Especially for U.S. companies, Mexico’s location offers huge advantages. It’s easy for managers at U.S. companies to visit facilities in Mexico on a regular basis—you could even get there and back in a day, unlike spending at least half a day just to get to China. Travel to Mexico doesn’t require as much advance planning.
Your Mexican facility will likely be in your time zone, or no more than three hours ahead or behind, so communication will be simpler as well.
Shipping from China takes longer and is more expensive. According to Investing Daily, it would cost about $7,000 to ship a 40-foot container from China, but just $2,800 from Mexico. If your facilities are in one of the border cities, it can take just 24-48 hours to get your finished goods from the plant to their destination in the U.S. Those same goods could take up to three weeks to arrive from China.
Mexico is now known for having a diverse, highly-skilled workforce—many of whom are at least partly bilingual. Mexico’s labor force is also relatively young, while China’s is aging and declining due to its family planning policies.
When quality issues occur, it’s relatively easy to address them when production is in Mexico. Products can be returned to be repaired or replaced, and managers can visit the plant to fix the problem. Quality issues in China— which may occur more often due to the distance and communication barriers—are more challenging to fix.
For years, wages in China were much lower than Mexico’s. Now, Mexico’s manufacturing labor costs are 20% lower than in China. When adjusted for worker productivity, the gap is even wider. Mexico also offers steadier wages, so companies can more easily predict labor costs. Exchange rates between the dollar and the yuan and peso also contribute to this change.
Mexico has 12 multilateral trade agreements that provide preferential trade access to 44 countries, making it one of the most open countries in the world for international trade. USMCA in particular has helped transform Mexico’s economy into one driven by manufacturing and exporting.
While Mexico has a strong trade relationship with the U.S., as evidenced by the USMCA, The China-U.S. relationship suffers from battles over import duties and tariffs. Additionally, there is an ongoing geopolitical struggle between the U.S. and China that often impacts businesses operating in both countries.
Overhead & Transportation Costs
Overhead and transportation costs are much lower in Mexico than they are in China. When you manufacture in Mexico instead of China, you can expect to save approximately:
4% in energy costs
60% in natural gas costs
40% in lease rates
Mexico has a strong reputation for protecting intellectual property rights. By contrast, China frequently has problems with counterfeits, and courts are slow to enforce or recognize intellectual property rights.
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