There are two ways to invest in a Mexican manufacturing business. You can purchase shares in a company smart enough to have built a plant there. Or, you can build a plant there yourself. There are countless reasons this is a good idea, including inexpensive freight and labor. Here’s what you need to know about investing in Mexico, and why it’s such an appealing option.
Offshore Or Outsourced?
[pullquote]Some companies will outsource their work to Mexico. Others will offshore entire production operations.[/pullquote] Both are inexpensive and viable options, but you’ll need to choose one. So, what are the benefits of offshoring vs outsourcing?
If you’re looking to put your dollars into a manufacturing business, you may not want one that’s partially run by outsourced third-parties. Offshoring production is a better idea when you’re not willing to give up your production control. A third-party (outsourced) company may not employ your exact production strategy which may risk quality.
Offshoring is more expensive than outsourcing. You may be more inclined to outsource your operations if you don’t need to move production. For example, you could save money by outsourcing your human resources department to Mexico, or your customer care hotlines.
The Maquiladora System
Now called the IMMEX program, the maquiladoras in Mexico offer additional savings and benefits to foreign manufacturers who import their production materials into Mexico. So, not only is it inexpensive to open a factory in Mexico, it’s cheaper to import raw materials and components too. Don’t invest in anything until you’re certain that the manufacturer (or yourself) have taken advantage of this prime government incentive.
Maquiladoras are factories operated in Mexico but owned by a foreign entity. A huge number of these are owned by American businesses. The benefits of the program are untold. Reduced taxes, fewer government regulations, fewer environmental regulations, inexpensive labor, and so much more. For investors the benefits are obvious.
Successful Industries In Mexico
Mexico’s skilled labor force makes it an ideal location for many industries. Its automotive industry is booming. Like many in the industry, Ford chose to build its newest plant in Mexico last year. There’s a lot of reasons for this, but inexpensive freight and labor were leading factors. Since moving, Ford has been successful in its endeavor and Mexico will be responsible for the automotive giant’s next small car production.
Mexico is the USA’s third-largest trading partner and second-largest export market. It’s high-functioning in the aerospace, clean energy, and electronics industries. Other successful industries are appliances, apparel, consumer products, furniture, and pharmaceuticals. Investing in big pharma can be tricky unless you know for sure a drug will be a success, but it can pay off big time if you choose the right company or drug to invest in.
Mexico’s Skilled Labor Force
[pullquote]Cheap labor is worthless when the worker isn’t skilled.[/pullquote] In fact, an incompetent labor force can actually harm your business. It’s essential that your workers follow production rules to a t, and are intelligent enough to make on-the-fly production and safety decisions. Mexico’s labor force is highly skilled.
The laborers in Mexico have experience working in factories, including with manufacturing heavy products. Consider how many of the USA’s best aerospace and automotive manufacturers trust their production needs to this labor force. They are skilled, on-time, dedicated to the job, and have degrees they earned for free through their country’s free university education offering.
Overall, there are plenty of reasons to invest in manufacturing in Mexico. Whether you’re putting your money or your factory into the country, you’re bound to see a return on the investment.
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