The Latin Business Association is taking the lead in building international partnerships. Our objective is twofold:
- to help businesses market efficiently on a local and/or global level and provide potential customers with information about their business, products and services;
- and to provide small businesses access to vital information needed for growth, expansion and accessing new markets and minimize distance, language and cultural barriers between businesses around the world.
Latino business owners throughout the world are creating a dramatic impact upon the global economy. The LBA represents the vanguard in providing the advocacy, education and business development opportunities for one the fastest-growing and successful group of business leaders and entrepreneurs in the world.
In continously seeking to build relations and establish trade in new markets, and thereby increase business opportunities for our Membership, the Latin Business Association is pleased to announce the signing of historical strategic partnerships with the following international government representatives and organizations:
On International Trade Opportunities with Mexico
Companies constantly seek lower-cost locations for their sourcing and production activities in an effort to gain a competitive advantage around the globe. Mexico’s labor costs, while significantly lower than those in highly developed countries, are still higher than those in China, India, and many other rapidly developing economies (RDEs). So, will Mexico lose out to lower-cost competitors, or are there compelling reasons for global companies to consider locating some of their operations in Mexico? According to an increasing number of sources, the answer to the latter question is a clear and resounding yes. Mexico offers a unique set of advantages that make it an outstanding global business opportunity.
Over the past few years, the increasing migration of production to very-low cost countries, particulary China, has had a direct effect on Mexico’s economic development. As of 2007, trade with the United States represented 83 percent of Mexico’s exports and 28 percent of its gross domestic product (GDP). However, from 1997 through 2007, Mexico’s share of U.S. imports remained fixed at around 10 percent while China’s more than doubled, from over 7 percent to more than 16 percent. During the same period, China displaced Mexico as the second-largest trading partner with the United States.
This drop in Mexico’s trade-share rank reflected a significant loss of jobs in the country’s maquiladora industry. Maquiladoras, often reffered to as “twin plants”, are manufacturing facilities located in Mexico and owned by a parent company whose administrative facilities are based in the U.S. The Maquiladoras structure allows the parent company to capitalize on Mexico’s low labor costs while retaining U.S. business benefits. Typically, the parent company will send raw materials, equipment, machinery and other supplies to its plants south of the border for assembly or processing without having to pay import duties. They can then be exported back to the U.S., sold in Mexico, or exported to other countries.
While the Mexican Maquiladoras industry lost some 260,000 jobs, a 20% decline, in 2000-2003 largely due to cost differentials, in many sectors Mexico has established a solid competitive advantage and is not only stemming the tide of migrating jobs to lower-cost countries, but also acheiving rapid growth. From 2004-2007, maquiladoras experienced a 25 percent growth in employment, more than compensating for earlier declines.
Among the many reasons that account for this recent growth are Mexico’s:
- privileged geographical location adjacent to the United States and abundant seaports on both coasts;
- relatively low labor costs;
- abundance of skilled labor and managerial talent;
- long experience in doing business in the Western Hemisphere;
- robust domestic market, due to macroeconomic stability and economic growth, spurring domestic productivity;
- strong incentives provided by federal and state governments designed to attract direct foreign investment;
- clusters of suppliers, organized geographically by industry, such as: Automobiles and Auto Parts; Appliances; Computers and Computer Software; Aerospace and Aircraft components and integrated systems, etc.
- Promexico’s Guide to Invest in Mexico
- PwC’s Doing Business in Mexico 2011
- Deloitte’s Taxation and Investment in Mexico 2012
In addition, the federal government has established an economic policy that fosters the development of higher-value-added capabilities and products that began in 2003 under the broad designation “economic policy for competitiveness”, which is being continued under the present administration and which has initiated programs for various industries to improve exporting conditions and fiscal incentives, provide a better-educated workforce, and improved infrastructure, the two most-successful which are Programa para la Competitividad de la Industria Electrónica y de Alta Tecnología (Program for the Competitiveness in the Electronics and High-Technology Industries)- PCIEAT- and Programa para el Desarollo de la Industrias de Software (Program for the Development of the Sofware Industry)- PROSOFT. PCIEAT has brought about the establishment of more than 250 suppliers to major multinationals, creating more than 30,000 jobs. PROSOFT seeks to upgrade Mexico’s software industry by improving the local workforce and by promoting new telecommunications networks and other infrastructures.
These political and economic conditions, combined with the lower costs associated with shipping of most products, and the rising labor costs in other nations, enable Mexico to offer significant opportunities for companies in certain industries and product lines to gain global advantage.
Source: The Boston Consulting Group
Read the complete BCG article Mexico’s Evolving Sweet Spot in the Global Landscape.
Additional Sources Examining Trade Opportunities in Mexico:
For further studies on Trade with Mexico visit US Mexico Business Council.
Watch for further announcements of new strategic LBA International Partnerships currently being formed!