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Why will manufacturing in Mexico be a competitive advantage for you?

Here are the top 10 reasons why:

Proximity strong markets in the US, Mexico and Latin America.

Immediate remanufacturing turnaround.

Skilled, available and affordable workforce: up to 80% in labor cost savings.

Technical training support: High technology training centers + Engineering & Design.

Quality culture: ISO, AS, NADCAP and other international quality standards.

Supply Chain Integration: mature supply base in key regions in Mexico.

Tariffs savings due to Mexico’s Free Trade Agreements with 44 countries.

Tax incentives for manufacturers: NO VAT and NO INCOME TAX.

Legal certainty for intellectual property.

Developed “Soft Landing” culture to help international manufacturers to start up operations in Mexico in fast-track, risk-free shelter programs.

Once you are certain that you will start up your manufacturing operations in Mexico, we invite you to know the different regions where you can land your operation.

 

Even better, if you want to by-pass and accelerate the “Why Mexico” learning curve, we offer you a Free Strategy Session, where we will understand your project and provide you with a Free Site Selection Analysis with a Cost Model comparing the total cost per hour in different regions in Mexico.

 

COMPETITIVE LABOR COSTS

Mexico manufacturing

Mexico  offers  significant  savings  on  labor  costs  when  compared  to  other  investment  options  in  the Americas, Europe and Asia. For example, transferring operations to Mexico can lead  to savings of close to 90% in labor costs.

Source: Promexico.com

 United  States  Department  of  Labor  (International  Labor  Comparisons,  2007)  and International  Labour  Organization  (salary history in dollars).

Simplicity of Operation

The amount of time and procedures required to open and close a business, as well as the procedures and time needed to obtain construction permits, are crucial to the success of international business.

In  Mexico,  investors  only  need  13  days  and  8  procedures  to  open  a  business,  and  138  days  and  12 procedures to obtain a construction permit. This is significantly lower than what is required in India, China or Brazil. Table 2 compares the number of procedures required to open a business in different countries.

 

Operation Costs

There  are  many  elements  that  affect  operation  costs  and,  therefore,  business  profitability.  Some  of  these elements  are  tax  rates,  the  number  of  tax  payments  (which  affect  administrative  costs)  and  the  cost  of employee termination.

Operating  in  Mexico  can  lead  to  significant  tax  savings  compared  to  Brazil, India  and  the  US.  A  high - level analysis shows that businesses that have production activities in the American market could benefit from a reduction of up to 11.5 percentage points in their tax rates simply by transferring their operations to Mexico.

With  respect  to  the  number  of  tax  payments,  Mexico  requires  only  6  payments  per  year,  which  is  better than countries such as Brazil, Germany, Poland and India. Even  though  it  seems  that  Mexico  is  at  a  disadvantage  when  compared  to  countries  such  as  Canada  and Poland  in  the  area  of  employee  termination  costs,  it  is  important  to  note  that  salaries  in  Mexico  are  54% lower than Polish and 88% lower than Canadian salaries. Therefore, employee termination costs in Mexico are lower than in most of the countries included in the comparison.

HUMAN CAPITAL - TRAINED STAFF

Every  year  in  Mexico,  close  to  90,000  students  graduate  from  engineering  and  technology  programs.  This means that Mexico is a source of talent that is very attractive for businesses in various sectors.  The  higher - education  system  in  Mexico  includes  2,539 institutions  that  offer  education  services  and international  exchange  opportunities.  Also,  Mexican  universities  combined  offer  more  than  900  graduate programs in the areas of engineering and technology.

With  the  purpose  of  maintaining  the  development  of  our  human  capital  within  the  context  of  economic recession   (which   we   are   already   overcoming),   the   federal   government   designed   an   Employment Preservation Program which avoided losing half a million job sources in the country’s exporting sec

 

ACCESSIBILITY TO LARGE MARKETS

Internal Market and NAFTA Region

Mexico has a population over 100 million inhabitants, where 45.7 million are in productive age. That is why Mexico’s internal market is attractive for businesses that establish in the country (1.08 billion  dollar GDP in 2009). In 2008, Goldman Sachs ranked Mexico as the thirteenth largest economy, and they estimate that by 2040 it will be one of the world’s largest economies.

 

Free Trade Agreement and Trade Agreement Network

Mexico  has  signed  12  free  trade  agreements  with  44  countries,  which  make  it  one  of  the  most  open countries  to  international  trade  and  provide access  to  more  than  one  billion  potential  consumers  (with income representing 60% of the world’s GDP). Figure 1 shows how Mexico has more free trade agreements

than China, the US, India and Korea, among other countries.

 Number of countries with which free trade conditions are established and maintained

Source: Promexico.com | World Trade Law

 

Also, Mexico has reduced its tariffs from 13% to 8% on average, and they are expected to reach 4% by 2012.

This will increase profitability for businesses that are established in Mexico, because they will have access to foreign input and final products at competitive prices.

On  the  other  hand,  Mexico  requires  very  few  procedures  for  importing  and  exporting  goods;  only  5 documents  are  required  to  complete  exporting  or   importing  procedures.

