Sourcing Materials for Manufacturing in Mexico: Exploring the Benefits

Last Updated on April 27, 2023

Mexico has established itself as a top destination for businesses looking to source materials for their manufacturing processes. With a range of advantages, including a well-established manufacturing industry, favorable trade agreements, and competitive costs, there are many benefits to materials sourcing for manufacturing in Mexico.

Competitive Costs

One of the main advantages of materials sourcing for manufacturing in Mexico is the competitive costs. Mexico has a lower cost of labor compared to many other countries, making it an attractive location for businesses looking to reduce their production costs. Additionally, the Mexican government offers tax incentives and other benefits to foreign investors, which further reduces the cost of doing business in the country.

Proximity to the United States

The proximity of Mexico to the United States is a significant advantage for materials sourcing for manufacturing in Mexico. The close proximity allows for faster and more efficient transportation of goods, reducing lead times and increasing the speed of production. Manufacturers sourcing materials in Mexico can benefit from the lower labor and production costs in Mexico while still being able to access the vast market opportunities in the United States.

The close geographical location also helps in reducing transportation costs, as goods can be transported by land, air, or sea with ease. This allows companies to remain competitive in the global market and provide high-quality products at lower prices. According to the ESG Blog:

Nearshoring can reduce the cost of production, as labor and materials are typically cheaper in nearshore locations than in other international markets. Reduced transportation costs – Nearshoring also cuts transportation costs, since goods can be shipped more quickly and easily to their destination.

Source: Blacksmith International

Favorable Trade Agreements

Mexico has established several favorable trade agreements, including the United States-Mexico-Canada Agreement (USMCA), the European Union-Mexico Free Trade Agreement, and more. These agreements allow companies to facilitate trade between Mexico and its North American neighbors by reducing trade barriers, eliminating tariffs, and facilitating the import and export of goods. As a result, businesses can source materials from Mexico without facing high import taxes, which can significantly reduce the overall costs of production.

Growing Manufacturing Sector and Government Support

The manufacturing industry in Mexico is diverse and growing, including automotive, aerospace, electronics, and others. As a result of this diversification, we have access to a wide variety of materials sourcing opportunities. Additionally, Mexico has a well established supplier base, which can provide reliable and high-quality materials to a variety of industries.

The Mexican government is keen on attracting foreign investment and offers various incentives to support this objective, including tax breaks and financial support for infrastructure development. These incentives are particularly beneficial for materials sourcing for manufacturing in Mexico, as they reduce the overall cost of doing business, making the country an attractive destination for foreign manufacturers. According to Area Development:

In addition to its economic performance, good business climate, and increased trade, Mexico’s new political reforms and improved government stability are making it more attractive to foreign investors, especially manufacturing companies. According to the United Nations Conference on Trade and Development (UNCTAD), Mexico ranks 10th in the world for FDI investment.

The tax breaks help to reduce the burden of tax expenses, while financial support for infrastructure development helps to enhance transportation, communication, and energy networks. This creates an environment that is conducive to materials sourcing and manufacturing in Mexico. Overall, the Mexican government's initiatives to promote foreign investment have made the country an attractive destination for businesses seeking to source materials and manufacture products.

High-Quality Materials

Mexico is home to a range of industries, including automotive, aerospace, electronics, and more. As a result, there is a wealth of knowledge and experience in producing high-quality materials that meet international standards. Additionally, the country has implemented strict quality control measures, which ensure that the materials produced in Mexico meet the required specifications and standards. This means that businesses can source materials from Mexico with confidence, knowing that they are receiving high-quality products.

Ease of Doing Business

Mexico has made it easy for businesses to set up operations and source materials in the country. The Mexican government has implemented measures to streamline the process of starting a business, including reducing bureaucracy and offering support to foreign investors. Additionally, Mexico has a strong logistics infrastructure, including ports, highways, and railroads, making it easier for businesses to transport their goods across the country and beyond. According to a study by the University of Pennsylvania:

The potential impact of upgrading Mexico’s transportation and logistics infrastructure is huge, says Walter Kemmsies, chief economist at Moffatt & Nichol, an international port infrastructure consultancy. Long isolated by geography and poverty from the major currents of global trade and development, Mexico has entered a crucial stage in its development…Just as crucial, Mexico’s geographical position gives the country what Kemmsies calls “optionality,” which means that from a Mexican location, corporate exporters “can send goods to anywhere in the world,” from either the country’s Gulf coast — positioned close to the Panama Canal — or via the Pacific Ocean to a growing list of markets in Asia.

Source: Blacksmith International

Materials Sourcing for Manufacturing in Mexico: A Host of Advantages for Businesses

In conclusion, materials sourcing for manufacturing in Mexico offers many advantages, including competitive costs, favorable trade agreements, high-quality materials, and ease of doing business. As a result, businesses can benefit from reduced production costs, streamlined logistics, and access to high-quality materials, making Mexico an attractive location for materials sourcing.