Mexico Industrial Parks Magazine, Mexico Site Selection
Oscar Espinosa, Principal and Manager, Mexico, was recently featured in Mexico Industrial Parks Magazine. The article, Mexico Site Selection, discusses key factors in the site selection process specific to the industrial projects in Mexico. Mexico abounds with a wide range of business opportunities that should best be pursued using prudent site selection practices. Considerations of central importance to the decision-making process, especially labor market analyses, are examined in depth by Espinosa.
With the cost of manufacturing labor being of vital significance to overall knowledge of the Mexican business climate, and its labor market’s trending-cheaper status beginning to approach the rising costs of Asian economies like Vietnam, the article provides key insights on the potential upside for location in Mexico during the next decade. This type of information is critical for companies in a global economy to be aware of, in order to develop strategies using the data to minimize expenses with an informed site selection.
To enjoy this article in full, read below or download the magazine here.
Mexico Site Selection
The Site Selection Process takes into a multitude of dynamics customized for the specific operations under review.
In a global economy, businesses have a real estate footprint which may encompass multiple countries and regions of the world. Determining where best to locate their facilities is critical to success of that portfolio, and the overall achievement of the company for the future. To do so, businesses often undertake a comprehensive site selection process with extensive utilization of proven data.
The site selection process takes into a multitude of dynamics customized for the specific operations under review. This includes myriad factors, including, but certainly not limited to, workforce costs and skill availability, operational costs, utility reliability and accessibility, proximity to customers, geopolitical aspects, logistic and supply chain concerns, economic development incentives, and tax and regulatory policies, among many others.
Conducting a site selection search in Mexico is no different. Whether it be industrial, office, warehousing, or a data center, the process must be comprehensive and incorporate those key factors for the specific project at hand. With a country with wide-ranging opportunities, along with unique challenges, businesses need to develop a strategy utilizing proven data. Below the article will touch on several of the key aspects to evaluate.
- Mexico is home to 120 million people, which includes a workforce of 54 million individuals. Of the total, the nation has a manufacturing workforce of approximately 13 million workers.
- The population of Mexico has grown consistently over the past 25 years and by 2025 is estimated to be 143 million. Growth may slow in the future, especially among populations younger than 14 years old, a trend that accentuated in 1990 and continues today. In fact, population growth fell below 2% (replacement rate) in 1990 and is 1.3% today.
- Key to understanding where to locate an operation is to know where the workers will be in the future. Deploying a site selection analysis will support a company in identifying where these locations of growth will be tomorrow. Digging even further, true labor analytics will help show where the required skills are today, as well as, into the future.
While operational and real estate costs can be significant for a project, labor costs can often prove to be the largest expense for a business. Manufacturing wages in Mexico have ranged between $3 and $4 per hour over the past 10 years and demonstrate a downward trend towards $3 recently.
Conversely, affordability in Asian economies, while still less costly than Mexico, is changing. Wages in India, Indonesia, and Vietnam, are roughly one-third to a quarter of the cost of labor in Mexico. However, wages in these countries are expected to continue trending higher over the next decade, outpacing current affordability.
These wages can vary greatly across the country dependent on the industry sector and location dynamics. Utilizing site selection methodologies and proven data, businesses should identify and understand these cost differentials across the various markets under consideration. With the extensive level of expense labor costs can be, this is a vital part of the site selection process.