Rick Hosea from Dewitt Move Worldwide looks at the Mexican market from his grandstand position just across the US border in San Diego.
When most of us think of Mexico, the first things that come to mind are white sandy beaches, blue sunny skies, green tropical vegetation, and great food. Most people see this country as a place of leisure, vacation, golf, and yes, great fishing. What many don’t realise is that for the past ten years, this is where international business has been thriving and manufacturing plants have been opening at a rate like nowhere else.
Automobiles, aerospace and technology products built here are exported all over the world. International companies are buying land to develop world-class facilities in states such as Nuevo Leon, Sonora, Coahuila, Puebla, Hidalgo, Guanajuato, Yucatan, and Quintana Roo. The Beijing Automotive Industry Holding Company, commonly known as BAIC, has recently chosen a new site for its $2 billion-dollar construction project for its new assembly plant.
Mexico has enjoyed a rising market place with the economic potential for continued growth well into the future. As we look at the economical drivers in play, the auto industry has been called the crown jewel of their manufacturing bonanza, with record exports of light vehicles and auto parts alike. There are currently 18 production complexes located in 11 states. These manufacturing plants generate a range of activities including assembly, armouring, casting, and stamping of vehicles and engines for a variety of manufactures. Currently, there are 48 different car and light truck models being produced by 12 different OMEs in facilities located in several Mexican states.
Mexico Now asserts that the country is ranked the seventh largest light vehicle producer in the world right behind China, the US, Japan, Germany, India, and South Korea. According to their research, Mexico is the fourth largest exporter of automobile parts, which means that this country is depending on a favourable and timely outcome in the ongoing NAFTA (North American Free Trade Agreement) negotiations between Mexico, the US, and Canada. Mexico Now also reported that the country will enjoy a continuous production increase in light vehicles with forecasts reaching 4.6 million units by 2020. A failed deal on NAFTA would be a setback for Mexico and its ability to see continued growth in manufacturing and exports.
Mexico’s auto industry currently boasts somewhere around 600,000 highly-paid positions in areas such as engineering, technical labour, and other skilled labour. It has been reported that 85% of those positions are directly related to the manufacturing of auto parts and about 15% are in the actual plants where light vehicles are assembled. Many of these jobs are being filled by Expats who have been relocated to train, manage, and oversee the production of these parts and vehicles. There are more than 60 of those automobile plants located all over Mexico. Many of those workers are coming from Korea, Japan, Germany, and even from the US. The other areas where we see future growth are the aerospace and the electronics industries. Both these areas continue to have high demand for talent that cannot be found locally.
Although there is a push to educate the local population, many of those positions are currently sourced from other countries around the globe. In the aerospace industry alone, employment has gone from 13,000 in 2004 to a projected 75,000 by 2020. At the end of 2013, the figure had reached 53,000. According to the research completed by Mexico Now, the country will see an increase of 5,000 new jobs year after year in the areas of engineering, assembly, technicians, administration, and skilled labour. This rate of projected employment will require that talent be sought outside of Mexico; therefore, a growing number of relocations to many of the states hosting foreign manufacturers will be needed.
As we witness the increase in globalization, Mexico has grown its GDP respectably since 1994 to 2017 at a rate of 2.5%. Mexico’s exports are growing at a much faster rate than the rest of the world, as they reached 10% from January to October 2017 according to the OECD (Organisation for Economic Co-operation and Development). Their exports were topping 9% in a year that saw the world’s exports around 3.6%. The OECD cited that most of those exports were made by multinational corporations established in Mexico.
Foreign investments grew at a rate of 9% in 2017 over the same period in 2016, which is why we see continued foreign interest in Mexico. International companies seek out new sites with intentions of building manufacturing plants to produce and export their goods around the globe. The North American Free Trade Agreement negotiations continue to linger resulting in uncertainty for the region. The pace of discussions can only be descried as sluggish, to say the least. The challenges seem to be surrounding the automotive industry, with the US attempting to improve America’s interests by re-drafting NAFTA to level out matters such as wages in Mexico, which are currently disproportionate causing a disadvantage to the US automobile industry. Just recently the US has softened up on its requests to have 85% of the major components such as engines, transmissions, and drive trains manufactured in the US down to 75%. These negotiations have been going on since last year and affect 1.2 trillion dollars of trade amongst the US, Canada, and Mexico.
Relocation industry needs to work together
For those of us in the relocation business, the success of Mexico strengthens our needs to focus on and advance our relocation capacity for shipments to and from this country. This is necessary if we are to meet the needs of our clients’ expanding operations in Mexico. We know that coming up with the right program, placing more attention on quality, and monitoring the performance of our partners will allow us to capture the confidence of our clients. This would be a big step in a market which has been plaguing our industry with quality challenges, interruptions, and various customer service snags in the past. We know that partnering with a quality relocation organisation in Mexico is a good step toward improving overall service in this country. If we are to exceed the needs of consumers, we need to have a secure supply chain to reach beyond their expectations.
We know that relocating a sophisticated workforce to many countries in Latin America can pose challenges from country to country, but when we see these same challenges within Mexico on moves from state to state and from port to port, it can be frustrating. We have found that getting to know our partners and their capabilities at each port of entry can make the process much easier. A good customs broker will know what the local customs officials will need before the shipment even arrives. This will save both time and money and will allow the shipment to continue its journey with little to no interruptions.
As we continue to watch Mexico grow its exports in auto manufacturing, aerospace, electronics, and technology, we must find ways to better support the relocation needs of our clients and their staff to this country. To accomplish this, we need to stay tuned to the ongoing changes with such things as NAFTA and other current events that impact global mobility, which in turn has an effect on growth in such countries. Fingers crossed we hope to see a favourable outcome to the NAFTA discussions, because there is much at stake as this doesn’t just affect North America. The outcome of these negotiations will also have global implications for many multinational companies that depend on a strong free trade agreement for the movement of their goods. The other variable we will be watching closely will be the upcoming Presidential elections in Mexico, as this can have an influence on the outcome of NAFTA depending on who will be elected.
Rick is responsible for corporate business development for Dewitt Move Worldwide in San Diego. He has recently joined the company after spending most of his working life in the moving business. Being close to the Mexican border, he is developing a high quality moving service to and from Mexico to serve corporate and private clients.
Photo: It is claimed the Mexico is ranked the seventh largest light vehicle producer in the world.
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