Mexico has more than 50 free trade agreements with nations around the world, as well as a very young workforce. It’s no wonder that companies from all over are establishing operations there, to feed the world’s largest economy.
The move to Mexico is also accelerating right now because of current geopolitical pressures, according to Alberto Villareal, managing director of advisory firm Nepanoa. “First, we had COVID. That pretty much shut down full countries,” he says. “Then you had the trade war between the U.S. and China. Automatically, Chinese goods that were coming into the United States are now 6% to 26% more expensive, just because of shipping costs. That breaks a supply chain. That could even break a company, in and of itself.”
Villareal seeks to allay concerns about security while doing business in Mexico. “There has not been a single company that has left Mexico because of [lack of security],” he says. “But there’s also the risk of simply not understanding how to do business in Mexico. When we see companies fail, it’s when they don’t have a plan. They come in and say, let’s get it done. And then suddenly realize that it’s going be 12 to 14 weeks to register an entity.”
Other factors that need to be assessed in advance are whether there’s a lack of energy, water or gas in the targeted region, Villareal says. But all the risks of setting up operations and working in Mexico can be managed, just as they are in India, China or the Philippines, Villareal says.
It’s equally important “that we continue to strengthen the clusters in Mexico,” he says, adding that the country’s automotive cluster “is a complete supply chain,” while medical manufacturing is still in development.
