Could Mexico’s Manufacturing Sector Overshadow China’s?

Find out how Mexico’s manufacturing sector offers the right benefits and a favorable business environment for expanding companies and those seeking cost-effective manufacturing components.

Prior to the current global contingency planning caused by COVID-19, Mexico was already a well-known, strong performer in manufacturing. The country offers certain advantages and tax benefits and simplification of processes in some government procedures. While China and the US remain entangled in trade disputes – and as both countries grapple with COVID-19 issues – Mexico proves itself as a key alternative supplier of manufacturing goods to the rest of the world. 

Factors boosting Mexico’s manufacturing sector

Mexico’s manufacturing sector has great potential and is more attractive at this time due to 2 main factors:

The USMCA (United States-Mexico-Canada Agreement)

A person welding metal in Mexico's manufacturing sector
Moving manufacturing to Mexico will create more job opportunites in the country.

This recently signed USMCA agreement will most likely come into effect during the course of this year. The USMCA is set to benefit Mexico’s manufacturing sector due to the interest that both Canada and the United States have in engaging with those industries. This can lead to higher profits, reduced time and lower risks. Mexico’s proximity to the US compared to China’s also gives the sector an extra competitive edge.

Another factor that makes Canada and the United States especially interested in establishing their factories in Mexico, and further develop Mexico’s manufacturing sector, is that it can trigger job creation in Mexico. This can lead to the flow-on reduction of migrants entering the US and Canada from both Mexico and Central America.

COVID-19 effects on manufacturing

The COVID-19 pandemic has pointed out the difficulties of concentrating most of the global demand for manufacturing supplies in one place (in this case, China).

Mexico’s manufacturing sector can develop further to offer alternative supply solutions. Many companies that currently have their factories established in China must now look for alternatives. Mexico offers advantages over other countries, such as labor costs, market importance and geographical location.

In addition, the current exchange rate of the Mexican currency against the US dollar makes it attractive for manufacturing companies to establish themselves in Mexico. This also results in lower production costs.

China’s struggles to remain competitive

Companies looking to take cover from the ongoing trade disputes between the US and China are seeking alternative solutions, as Chinese manufacturing supplies become less competitive. This is another key influencer in the shifting interest to Mexico.

Another important aspect that makes foreign companies turn to Mexico’s manufacturing sector is a certain atmosphere of mistrust regarding the information coming from China about the COVID-19 situation. It remains unclear to what extent China takes measures against COVID-19, and how it will influence the country in the future. This uncertainty may influence companies to look for manufacturing opportunities in Mexico.

Conclusions in the near future in Mexico’s manufacturing industry

A person welding metal in a Mexico manufacturing company.
Mexico’s cost of production in manufacturing are low enough to compete with China’s.

Mexico’s manufacturing sector offers competitive production costs. In addition, depending on the location and activities of the manufacturers, companies may be eligible for certain tax benefits.

Due to the global economic situation caused by COVID-19, companies seek to reactivate quickly to reduce adverse effects. As a large contributor to GDP and as a global supplier, Mexico’s manufacturing sector will have to be one of the first to reactivate and stabilize the economy as soon as possible.

Enter Mexico’s manufacturing sector with Biz Latin Hub

Entering the Mexican manufacturing sector is an attractive option now. However, doing so requires compliance with government requirements and overcoming the language barrier. Entering the market in Mexico with the help of bilingual experts makes this process more smooth and offers security to foreign companies. 

To enter Mexico’s manufacturing sector, find a trusted legal representative to guide you through the steps and required documentation. Your legal partner must have an in-depth understanding of the Mexican legislation and assist you with your introduction to Mexico’s manufacturing sector.

Biz Latin Hub offers a team of experienced local lawyers with vast experience helping businesses with their company formation, legal representation, hiring services and more. We are experienced in supporting new businesses apply and obtain the required permits to enter Mexico’s manufacturing sector.

For more information about how we can help, contact us today at [email protected] and get started.

Learn more about our team and expert authors.

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