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Benefits of Manufacturing in Mexico

Mexico has often been overlooked as a place for U.S. businesses to begin manufacturing. Discover the many benefits you’ll be able to enjoy by moving your production closer.

By

Jacob Lee
August 15, 2019
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In 2023, Mexico overcame China to become the U.S.’s top trading partner.  Due to ongoing trade wars with China and various global conflicts, many businesses have begun to move their manufacturing closer to home. Mexico in particular has many benefits that have made it popular amongst U.S. businesses.

Key takeaways:

  • When manufacturing in Mexico, you’ll enjoy proximity to the U.S., lower labor costs, an educated workforce, USMCA benefits, and much more. 
  • You can structure your manufacturing by subcontracting, establishing a foreign subsidiary, or by becoming a client of a shelter company. 
  • Manufacturing in Mexico is better than China due to shorter transit times, cheaper shipping costs, faster operation start times, and lower labor and warehouse costs.

To help you understand the benefits of manufacturing in Mexico, I’ll give you a breakdown of each one so you know what to expect.

Proximity to the U.S.proximity to us and canada

Mexico can be a great place to set up your manufacturing operations. By moving these processes closer to the U.S., you won’t need to wait nearly as long for your freight to arrive in the country. Numerous cities in Mexico have become popular locations for manufacturing because of their closeness to Texas, New Mexico, Arizona, and California. 

This includes:

  • Monterrey
  • Matamoros
  • Reynosa
  • Nuevo Laredo

If you don’t want to set up your own facilities, look into Mexican factories called maquiladoras. There are thousands of these facilities located near the U.S./Mexican border. Hundreds, if not thousands, of different products can be manufactured according to your own specifications.

Their locations mean it won’t take long for your goods to cross into the U.S. after they’ve been shipped from one of these factories. 

Transit times for Mexican goods can vary based on where you’re located in the U.S., but it shouldn’t take longer than a week for your freight to arrive. 

Mexico’s proximity also makes truck transport a viable way of moving cargo into the United States. To demonstrate this, I’ve provided data from the Bureau of Transportation Statistics that shows the frequency different modes of transport used to import cargo from Mexico. 

U.S. Freight with Mexico by Mode (2022)

Mode of TransportAmount Used To Transport Freight
Truck 71%
Vessel12%
Rail12%
Air3%
Pipeline2%

Provided by the Bureau of Transportation Statistic

Truck shipping is a convenient and cheap way of moving Mexican freight into the country. You can also combine it with other methods of shipping if needed. 
Related: Mexico to U.S. Trucking Companies: What To Look for

Low Cost of LaborLow Cost of Labor

While the averagy pay for workers can vary in Mexico, they’re comparable to that of workers in other common manufacturing zones, such as China. Entry-level manufacturing workers earn about $4.90 per hour, while experienced workers make between $7-8 per hour. 

Once your goods have been made, you might need a place to store them until you want to bring them to the states. Fortunately, warehouse rent in Mexico costs between $4.37 and $9.57 per square meter as of 2023. You can find prices like these in a variety of Mexican cities. 

This includes:

  • Greater Mexico City
  • Tijuana
  • Guadalajara Metropolitan Area
  • Saltillo
  • Monterrey
  • Reynosa
  • Querétaro
  • Guanajuato 

In addition to the low rent, warehouses in Mexico are known for their safety and quality. 

Looking for a solution to move cross border freight? R+L Global Logistics handles truckload shipping across the border. Let us know when and we’ll handle the rest.

Educated WorkforceEducated Workforce

With such a low cost in labor, it’s fair to wonder if the products you’ll receive will be high quality.  Fortunately, Mexico is home to a workforce with diverse skills that take pride in their work. Some are seasoned technicians, while others are experienced engineers. 

Regardless of what you need, you’ll have access to an extremely talented pool of workers that can make a variety of products. Even when laborers don’t have a wealth of experience, they have transferable skills that allow them to be trained to perform more complex tasks. Mexican workers in maquiladoras use their skills to make all kinds of high-quality goods. 

This includes:

  • Medical devices
  • Electronics
  • Automobiles
  • Auto parts
  • Textiles
  • Appliances
  • Furniture 

In addition to the skilled and diverse workforce in Mexico, the median age in the country is 29. This means there’s a young and dynamic population of workers that’s ready to innovate and give fresh perspectives. 

Growth of Foreign InvestmentGrowth of Foreign Investment

The U.S. is the largest source of Foreign Direct Investment (FDI) in Mexico. Much of the investment goes into the northern states that are close to the U.S. border. All the U.S. FDI that’s been funneled into Mexico has made the country an appealing place to manufacture. 

