Foreign companies are migrating to Mexico in droves in 2010.
Already this year,Dalmier has announced it is closing its plant in Canada and moving it to Mexico,Dell computers is shifting its operation from North Carolina to south of the border,Whirlpool is migrating its Indiana production to Mexico,Cummings is moving from Iowa,Bestop Awnings from Colorado,Sanford Pens from Wisconsin,Panasonic,Matsushita,Chrysler,Ford and BMW are all coming. Why?
According to one of the leading corporate consulting firms,AlixPartners,Mexico has shot past China as the cheapest manufacturer in the world for those companies around the globe looking to make products bound for U.S. markets. India is now number 2,then China,followed by Brazil.
Unbelievably,Mexico’s manufacturing costs have become so cheap that even some Chinese companies have moved operations to Mexico in order to capitalize on the advantages that come from proximity to the United States.
This economic phenomenon has been called “reverse globalization” or “near-shoring” which is known as the outsourcing of manufacturing to a foreign,lower wage country,close in distance to the product’s intended delivery market.
With the rise in Chinese wages,probable increase in Chinese currency,and the inevitable increase in fuel and transport costs,American and European companies are realizing that the notion of manufacturing U.S. bound products in Mexico trumps China in almost every equation. Asia’s production costs are already 15-20% higher than they were just 4 years ago,making Mexico a much more appealing and logical choice even if your products are not heading to the United States.
Not everyone is fully aware that NAFTA is only one of 12 different free-trade agreements (more than any other country) that Mexico has with over 40 different countries allowing Mexican manufactured goods to be sold duty-free to the U.S.,Canada,Europe,Japan and all of Latin America.
This may explain why the Mexican economy is soaring out of the recession and there are now over 18,000 major American companies investing,operating and exporting out of Mexico with more corporate relocation announcements coming soon.