Navigating the road to Mexico

ANZMEX is pleased to share the KPMG 2016 Report "Navigate the Road to Mexico".

This report presents extensive research and informaiton on why you should do business in Mexico and 'strategies and actions for establishing your supply chain'.

The primary reasons for this “reshoring” to Mexico include:

  • Lower logistical costs and more secure geographic presence
  • Lower operating labor wages are available in Mexico and with the newly negotiated and approved union contracts, the Detroit 3 manufacturers have more flexibility to move production to lower wage countries to better match vehicle sale prices to vehicle cost structures. Source: Chicago Tribune, Detroit-to-Mexico shift predicted after union’s big victory, December 9, 2015.
  • Favorable trade agreements between Mexico and other nations allow OEMs to use Mexico as an export sales platform in addition to sales to the internal Mexican market.
  • The Mexican supply chain is less likely to experience natural hazards that have occurred in places like Japan and Thailand.
  • The political landscape in Mexico is primarily business friendly and currently no inflation is being experienced within the country.
  • China’s economy continues to lose steam and production has begun to move to other locations such as Mexico and the United States. More importantly, shipping costs from Mexico are lower than shipping costs from Asia Pacific.
Assessment of Local Market Landscape
Prior to any action, it is imperative that suppliers considering operations in Mexico assemble the correct team to analyze the potential opportunities and develop a thoughtful and complete business case, specifically, creating a maquiladora, assessing the impact of valueadded tax (VAT), conducting a review of the state growth rates, and initiating a location analysis to facilitate site selection. See more..
Analysis of Market Entry Options
After the analysis of the local market landscape has been completed, suppliers will need to determine which market entry option is the right one for their business. Suppliers will need to decide whether to (1) purchase an existing facility and retrofit to the needs of the business, (2) create a greenfield operation, (3) purchase an existing business and facility, (4) create a joint venture with a Mexican supplier, or (5) use some other form of combination and collaboration. See more..
Financing Strategy and Establishing Capital Resources
It is imperative that a supplier entering the Mexican market have a clear understanding of the limitations on financing such operations. See more..
Review of Necessary Legal and Tax Structures
One of the key challenges facing a potential market entry by a company will also be the lack of understanding and local expertise in terms of legal matters. Experts are needed to advise the supplier on the constitution of its legal entity in Mexico, taking in to consideration the company’s specific legal requirements. See more..
To see the full report from KPMG Mexico, please see here.