New Focus on Mexico as a Key Supply Chain Location

1. Mexico is not China – and that’s a good thing. The report notes that China’s labor pool is becoming shallower, while labor as well as land and energy costs are rising. According to Gerardo Ramirez, National Director for JLL’s Mexico Industrial & Logistics group, “Mexico offers many competitive advantages, including low labor costs, ample developable land at affordable prices, and shorter shipping times compared to Asian markets.”

2.Mexico’s economy is strengthening, and the impact of crime is not significant in most markets. In fact, Mexico is now the seventh leading auto manufacturer in the world and the second largest supplier of electronic products to the U.S. market.

3. Mexico has a low-cost but highly skilled work force. The pool of working-age individuals in Mexico is approaching 62 million, and workers are becoming increasingly affluent and well educated, with the literacy rate now more than 93 percent.

4.Supply chain improvements magnify Mexico’s geographic advantages. Investment in supply-chain infrastructure, spurred by the privatization of the country’s major industries, has resulted in $226 billion in rail, roadway, and port improvements since 2006, a 50 percent increase over the previous six years. The Mexican government is also investing in improvements to its major highways and border crossings to speed up delivery times. “Goods can be shipped from Central Mexico to Chicago in about three days, compared to the three weeks it takes to ship products from China to the United States,” says Ramirez.

5.Mexico is an eager business partner. Investors are increasingly benefiting from Mexico’s trade agreements, export programs, and overall movement toward operational transparency. Mexico now has free-trade agreements with 43 nations, compared to 20 in China and 15 in the United States.

In a move to encourage foreign investment, Mexico has created export promotion programs to reduce or eliminate import, value-added and customs operation taxes. It has also implemented the Strategic Tax Zone Regime, which allows for the tax-free storage and repair of goods.

Mexico’s economic initiatives have paid off: According to Jones Lang LaSalle’s Global Transparency Index, Mexico’s rate of improvement in overall transparency ranks second in the Americas and third globally. “There are a variety of compelling reasons for investors to consider Mexico as a supply chain location. With the country’s improved supply chain infrastructure, expanding and low-cost labor pool, growing manufacturing base, and geographic advantages, the outlook for industrial investment appears favorable for the long term,” concluded Rich Thompson, managing director and head of JLL’s Supply Chain & Logistics business.