Manufacturers are looking to Mexico — here is why

During the last few years, positive changes in Mexico’s economy have positioned the country to become a manufacturing powerhouse. Because of this, foreign direct investment (FDI) into Mexico is at an all-time high and companies from virtually every country in the world have or are considering a manufacturing footprint in Mexico.

Growth is taking place within virtually all sectors. Advanced technologies, aerospace, automotive and medical devices industries have been steadily expanding, with the automotive industry seeing the most   exponential growth. In just the last five years, some of the biggest automakers, including Audi, BMW, Kia and Toyota, have built new assembly plants in Mexico. Other automakers that long have had a Mexico presence – like GM, Fiat Chrysler, Ford and Nissan – have increased their size and manufacturing capabilities. Following suit, automotive suppliers are setting up shop or expanding in Mexico. Virtually every big automotive tier one company has a footprint there.

Why the move to Mexico? The following are the main drivers that make Mexico a place where manufacturers should have a manufacturing footprint to compete in the global economy.

Skilled and available workforce

Mexico enjoys a low unemployment rate, a highly educated workforce with multiple generations of manufacturing experience, and an economically active demographic with a median age of 30 years. Today, Mexico is second only behind Canada among countries with the largest percentage of employment per capita in creative industries. Mexico also graduates more engineers per capita on an annual basis than the United States. In the manufacturing sector, the average wage is about $2 an hour in Mexico, versus about $20 per hour in the U.S. This pool of skilled workers in Mexico is a benefit for foreign companies looking to reduce labor costs but keep a high level of quality standards for their products.

Sophisticated manufacturing capabilities

About 27 percent of Mexico’s total exports are of medium- and high-technology products and components, higher than the percentage of the same products exported by Germany or South Korea. The country is ranked 20th in MIT’s and Harvard’s Atlas of Economic Complexity. The Atlas measures the economic complexity of a country based on the diversity of exports it produces and the number of other countries that can produce those exports. For comparison, China ranks 19 and the U.S. ranks 12.