NAI Mexico is pleased to invite you to the Bajio Operations Directors Forum, Thursday, January 19.

Global industrial operations executives in Mexico’s Bajio Region are meeting for lunch at the GPARK Building 2, in Queretaro, from 1:00 – 3:00 p.m.

The Bajio Operations Directors Forum will present the impact of US political elections, latest trends in Mexico, and how directors can support their 2017 planning processes. The agenda will include:

1. Welcome and Introduction to Visitors
   
   • Host Welcome:  GPARK Alberto Giundi, Vice President
     • Introduction to the Presenters
2. 2017: Global Macro Outlook Impacting Mexico
   • Presented by: Price Waterhouse Cooper (PWC)Joshua Levy: Foreign Client Services www.pwc.com
     • 2016 Prediction Review: Global Trends Affecting Mexico
     • 2017 Global Economic Perspectives
     • Trends and Economic Risks: Mexico and North America
3. Impact of US Elections on Foreign Industrial Operations in Mexico: Planning 2017
   • Presented by: Seraph Ambrose Conroy: Founder and Managing Partner www.seraph.com
     • Proposed Changes by the Incoming US Leadership
     • Likely Impact on Foreign Firms and Exporters in Mexico
     • Preparation Suggestions by Industry Sector
4. Bajio Market Trends and Activities: Real Estate and Facilities Decisions
   • Presented by: NAI Mexico Gary Swedback: CEO www.naimexico.com
     • US Elections: Feedback from Our Global Clients
     • Planning Mexico vs. Other Markets
     • Multi-Market Comparison Analyses: Total Occupancy Cost
     • Operations Location Planning: 2017
5. What Are Most Important Issues to Maintain Competitiveness for Bajio Management Teams ?
   • Roundtable and Interactive Discussion
   • Largest Challenges Perceived for 2017

Location: KM 28.5 Carretera San Luis Potosi – Queretaro,  Fase 4 Parque Industrial Queretaro, Santa Rosa de Jauregui, QRO. 76220

Invitations and seating will be limited to 30 attendees.

When you think of outsourcing manufacturing operations, what country do you typically think of? China? Vietnam? Philippines? Yes, Asia is typically the go-to region for companies looking to cut costs by outsourcing production processes – and for good reason. Asia possesses both the labor and raw material resources to make the region an effective substitute to higher cost labor in the U.S. and the limited availability of certain raw materials in North America.

While outsourcing to low-cost countries such as China has its benefits (i.e. labor/overhead costs, raw material costs, scalability, freeing up the business’ time to focus on other critical functions, etc.) it comes with challenges as well. Lead times, language barriers, time zone differences, IP integrity, and a general lack of physical presence make outsourcing certain functions a constant struggle for US-based manufacturers and can outweigh the initial savings gained over the long-term. Companies oftentimes look at the price-tag of outsourcing functions such as IT support or manufacturing assembly work, figuring the decision is obvious. However, to minimize risk and to optimize/streamline domestic manufacturing operations it is important to weigh the pros and cons of outsourcing, especially in deciding which low-cost region to outsource to, which processes to outsource, and which partner(s) to use.

As the industry changes and the outsourced business model matures, domestic manufacturing companies have begun to consider alternative options to outsourcing in Asia given the inherent challenges that have to be overcome in order to benefit from their low costs. The aforementioned challenges that come with outsourcing business functions across the globe have nurtured the growth of an emerging trend – the nearshoring model. Nearshoring is an alternative to US trade/outsourcing to Asia by shifting the outsourcing of production, assembly, and other business functions and processes to our neighbors in Mexico and Canada and vise-versa. With the establishment of NAFTA in the early 1990’s came the development of transportation and telecommunication infrastructure through the CANAMEX corridor along with IP protection provisions and the elimination of tariffs on the vast majority of exports between the three countries. As a result, trade barriers were reduced, fostering the growth of inter-North American trade.
The gap between Chinese and Mexican labor rates in the late 20th and early 21st centuries has closed, and then reversed. With the maturation of the Chinese manufacturing industry, they have seen an accompanying demand for a higher wage for skilled labor. From about 2000 and on, Chinese labor rates have steadily increased while the Mexican labor rate has remained relatively stagnant. In fact, multiple studies have shown the average Mexican labor pay-rate dropping below that of China’s. Moreover the Mexican labor force maintains a competitive edge over China from a productivity per worker standpoint year- over-year.

