If your business makes something, whether it be furniture, appliances, electronics, apparel, clean energy, or just about anything else, you might be considering moving the manufacturing arm of your business to Mexico. If this is the case, you would probably be specifically considering maquiladoras in Mexico, which are factories protected by certain trade agreements to make them more attractive to American companies. Let’s look at some of the common questions you might face when making this decision.
Q: What are the pros of moving your manufacturing to Mexico?
A: The advantages are pretty standard. Cost-savings is a big one, not only because of the difference in labor fees but also because of trade agreements which allow for – in many cases – lower tariffs, fees, and taxes. In other words, the legalities of it have been set up to make it more attractive to companies who might be considering the move.
Q: Okay, so besides cutting costs, what other advantages are there in Mexico?
A: There’s something called the cluster effect. Factories of a similar design are built in the same area, which allows for a workforce with a particular skill set to be built up. Let’s say, for the sake of argument, that your business makes old-fashioned desks out of oak. It’s a simple example, but it will work. Now let’s say that your factory is in Indiana. Do you think that Indiana is home to an endless supply of skilled carpenters? If the guy who runs your lathe decides he’s going to move to Oregon all of a sudden, do you think you’ll be able to fill that position without skipping a beat in production? And this is nothing against Indiana – for all we know, Indiana could be full of people who are really great with the lathe. (In fact, you can read our recent article about trending career options in the U.S.)
But now let’s say you source a factory in Mexico to build your oak desks. Okay, so you’ve figured out that you can get the supplies down to the factory and then the finished desks back across the border efficiently. But you might be thinking: what does the skilled carpentry profession look like? And again, remember that carpentry is just an example for the sake of argument. Well, I’ll tell you what this fictictional carpentry profession is going to look like. There will be all of these factories in this one town (or grouping of towns) that will specialize in making oak desks, and so there will be a skilled workforce that exists around the oak desk industry.
Q: That makes sense. Obviously the oak carpentry reference is just like saying “widgets,” but what other skill sets exist in Mexico?
A: All kinds – from laborers to engineers. If you look at the demographics, you’ll see that Mexico is a country with an educated workforce. There are factories in place for industries ranging from automotive to textiles to clean energy. If you make it, chances are they can make it for you.
Q: Okay, so we have a skilled workforce and cost savings. Anything else?
A: On top of those, it’s surprisingly easy to start working with manufacturing companies in Mexico. If you were to look at your current staff, you probably have many bilingual employees who can speak Spanish. If not, it’s an easy hire. Also, many people in Mexico can speak English. So communication is going to be easier than if you were to look at manufacturing in China, for example. Geographically, Mexico is obviously far closer than China. And again, all of the trade agreements that are in place make it extremely convenient.
Q: What resources are available to someone looking to move their manufacturing to Mexico?
A: To start with, visit the North American Trade Agreement (NAFTA) website, and from there you can branch out with your research. There is a wealth of information online to help guide you through your process.