INFRASTRUCTURE AND ACCESS TO THE UNITED STATES

Mexico  is  well  communicated  thanks,  in  part,  to  27,000km  of  railroads  that  go  north  to  the  US,  south  to Guatemala, west to the Pacific Ocean and east to the Gulf of Mexico (and the Atlantic Ocean).

Mexico has several internal distribution terminals which communicate with the main sea ports. This allows reducing costs and expediting the arrival and departure of goods.

In summary, Mexico has

• 85 airports (26 domestic and 59 international airports)

• 16 international sea ports

• 27,000 kilometers of railroads

• 123,000 kilometers of main highways

 

In  addition,  Mexico  has  a  3,000km  border  with  the  US,  which  allows  for  low  transportation  costs  to  that market.  There  are  52  access  points  between  the  US  and  Mexico  that  record  traffic  of 4.5  million  load vehicles and more than 70 million automobiles every year. Appendix 1 includes graphs to illustrate Mexico’s logistics platform.

With  the  purpose  of  helping  increase  Mexico’s  competitiveness,  the  federal  government  increased investment in infrastructure from 3% of the GDP to 5% in the last three years, through the most important infrastructure  program  that  the  country  has  had  in  decades.  Also,  the  government  continues  working  to

create  the  best  conditions  that  will  allow  the  private  sector  to  participate  in  the  program’s  projects  and other projects that are interesting for businesses.

LEGAL CERTAINTY FOR FOREIGN INVESTMENT

Signing  Agreements  on  Reciprocal  Promotion  and  Protection  of  Investments  (RIPPA)  is  part  of  a  strategy established  by  the  Mexican  government  to  provide  national  and  foreign investors  a  legal  framework  that offers stronger protection for foreign investment in Mexico and Mexican investment abroad.

In  general,  RIPPAs  cover  the  following  disciplines:  investment  definition,  scope  of  application,  promotion and  admission,  investment  treatment,  expropriation,  transfers  and  resolution  of  Investor-State  and  State-State controversies.

 

Furthermore, some of the Free Trade Agreements that Mexico has signed include a chapter on investment that is similar to an RIPPAs, for example, the agreements signed with the US, Canada, Chile, Colombia and Japan.

The institutional framework that relates to trade agreements regarding investment (through RIPPAs) brings legal certainty to businesses that decide to establish operations in Mexico.

 

LOW TRANSPORTATION COSTS

Internal Market and NAFTA Region

Mexico has a population over 100 million inhabitants, where 45.7 million are in productive age. That is why Mexico’s internal market is attractive for businesses that establish in the country (1.08 billion  dollar GDP in 2009). In 2008, Goldman Sachs ranked Mexico as the thirteenth largest economy, and they estimate that by 2040 it will be one of the world’s largest economies.

 

Source: Boston Consulting Group

SAFETY AND INSTITUTIONAL STRENGHT

Would you let your business decisions be guided by rough data and facts, or would you prefer to guide them by other people’s opinions?

There is a lot of media coverage for unfortunate situations that happen in Mexico, just as in other cities and countries around the world. What is important is getting rough data on threat levels from official and trustworthy sources.

 

 Despite what the media is displaying, there are rough data facts that show a solid trend:International companies that are already manufacturing in Mexico are growing their production and new OEMs and Tiers 1, 2 and 3 are establishing new operations every year.

 

According to Juarez Maquiladora Association, the manufacturing companies established in this region have expressed their growth plans and the need for suppliers. These companies are expanding their operations.

 

According to the Reynosa Maquiladora Association, manufacturing companies established in that region are expanding their operations by constructing new industrial facilities in a built to suit mode. Besides, potential suppliers for OEMs and other manufacturing companies established in Reynosa are evaluating their start up in this low cost region.

 

We can hear similar stories in other manufacturing cities like Chihuahua, Monterrey, Queretaro and Guadalajara, among other important manufacturing hubs.

 

However, there are a set of security prevention steps every person should observe when visiting or living in an unknown city. These prevention pieces of advice are not particular to cities in Mexico, but to any region in the world.

 

Plant managers, some of them expatriates of current companies manufacturing in Mexico concerned about security issues have received the support and guidance from the American Industries Group to mitigate security risks.

 

Mexico  is  becoming  stronger  because  its  institutions  are  being  reinforced  and  the  rule  of  law  is  being consolidated. The government is committed to fighting organized crime.

 

Investors and citizens can be sure that, regardless of the images that a re being broadcast, Mexico’s streets are safe and it is possible to make business as in any other part of the world.

In fact, some studies clearly reveal the differences between how society perceives safety in Mexico and the numbers  that  are  associated  to crime  rates.  A  clear  example  is  how  the  media  have  recently  compared Mexico to Colombia in terms of safety.

 

American Industries Group has helped over 200 global companies to successfully establish and run manufacturing operations throughout Mexico since 1976 through Site Selection, Administrative “Shelter” services and Industrial Real Estate.

 

Our commitment is to provide high quality value added services that facilitate the successful establishment and operation of international companies in Mexico.

US Toll Free 1 877 698 3905

 

Send us your comments and questions to:

contact@americanindustriesgroup.com

12035 Rojas Dr. Suite F

El Paso, TX 79936

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