Though a gap a still persists from a raw material and natural resource prospective, the wage rate shift marks a significant turning point in the traditional outsourcing school of thought. This has been further compounded in the Yuan/Peso exchange rate where the Peso has continued to steadily weaken against the Yuan over the past five years making it even more affordable to produce in Mexico. Other factors such as the natural gas costs per MMBTU steadily decreasing for Mexico and increasing in China over the past 10-15 years gives an additional cost advantage to Mexico from an operating cost standpoint.

The list of the tangible benefits of nearshoring goes on: Other advantages include transit times being shortened from 2-3 weeks to less than one day. Intellectual Property is protected by Mexican authorities and IP laws are more effectively enforced than in China and other Asian countries. Social responsibility and strict child labor laws are prevalent in their 48 hour week.

The geographical proximity of Mexico to the US also gives some less tangible benefits to US manufacturing companies looking to nearshore in Mexico. Let’s say it is 11:30 am Eastern Standard Time in Philadelphia and approaching lunchtime. Meanwhile its 11:30 PM in China and your business partners are fast asleep. Any questions that you have for your Asian manufacturing partner will have to remain on hold until the following day and the answer will come while you are long off the clock. This inherently makes communication more difficult and extends response times. Mexico meanwhile shares the same time-zones as the US split up into Eastern, Central, Mountain, and Pacific. The Mexican and US cultures also have many more similarities than differences when compared to the US/Chinese cultures which further the ease of doing business (i.e. more commonly English speaking, language and numbers use same characters, similar holiday schedules, at most a few hour flight away, etc.).

When you couple the labor and productivity rates of the Mexican workforce with the less tangible factors that make doing business in Mexico much easier than with China, old school assumptions about outsourcing to low cost countries requires a new look.

There’s no doubt that nearshoring presents countless benefits over the traditional practice of outsourcing to Asian countries. In my next blog post, we’ll discuss some of steps to take in order to make sure your Mexico supplier sourcing initiative is successful.

Source: http://buyersmeetingpoint.com/blogs/bmps-qthe-pointq/entry/nearshoring-why-now

Traditionally, Latin America’s role in global trade has been impeded by the same anti-trade suspicions which are now discrediting the benefits of globalization in the United States. The TPP is the world’s most extensive trade agreement to date, extending into different industries and reforming trade practices in areas such as intellectual property. The 12 country agreement, whose members include: Australia, Brunei, Canada, Chile, Malaysia, Mexico, Japan, New Zealand, Peru, Singapore, the United States, and Vietnam, make up almost 40 percent of global GDP and almost 30 percent of all global foreign direct investment (FDI).

Trade and Regional Development

Despite the waves of populism in the United States and Europe, a trend which is all but unknown in Latin America, trade is universally recognized as the fuel for growth in the Western hemisphere. Mexico, for instance, can attribute most of its recent growth to its reliance on trade and foreign investment; Mexico has signed the most free-trade agreements in the world.

The region’s growth, however, also depends on intraregional trade, which is low but slowly increasing. The TPP’s three Latin American members: Mexico, Peru, and Chile, are also members of the Pacific Alliance, a Latin American trade bloc encouraging regional integration and intraregional trade.

By approving the TPP, countries like Mexico gain access to a market of almost 1 billion consumers and low cost goods which can be traded within the region. Mexico already does this through the NAFTA agreement with the United States and Canada. By import- ing value-add products from the United States, the region gains access to a market of American goods that would otherwise be unavailable. This agreement also facilitates the creation of small to medium sized businesses in the region who will inevitably have lower costs of production and new markets.
Despite the enormous benefits of trade in the region, it is not enough for countries to reach their development goals. A strong middle class and a new entrepreneurial class are the future of a less commodity dependent region. By lowering costs, the new trade agreement will empower the middle class by offering low-cost goods to increase domestic spending. This agreement also facilitates the creation of small to medium sized businesses in the region which will have lower costs of production and access to new markets.

Regional Trade Security

Besides the potential gains from trade in the Pacific, the TPP fulfills an important geopolitical strategy of Chinese containment.

China’s footprint in the hemisphere over the past decade has increased substantially. In part due to the United States’ interests in the Middle East, China’s international pivot not only perpetuated Latin America’s dependence on commodities, it also increased their vulnerability. China has expanded its interest in the region through investment in infrastructure and even arms sales to governments for preferential business. Playing to historic resentment towards Western institutions like the World Bank and the IMF, unconditional loans from China have done little to strengthen the region’s institutions.going on in those home countries of our buyers.”

Source: http://intpolicydigest.org/2016/09/13/tpp-matters-latin-america/