Numerous companies have already set up their production operations in Mexico as a result, including major names like: 

  • Medtronic
  • Molex
  • General Motors (GM)
  • Ford 
  • Curtis-Wright
  • Honeywell
  • Whirlpool
  • Tesla
  • Samsung 

Companies like GM and Medtronic have been manufacturing here for decades. Others have been operating in the country for a far shorter amount of time. They are all benefiting from the popular perks Mexico presents: 

  • The number of natural resources Mexico has in abundance
  • Special Economic Zones (SEZ) located in the southern states specifically to attract foreign investment. Companies who set up in SEZs received numerous benefits.
  • The No. 2 economy in all of Latin America, behind only Brazil

While these factors bring in more U.S. FDI, they also lead to increased manufacturing operations. Numerous natural resources allow factories to create an assortment of goods. Maquiladoras located in SEZs will enjoy the benefits of favorable economic regulations. 

A strong economy typically correlates with high productivity and a strong workforce. Therefore, you can expect your manufacturing operations to run smoothly and efficiently. 

Looking for a solution to move cross border freight? R+L Global Logistics handles truckload shipping across the border. Let us know when and we’ll handle the rest.

Willingness To TradeWillingness to Trade

The United States-Mexico-Canada Agreement (USMCA) is a free trade agreement (FTA) that was established in 2020. It’s an improvement of the North America Free Trade Agreement (NAFTA) that came before it. USMCA eliminates duty rates on nearly every product that originates in Mexico. 

This will help reduce the costs you’ll have to pay when importing your manufactured goods. To enjoy preferential tariff treatment, you’ll need to a certificate of origin. While there’s no specific format for this document under USMCA, your document should have nine essential data elements. 

This includes:

  1. Producer of the document
  2. Certifier
  3. Exporter
  4. Producer
  5. Importer
  6. Description and HS Classification of the products
  7. Origin criteria
  8. Blanket period (if applicable)
  9. Authorized signature and date 

Besides preferential tariff treatment, there’s an assortment of perks that USMCA has to offer. 

  • Support for small and medium-sized enterprises (SME)
  • Increased De Minimis levels
  • Provisions for digital trade
  • Improved protection for intellectual property 

All these provisions will make importing any goods you manufacture in Mexico an easier process. 

Improved Communication

Having to navigate the time difference between Asia or Europe and the United States can be a headache. You won’t have these problems if you you choose to manufacture in Mexico. The vast majority of the country is in the Central Time Zone, with certain parts being in Mountain and Pacific time.

Chances are, your business will be operating during the same hours as your manufacturer in Mexico. As a result, it’ll be easier for both of you to get in touch with one another throughout the day.

Checking in on your operations will also be easier. If there is an immediate concern that can only be addressed in person, towns along the Mexican border can all be reached in less than a day from anywhere in the continental United States if you travel by plane. In many cases, it’s a matter of just a few hours, depending on where your U.S.-based offices are located.

Any language barriers you run into when manufacturing in Mexico will be easy to overcome. The U.S. is home to numerous citizens that are bilingual in Spanish and English. All you need to do is hire a team that can serve as your line of communication between you and your manufacturer. 

Looking for a solution to move cross border freight? R+L Global Logistics handles truckload shipping across the border. Let us know when and we’ll handle the rest.

Working with Manufacturers in MexicoWorking with Manufacturers in Mexico

While there are many businesses that manufacture in Mexico, their operating structure can vary. There are several ways you could set up your production.

The three primary methods you can choose from includes:

  • Subcontracting 
  • Establishing a wholly owned foreign subsidiary
  • Becoming a client of a shelter company

In the following section, I’ll explain how each operating structure works and the benefits you’ll be able to enjoy. 

Subcontracting

Subcontracting is when one company hires another company to perform all or certain aspects of manufacturing.  For example, a U.S. automotive business may hire a company in Mexico to make auto parts for one of their cars. The parts will then be shipped to the U.S. where they’ll be installed on the vehicle. 

This method of manufacturing requires minimal capital and has very low legal risks. As a result, both large and small companies in the U.S. can benefit from using it. However, the quality of the work can vary based on the contracted manufacturer. 

Wholly Owned Foreign Subsidiary

Establishing a wholly owned foreign subsidiary will require you set up a factory of your own in Mexico. This will be exceptionally more expensive and come with higher legal risks. The upside is that you will have more control over the work that’s done in these factories. 

To get established, you’ll need to register under the Manufacturing, Maquila and Export Services Industries (IMMEX) Program. The IMMEX Program is an initiative by the Mexican government that provides tax and customs benefits to foreign companies that manufacture or assemble goods in Mexico. 

To apply to the program, you’ll need to complete two initial steps:

  1. File a request for authorization to the Mexican Secretary of Foreign Relations (SRE)
  2. Provide five names that could be used for the company that will be formed

You’ll have to wait for approval from Mexico’s SRE after completing these first two steps. After approval has been given, you may need to provide additional information. 

