A growing number of manufacturers are seeking more bang for their buck south of the American border. Mexico's low landed costs for American companies is an attractive consideration when comparing other developing country options. With higher fuel prices, companies are looking for ways to manage shipping costs. Shipping a container to the USA from China costs roughly $5000, compared with roughly $3000 to truck the same freight in from Mexico. Nearness to the US market as well as the consumer base fulfill just in time requirements. Advanced protection of patents and other intellectual property compared to other low costs producing countries make Mexico an attractive options for American companies.
Perhaps the biggest allure is the relatively low cost of Mexican labor. HSBC notes the average Mexican salary was $2.10 in 2011 up 19% from $1.72 in 2001. By comparison labor costs in China have increased nearly four fold from $0.35 in 2001 to $1.63 in 2011. The difference in labor costs is expected to continue to shrink in the years to come.
However, companies looking to Mexico as a base of manufacturing have noted the relatively high rate of corruption exceeds that of low cost European manufacturing centers. Employment and labor laws impose strong penalties for laying off workers.
With half of the nearly 19.4 billion in foreign direct investment reaching Mexico's manufacturing sector, it appear the trend towards near shoring by North American companies is set to continue.
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