Made In Mexico

Manufacturing in Mexico grew rapidly in the late 1960s with the end of the US farm labor agreement known as the bracero program. This sent many unskilled farm laborers back into the Northern border region with no source of income. As a result, the US and Mexican governments agreed to The Border Industrialization Program, which permitted US companies to assemble product in Mexico using raw materials and components from the US with reduced duties. The Border Industrialization Program became known popularly as The Maquiladora Program or shortened to The Maquila Program.

Over the years, simple assembly operations in Mexico have evolved into complex manufacturing operations including televisions, automobiles, industrial and personal products. While inexpensive commodity manufacturing has flown to China, Mexico attracts U.S. manufacturers that need low cost solutions near-by for higher value end products and just-in-time components.

Larger foreign firms with global experience can set up operations in Mexico readily. Smaller companies are usually advised to seek professional help from a qualified consulting firm or by working with a partner in Mexico.

Mexico’s low landed costs are attractive when considered in comparison to other developing country options. It is suited to serve as a manufacturing venue for short to medium-run products that have a high degree of engineered content. Its proximity to the United States enables technical and production personnel to coordinate activities to bridge temporary and physical distances. The closeness to markets, as well as to the consumer base, fulfills the just-in-time requirements of both. Additionally, Mexico’s efforts to enforce patent and intellectual property laws are advanced compared with those in place in other low-cost nations. Political risk associated with the country is minimal. Although the average wage rate in Mexico is higher than in China and other emerging Asian economies, the workforce in Mexico has a large pool of highly educated and skilled engineers. Also, freight charges from China has significantly increased over the years, which make up for the difference in labor cost.

There are five common methods by which foreign companies setup manufacturing operations in Mexico.

Companies are well advised to consider the contract manufacturing or subcontract manufacture option when the work to be performed requires approximately 25 individuals or less, or is sporadic. Once this number is surpassed, other options would provide savings as a result of economies of scale derived from increased labor content.

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Wikipedia