Why American Companies Continue to Move Production Across the Border

Many American production and manufacturing companies have moved across the southern border to Mexico over the past four decades. And it does not seem the trend will stop anytime soon. This has led many to take a closer look at why it has become so popular for American companies to move production south of the border.

Competitive Labor

Perhaps the number one reason companies choose to produce their products south of the border is the reduced salaries paid for quality workers. Labor costs in Mexico are approximately 70 percent less than in the United States. While companies must take a little time to acquaint themselves with the labor laws in Mexico, conditions are extremely favorable from the bottom line point of view. This is especially true considering the skilled workforce in Mexico, which supplies manufacturers with reliable human resources at an affordable price.

Close to the United States

The close proximity of Mexico and countries in South America to the United States make it more cost effective to transport items from our neighbors to the south than from Asia. Another advantage is that owners and senior executives of businesses who do not relocate south of the border with their businesses can visit production facilities regularly without the need to spend massive amounts of money.

Trade Agreement

Participation by the Mexican government is first necessary for so many companies to find success in Mexico. While NAFTA is the most well-known trade agreement to people living in North America, Mexico has entered more than twenty trade agreements globally. These agreements allow companies to manufacture goods in Mexico, as well as, import the raw materials from other countries which are necessary for producing their final products.

Infrastructure

The Mexican government maintains the necessary infrastructure to ensure production can take place without disruption. This is seen especially with the electrical grid the country enjoys. In the major industrial areas of Mexico, the electric grid is of a quality similar to what is expected in America and other industrialized nations. The country's 2015 energy reform gives notice to Mexico's intent to remain competitive in this regard for years to come.

Educated Workforce

The fact that labor is cheap is not the only attraction owners have to the Mexican labor force. The country's workforce is large and is comparable in skill and education to any workforce in the world. As of present, Mexico is graduating more engineers on an annual basis than the United States. There is also a large pool of professional and operational managers available in the country to help business owners run their production facilities.

Popular Industries

The growth of production companies in Mexico can be seen in multiple industries. Extensive growth has been seen in industries like electronics, aerospace, and medical devices. But it is the auto manufacturing industry that is responsible for much of the recent growth in the country. A number of major automakers have either built a plant in the country recently or are planning to do so in the near future. The manufacturing of automobiles is expected to become the largest industry in the country and Mexico will be counted among the top exporters of cars in the world.

Final Thoughts

Many American companies are discovering the benefits of moving their production across the border into Mexico. As transportation and labor costs continue to increase across North America, Mexico grows more inviting to American business owners. In fact, Mexico is primed to become the largest exporter to America over the next ten years.