This includes:

  • Amount of fixed capital
  • Amount of variable share capital
  • Names of company shareholders
  • Requirements for capital upon formation of the subsidiary
  • The company’s purpose and other details

After you’ve established the legal infrastructure and have met all applicable tax requirements, you can start looking for the workers to run your warehouse. When searching for talent, you’ll need to ensure you find workers that can perform a variety of tasks.

This includes:

  • Human resources
  • Setting up payroll
  • Tending to Mexican Customs
  • Following environmental regulations
  • Manufacturing skills and experience

You can begin your manufacturing operations once you’ve hired all the necessary talent to work for your subsidiary. 

Shelter Company Client

Becoming a client of a shelter company is another way you can manufacture in Mexico. A shelter company is a legal entity that lets other companies use their facilities for production.  When using this method, you’ll set up your manufacturing under a license that’s held by one of these businesses. 

Since you won’t have a legal presence in Mexico, your company isn’t directly responsible for following applicable regulations. Instead, it will be up to the shelter company to handle these requirements. 

In addition to reduced risk, you’ll be able to enjoy other benefits when you become a client of a shelter company: 

  • Fast startup times: Shelter companies already have established facilities, which means you won’t need to wait for a facility to be built before operations can begin.
  • Lower cost: You’ll be able to take advantage of the lower labor costs Mexico has to offer. 
  • More control over production: The shelter company will handle all administrative tasks while you enjoy full access to the manufacturing process. 
  • Easy access to skilled professionals: Shelter companies already have skilled workers on their payroll, which eliminates the need to recruit talent yourself.  
  • Modern Facilities: Most facilities in Mexico are state-of-the-art and powered by dependable energy grids.  

While shelter companies can be very beneficial, you should vet each one very carefully to find the one that’s best for your business. 

Related: Understanding Shelter Services In Mexico

Looking for a solution to move cross border freight? R+L Global Logistics handles truckload shipping across the border. Let us know when and we’ll handle the rest.

Manufacturing In mexico vs china

Considering Mexico and China frequently conduct trade with the U.S., it’s a good idea to look at how the two stack up against each other when it comes to production. Unsurprisingly, there are a few key areas where they differ. 

This includes: 

  • Transit times
  • Shipping costs
  • Operation start times 
  • Labor costs
  • Warehousing 

At most, cargo coming from Mexico will take a week to arrive. Freight traveling from China can take four weeks or more, depending on port conditions. This makes Mexico the clear winner when it comes to transit times. 

Shipping costs is another area where these two countries drastically differ. Most cargo that comes into the U.S. from Mexico is transported by truck, which is cheaper than other methods. You can expect to pay an average of $200 for these shipments.  

Transporting freight from China is more expensive. Goods have to be loaded into a container and transported by vessel. When they reach a U.S. port, they’re loaded onto a truck and moved the rest of the journey. By the time your cargo arrives, you’ll have spent an average of $4,300. 

Regardless of where you choose to manufacture, there will be preparations you’ll have to make before getting started. In Mexico, it takes an average of six days before nearshore operations can begin. This is thanks to the various manufacturers in Mexico that are ready to work for U.S. companies. 

In China, it takes 33 days for production operations to begin. The bureaucracy of the Chinese government and language barriers cause frequent delays. 

One concern every business has when they outsource their manufacturing is how much they’ll have to spend on foreign workers. Labor costs in Mexico are cheaper than China’s. Expenses for labor are 44% percent higher in China compared to Mexico

Renting warehouse space South of the border is cheaper as well. In China, the average cost for this service was 104.76 yuan ($14.40) per sq feet during 2023. This is more expensive than warehouse rent in Mexico, which fluctuates between $4.37 and $9.57 per meter.   

Related: Mexico to U.S. Trucking Companies

Freight Shipping Your Goods with Mexico cross border freight

Now that you know the benefits of manufacturing in Mexico, let Mexico Cross Border Freight handle transportion for your valuable goods. We can ship both to and from maquiladores in Mexico, providing door-to-door service. 

We have a 99.5% on-time rating and can offer your business full supply chain management with our vast network of carriers.  Our team also consists of logistics specialists that are bilingual in Spanish and English. They’ll be able to offer their expertise and help you overcome any language barriers you run into. 

If you have imports coming from Mexico, we can help you with clearing customs. The team at Mexico Cross Border Freight know what requirements must be followed for goods to enter the country. We can also help you apply for preferential tariff treatment under USMCA. 

Get a quote today or call our team at (866) 335-0495 and see how Mexico Cross Border Freight can help your business thrive.

Looking for a solution to move cross border freight? R+L Global Logistics handles truckload shipping across the border. Let us know when and we’ll handle the rest.
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