GlobalAutoTV
Click to watch Wim van Acker -
Click to watch Wim van Acker -
latin resources

Need an office in Mexico or Brazil? Office suites, meeting rooms, virtual offices, network access



free downloads
LATIN AMERICA: "Doing Deals in Brazil - 2015" Guide

LATIN AMERICA: "Doing Deals in Brazil - 2015" Guide. 91-page report by PwC Brazil.

proceed to download
eJournals




back to index backLATINtalk July,  2005


'New' Mexico courts investors

New dynamics are at play on the Mexican side of the U.S. border, making investing in the region more attractive — and more complex.


Reports of the maquiladora industry's death are greatly exaggerated, to borrow from Mark Twain. To be sure, plenty of U.S. facilities investment shifted to China in recent years, but China will never have the proximity to the North American marketplace that Mexico has. If direct investment trends are any indication, U.S. investors now are expanding with that fact in mind. Investment in Mexico's maquiladora region will increase to about US$6 billion in 2005 from $4 billion in 2004.

By some measures, China's competitive advantage in terms of labor costs is eroding relative to Mexican and even some U.S. locations; the farther from the border, the more this tends to be the case. Economist Brian Wesbury, the featured speaker at the opening general session of the Industrial Asset Management Council's (IAMC) Spring 2005 Professional Forum in Charleston, S.C., is among those holding this view.

But several other factors are at work, from infrastructure improvements to advances in cross-border logistics capabilities to smart development on the Mexican side of the border that is catching the attention of U.S. and global investors.

Mike White of CB Richard Ellis says master-planned communities that incorporate industrial property are central to the new Mexican manufacturing model.

"There was some investment outflow going to China in 2002 and 2003, and now some of that is coming back," notes Edward J. O'Neill, director of global real estate at Federal Mogul, a $6-billion automotive components manufacturer based in Southfield, Mich. "I see that continuing, but it depends on who the investor's customer is. Do you have to support them on a just-in-time basis or not? If it is just-in-time, then you need to be as close to the border as possible," where labor is pricier. If labor costs alone are the predominant site determiner, then 100 miles (161 km.) plus and farther from the border is where an investor will want to look, says O'Neill.

Regardless of the cost of labor, establishing Mexican operations is a complex business, O'Neill points out, in part because of the impact a plant can have on a community there. To establish a facility in a town with several other plants already in place drives up the cost of labor faster than it may already be rising.

"The alternative is to put a plant in a small town where you are it," he says. "The problem with that is if you should decide to leave, the impact on the town is that much more significant."

Mexican Industrial Development Comes of Age

Mexico's urban centers on the border are another story, with significant changes under way in many since substantial investment in the region has resumed.

"Mexican cities are adopting master-planned communities and are getting away from the old model of a cluster of manufacturing plants in an industrial park," says Mike White, managing director, international real estate services, at CB Richard Ellis in El Paso, Texas, and Juarez, Mexico.

"They are very strictly zoning a ratio between manufacturing sites and residential sites, and they are co-locating the residential with the manufacturing so that the worker can walk to work and the manufacturer has a ready source of labor in his neighborhood," White explains. "This is a big plus for manufacturers, because it has reduced the amount of bus transit time and cost to the manufacturer to get their work force to the plant every day. This is making it easier for manufacturers to locate and to be successful." Plants can now be sited within industrial bands located along major highways with residential development adjacent.

A younger, savvier development community is behind this emerging trend, but state and city governments are realizing, too, that this new approach to zoning results in a better use of the infrastructure. U.S. investors win, says White, because they do not have to compete as intensely with other manufacturers for labor.

Could Central Mexico Drain Border Investment?

Throughout the U.S.-Mexico border region, industrial and commercial space inventory has largely disappeared, reports Gary Swedback, president of NAI Mexico, in Tijuana, Baja California.

"It's switched from being a buyer's market, where they can call all the shots, to where there is strong activity again," he says. "The site-selection process is even more important now for corporate users, because they have to know how to structure the most efficient operational and occupancy cost scenario for their project."

Swedback says the region to watch in the near future for even more robust industrial development is the "bajio" region of central Mexico. Cities such as San Luis Potosi and Aguascalientes northwest of Mexico City and the state of Guanajuato represent a region in which 70 percent of Mexico's GDP is transacted, he relates.

"We're used to seeing all this activity on the border, but there is an unbelievable amount of industry locating and expanding in this region. Central Mexico is getting this activity, and it's poised to boom in the next three years," but not to the detriment of the border region, he asserts. It all depends on which is more important to the site seeker — logistics and access to the U.S. or lower-cost labor.

Source: Site Selection magazine - GAI

previous page

go top
search our site


Loading

LATINtalk

Other articles from the same issue (July,  2005).

A Business Manual for Moving to México
play read on

Volkswagen rides the Brazilian auto recovery to new export markets across the globe
play read on

'New' Mexico courts investors
play read on

Political Crisis, Economic Aftermath: Slow Growth For Brazil...
play read on

The practice of low-cost country sourcing (LCCS) is accelerating
play read on

Latin America: Setbacks inevitable
play read on

Setting up your business in Mexico
play read on

New book details export compliance responsibilities
play read on


Our Free eJournals
GlobalAutoExperts

To visit GlobalAutoExperts Directory, click here.


©2008 GlobalAutoIndustry.com | HCI Group, Ltd.
101 West Big Beaver Road, Suite 1400 | Troy, MI 48084 USA
USA Tel: +1.248.687.1060 | USA Fax: +1.248.927.0347
Fax UK: +44.(0)845.127.4765 | Fax Europe: +31.20.524.1659 | Fax Asia: +852.3015.8120