Cross-border services between the U.S. and Mexico continue to increase under the nearshoring trend as manufacturers leverage Mexico’s growing production capabilities. Many companies have established facilities in Mexico or announced plans to set up production there. The appeal focuses on cost savings, increased efficiency, access to a skilled workforce, favorable trade agreements, and its proximity to the U.S. market that helps optimize the supply chain.
Top Benefits of Production in Mexico
Cost Efficiency – Mexico offers lower labor costs than the U.S. and Canada, which can lead to significant savings in manufacturing expenses. Labor costs are typically higher, however, compared to similar roles in countries like China, India, Cambodia, and Vietnam but are less efficient in reaching North America. In many cases, Mexico’s proximity to the U.S. can offset higher labor costs when considering shipping and logistics.
Skilled Workforce – Mexico has a high percentage of skilled labor with a growing skilled workforce in many key industries, including manufacturing, engineering, and technology. They have a strong network of universities and technical institutes focusing on STEM (science, technology, engineering, and mathematics) education, producing graduates in critical related fields. Many companies in Mexico also invest in training programs to develop specific skills relevant to their industries, particularly in the automotive, aerospace, electronics, and information technology industries. Additionally, the workforce is known for its adaptability and willingness to learn new skills, which is essential in fast-paced industries.
Proximity to U.S. Market – Mexico’s geographical location allows for shorter shipping times and reduced transportation costs to reach the U.S. market. Other factors of cost efficiency and supply chain optimization impacted by the proximity of Mexico to the U.S. include the ability to oversee and uphold quality standards, cultural similarities and language skills that ease communication, and enhanced collaboration opportunities due to the ease of travel and being within similar time zones.
Trade Agreements – Mexico has favorable trade agreements with approximately 50 countries, including the European Union – Mexico Free Trade Agreement and the United States – Mexico – Canada Agreement (USMCA), which is up for renewal in 2026. Trade agreements provide manufacturers greater access to foreign markets, helping to facilitate trade and investment by reducing or eliminating tariffs and establishing trade rules that promote exports and enhance economic growth. Trade agreements typically include provisions that establish common regulations and standards that can simplify compliance and reduce the costs associated with navigating different regulatory environments in various countries.
Favorable Business Environment – Government incentives and policies aimed at attracting foreign investment can provide additional benefits for companies operating in Mexico. Some incentives even come from other countries through their trade agreements, including an agreement that allows vehicles and qualifying automobile parts produced in Mexico to enter the U.S. tariff-free under the USMCA, provided they meet specific rules of origin requirements. Additionally, under the IMMEX/Maquiladora program, manufacturers can import goods duty-free to Mexico for assembly or manufacturing and export the finished product back to the U.S.
Established Infrastructure – The country has developed a robust manufacturing infrastructure, including logistics hubs, transportation networks, energy infrastructure, telecommunications, and industrial parks, facilitating efficient production processes. Infrastructure investments are often accompanied by government incentives, such as tax breaks or grants, which can further reduce costs for manufacturers and encourage investment. Under the leadership of Mexico’s new administration, President Sheinbaum has indicated that infrastructure investments will continue to be a focus in Mexico in the years to come. (Learn more here).
While Mexico may have higher labor costs than some Asian countries, its strategic advantages, skilled workforce, and proximity to major markets make it an attractive option for many companies. When considering total production costs, including labor, materials, overhead, and logistics, Mexico can oftentimes be more competitive than other countries, especially when targeting the North American market.
ProTrans has been operating in Mexico since our establishment more than thirty years ago. Our team offers unparalleled cross-border expertise moving goods northbound and southbound across the U.S./Mexico border. In addition to our facilities and operations in Mexico, we are also working to strategically expand our intra-Mexico services and integrate our global freight forwarding capabilities. Contact our team today to learn more about optimizing your supply chain and reducing costs.