Why Mexico? 10 reasons to invest in Mexico
By Alan Russell, Tecma
According to a recent World Investment Report of the United Nations Conference on Trade and Development (UNCTAD), Mexico is one of the top developing nations in which to invest. If your firm is currently analyzing new markets in which to commit production resources, consider the following 10 reasons why investing in Mexico is a good option for executives seeking to grow their businesses.
- Strategic Geographical Position
Mexico is in the backyard of the largest consumer market in the world. The two countries share a common border of more than 2,000 miles. The country’s proximity to the United States means that a truck carrying manufactured goods can drive from Mexico and deliver its cargo to any location in the continental US in less than 48 hours.
Because of this Mexico is highly cost competitive in terms of shipping when compared to that of its competitors. In addition to its advantageous position in North America, Mexico is the bridge between the US and Canada and the rest of Latin America.
- Large Economically Active Population
According to government data, Mexico is the tenth most populous country in the world. It is projected that the nation’s “economically active population” will continue to expand. The economically active population comprises all persons of either sex who furnish the labor for the production of goods and services. In recent times, Mexico has done much to enhance the skill sets of its workforce.
- Wide Network of Free Trade Agreements (FTAs)
Mexico participates in a total of 12 FTAs that encompass commercial relations with a total of 45 countries throughout the world. To invest in Mexico is to access the ability to ship goods duty-free to most of the world’s major markets. Four of Mexico’s most significant trade agreements include the United States-Mexico-Canada Free Trade Agreement, The Trans-Pacific Partnership (TPP), The Mexico-EU Free Trade Agreement, and the Pacific Alliance, which is an agreement between Chile, Colombia, Peru, and Mexico.
- Highly Qualified Human Capital
The Organization for Economic Cooperation and Development (OECD) recently reported that higher education graduation rates for Mexican youth have steadily increased over the course of the last decade. Mexico is replete with federal universities, national universities, private universities, and technological institutes. Companies that make the move to invest in Mexico can access a workforce that includes more than 113,000 engineering graduates per year. In terms of availability of engineers, this number puts Mexico at 8th place in the world.
- Growing Internal Market
Those companies seeking to invest in Mexico for the purpose of accessing its internal market will find that Mexico’s Private Consumption accounted for more than 65 percent of its GDP in 2018. Mexico’s growing middle class is driving a steady trend of increased consumer spending in the domestic market. A recent study by the Financial Times indicates that 53% of Mexican consumers have access to supermarkets, “hypermarkets,” and department stores.
- Tax Benefits and Incentives
Among the most significantly attractive benefits and incentives for foreign manufacturers that seek to set up manufacturing in Mexico are:
- Duty-free imports for up to 18 months for raw materials and suppliers for IMMEX certified companies:
- A zero-rate value-added tax on exports, even when physically exported to a third-party;
- Value-added tax refunds for IMMEX certified manufacturers;
- Import duty refunds for inputs integrated into products exported by the manufacturer or sold to another entity for export;
- No local or state income taxes on corporate earnings.
- Innovation and Intellectual Property Protection
Mexico’s Industrial Property Law and Federal Copyright Law both cover intellectual property in Mexico. Among IP organizations of which Mexico is a member is the:
- World Trade Organization (WTO);
- World Intellectual Property Organization (WIPO);
- Patent Cooperation Treaty (PCT);
- Paris Convention for the Protection of Intellectual Property.
- Leading Industrial Sectors
One of the most important industrial sectors in Mexico is the production of passenger vehicles. The companies that have decided to invest in Mexico and its auto industry have made the country the seventh largest producer in the world. Other prominent industries in Mexico include aerospace, medical device, and electronics.
Mexico instituted a National Infrastructure Program between 2014-2018 during the presidency of Enrique Pena Nieto. The program invested approximately US $600 billion, about 8% of GDP, into modernizing the infrastructure that is vital to Mexico’s economy. During this period investment was made in:
- New and existing ports;
- Electricity generation capacity.
- Competitively Priced Workforce
The average fully-loaded base salary for an entry-level worker is just a fraction of the fully loaded hourly wage in the U.S. The cost of fully burdened labor for entry-level workers in China is about double that of Mexico.