.

Things to Consider Before Moving Manufacturing to Mexico

Although the prospect of getting your manufacturing in Mexico for your product may seem daunting, there is good news: NovaLink has the process of setting up manufacturing in Mexico down to a precise science.

Whether you are a large corporation or a small business trying to get off the ground, NovaLink has the software, facilities and manpower to get your business up and running quickly and efficiently with minimal cost.

With NovaLink prepared to handle the business logistics, all that is left is to consider the administrative, and in some cases, legal issues, that must be considered before taking the step to working with a nearshore partner.  These include:

• Determining the corporate and tax structure most appropriate for a proposed venture in Mexico based on its needs, expectations, and area of business.
• Procuring the proper immigration documentation, as well as the necessary Federal and State licensing.
• Fulfilling the necessary Federal and State registrations.
• Advising the company on the requisite bookkeeping which must be followed.
• Advising the company on various labor law issues.

All of these issues can be conveniently handled by engaging the advice of an experienced Mexican corporate attorney in the United States.

There are many, many advantages to manufacturing in Mexico with NovaLink.  Understanding if your business is a good fit for Mexico as opposed to the Far East should be the least of your worries.

FAQs: Is My Manufacturing Business a Good Fit for Mexico?

1. What factors should I consider to determine if my manufacturing business is a good fit for Mexico? Several factors should be considered to determine if your manufacturing business is a good fit for Mexico, including:

a) Industry compatibility: Assess if your industry aligns with Mexico's manufacturing capabilities and strengths. Industries such as automotive, aerospace, electronics, medical devices, and consumer goods have a strong presence in Mexico.

b) Supply chain advantages: Evaluate if Mexico's proximity to major markets, such as the United States, offers logistical advantages and reduces transportation costs for your business.

c) Cost considerations: Compare labor costs, operating expenses, taxes, and regulatory compliance requirements in Mexico with those in your current location to determine if Mexico offers cost advantages.

d) Skilled labor availability: Assess the availability of skilled labor in Mexico for your specific industry and determine if it meets your workforce requirements.

e) Infrastructure and connectivity: Evaluate the quality of infrastructure, transportation networks, access to ports, and reliable utilities to support your manufacturing operations.

2. What are the benefits of setting up a manufacturing business in Mexico? Setting up a manufacturing business in Mexico offers several benefits, including:

a) Cost advantages: Mexico offers competitive labor costs, lower operating expenses, and tax incentives that can lead to cost savings compared to other countries.

b) Proximity to major markets: Mexico's geographical proximity to the United States and Canada provides easy access to the large North American market, reducing transportation costs and lead times.

c) Skilled labor force: Mexico has a well-established manufacturing sector with a skilled labor force, particularly in industries such as automotive, electronics, and aerospace.

d) Strong supply chain integration: Mexico has developed robust supply chain networks and has free trade agreements with numerous countries, facilitating seamless integration into global supply chains.

e) Favorable business environment: Mexico has implemented business-friendly policies, trade liberalization measures, and incentives to attract foreign investment, making it an attractive location for manufacturing businesses.

3. What industries are thriving in Mexico's manufacturing sector? Mexico's manufacturing sector has seen significant growth across various industries. Some of the thriving industries in Mexico include:

a) Automotive: Mexico is a major hub for automotive manufacturing, with numerous international automakers and suppliers operating in the country.

b) Aerospace: Mexico's aerospace industry has experienced rapid growth, attracting investments from global aerospace companies for manufacturing and assembly operations.

c) Electronics: Mexico has a strong electronics manufacturing sector, producing consumer electronics, telecommunications equipment, and electronic components.

d) Medical devices: The medical device manufacturing industry in Mexico has grown significantly, serving both domestic and international markets.

e) Consumer goods: Mexico is known for its production of consumer goods, including textiles, apparel, furniture, and appliances.

4. Are there any challenges or risks associated with setting up a manufacturing business in Mexico? While Mexico offers numerous advantages, there are also challenges and risks to consider, including:

a) Security concerns: Certain regions in Mexico may have security challenges, and it is essential to assess the safety and stability of potential locations.

b) Workforce training and skills development: While Mexico has a skilled labor force, specific industries may require specialized training and skills development initiatives.

c) Regulatory compliance: Understanding and complying with Mexico's regulatory framework, tax laws, labor regulations, and customs procedures can be complex for foreign businesses.

d) Cultural and language differences: Operating in Mexico may require adapting to cultural nuances and language barriers, necessitating effective communication and cross-cultural management.

e) Supply chain dependencies: Mexico's manufacturing sector heavily relies on cross-border supply chains, making it susceptible to disruptions caused by geopolitical factors or trade policy changes.

5. What support or incentives are available for foreign manufacturing businesses in Mexico? The Mexican government offers various support programs and incentives to attract foreign manufacturing businesses, including:

a) Tax incentives: Mexico provides tax benefits, including reduced corporate tax rates, duty exemptions for specific industries, and tax credits for research and development activities.

b) Free trade agreements: Mexico has an extensive network of free trade agreements, such as NAFTA (now USMCA), allowing duty-free access to major global markets.

c) Special economic zones: Certain regions in Mexico have designated special economic zones that offer additional incentives, including tax breaks, simplified customs procedures, and infrastructure development.

d) Workforce development programs: The government collaborates with educational institutions and industry associations to provide training and workforce development programs to support the manufacturing sector.

e) Investment promotion agencies: Mexico has investment promotion agencies that provide guidance, assistance, and incentives to foreign businesses looking to establish manufacturing operations in the country.