NAI Mexico Headquarters in Tijuana, to host End-of-Year Regional Meeting

Tijuana, Baja California, — Professionals from NAI 10 offices throughout Mexico are gathering together November 30 — December 2nd. at NAI Mexico’s headquarters, to discuss current business, plans, trends, opportunities and strategies for the future of commercial real estate in Mexico and Latin America.

CEO Gary Swedback noted, “We are very pleased to assemble such a talented group of sales and staff to focus on business development opportunities throughout Mexico, Latin America, and the Caribbean. We are also honored to host alliance partners and visitors from New York, Los Angeles, and Toronto.” Mr. Swedback also cited the Panamericas initiative, created by NAI Mexico, as a way to offer global clients consistent service from Mexico to the Caribbean, and throughout South America.

Jay Olshonsky, President, NAI Global will be visiting from New York and attending the meeting in Tijuana. Mr. Olshonsky observed:

“The US election results are prompting our North American clients in Mexico to request broad ranging advisory analyses to help plan for the next 9-12 months. The NAI teams are already deeply involved with analyzing both the challenges and opportunities for new firms and existing operations in Mexico. This regional meeting will provide inputs from all 10 NAI Mexico offices to benefit our clients through our national presence and unique point of view.”

NAI Mexico is an exclusive member of NAI, the world’s leading managed network of commercial real estate firms serving over 375 markets worldwide.

NAI Mexico supports both Mexican and global clients through a platform of 10 offices in Mexico. In addition to traditional leasing and sales, NAI Mexico offers additional integrated services for design and construction, project management, valuation, market analytics, capital markets and supply chain solutions.

 

Nearshoring: why now?

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

Roca Desarrollos

ROCA Desarrollos in partnership with Gava Capital consolidate their participation in one of the major industrial markets in northern Mexico, Tijuana BC, with an initial investment of 3 million dollars.

The project consists of the construction of the first of two buildings forming part of an industrial complex designed to meet the growing space demand for manufacturing, logistics and assembly operations.

The TJ01 building will be located on Via Rapida de Otay / Alamar, one of the prime industrial areas in the city, with a total area of 175,000 square feet. The facility will accommodate projects from 50,000 SQFT. Roca TJ01 will be available for lease in February 2017.

With this national investment ROCA Desarrollos commits to provide Class A industrial construction for a high demanded market, in one of the best locations in the country.

ROCA Desarrollos provides the flexibility to fully comply with its clients’ requirements; always seeking to suit clients needs. Although each project varies in complexity, size and location, the business approach is to adopt a direct and open communication with each of its customers and suppliers to achieve mutual reward, and establish long-term relationships.

Besides the development of inventory buildings for lease, ROCA Desarrollos, provides turnkey projects tailored to lease or sale anywhere in the country; ROCA Dearrollos also services: architectural design, infrastructure development, project and property management.

ROCA Desarrollos envisions to be a leader in the Mexican real estate development.

 

Why the TPP Matters for Latin America

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/ 

 

Michelin breaks ground on plant in León, Mexico

LEÓN, Mexico (Aug. 24, 2016) — Group Michelin has started construction in Mexico of its 21st factory in North America — eight years after the global economic crisis of 2008 forced it to postpone the project.

“I’m really excited because a few years ago, in 2008, I had to come to this country to postpone our investment because of the crisis,” Michelin CEO Jean-Dominique Senard told Tire Business Aug. 22.

“At the same time I was incredibly impressed by the way the Mexican authorities took the news. So coming back with the decision (to revive the project) is a joy.”

Mr. Senard had earlier hosted a groundbreaking ceremony at the 242-acre site in central Mexico where the French tire company is investing $510 million in what, according to one senior executive, will be Michelin’s first greenfield passenger tire plant in North America in three decades.

In a speech, Mr. Senard said the León investment is the tire maker’s largest investment anywhere in 2016.

“The last time we launched a greenfield passenger tire plant in North America was over 30 years ago,” Scott Clark, executive vice president and COO of Michelin North America, said in a separate interview with Tire Business.

“So this is not something we do every day. This is a big deal and this is exactly the right place to be and at the right time.”

The factory, which will employ 1,000 when finished in late 2018, will be within a threehour drive of 18 car maker assembly plants, Mr. Clark said. It is located in a new industrial park called León-Bajio, which stands beside the León-Silao highway.

 

“The new Michelin investment in Mexico represents a vote of confidence that strengthens the positioning of Mexico as an investment destination, because it comes from a company with a long tradition in the industry and widely recognized for its commitment to innovation”

Idelfonso Guajardo Villarreal, Mexico’s federal economy secretary.

 

Source: http://www.tirebusiness.com/article/20160824/NEWS/160829978

 

Mexico City (CNSNews.com) – Experts who help foreign companies build factories in Mexico report a recent surge in interest by U.S. and international firms, with executives voicing less concern about Mexico’s crime and security problems.

“We’ve seen a 40 percent increase in inquiries about building factories in Mexico compared to where we were last year,” Ricardo Rascon, a salesman with The Offshore Group in Tucson told CNSNews.com.

“It has surged dramatically in recent years,” he said. The number of companies approaching the company looking to build facilities in Mexico is not as high as it was prior to the financial crisis of 2007, however.

Half of the increased interest is coming from U.S. companies, while the other half is from companies located in Canada, Germany, South Korea and even China, Rascon said.

“We signed our first Chinese company this week. They are moving a product line from China into Mexico for the logistical advantages for serving the U.S. market.”

Companies in Germany in particular were also showing a “big interest” in building factories in Mexico to be closer to the U.S. market, Rascon said.

U.S. companies that move to Mexico don’t always shut down in the U.S., but often instead open new factories in Mexico to be closer to suppliers, he said.

Rascon also said company executives were asking fewer questions about crime in Mexico than was the case several years ago.

“I could tell you three or four years ago, security was the first thing people would ask, but now it’s on the back burner. Now, all they ask about is cost.”

According to the business data firm Dun & Bradstreet, inquiries from multinational companies about locating in Mexico have increased by 20 percent through June just this year, Reuters reported on Tuesday.

A recent survey of companies that moved jobs overseas to take advantage of lower wages and costs in Asia, but now want to relocate them back to North America, found Mexico to be their “first-choice destination” over the United States.

A third of the companies surveyed said they were now actively looking at moving “primary production and assembly operations currently located in China, India and Brazil back to North America,” it said.

Entitled “Footprint 2020: Expansion and Optimization Approaches for U.S. Manufacturers,” the survey was sponsored by Deloitte and The Manufacturers Alliance for Productivity and Innovation.

In a report this week analyzing corporate credit worthiness in Mexico, Moody’s Investors Service said free trade agreements make Mexico especially attractive to U.S. automakers Ford, GM and Chrysler.

“Hourly industry wages in Mexico are well below rates in Brazil, South Korea and even China,” the report said, noting that the auto manufacturing industry in Mexico is now the seventh largest worldwide and the country’s second largest industry.

“Mexico’s auto-parts manufacturers depend heavily on North America, which bought 82 percent of their exports in 2015, far more than South America (8 percent) or Europe (6 percent),” the report said.

A 2015 survey of 250 senior-level manufacturing and distribution executives in North America and Western Europe by the consulting firm Alix Partners found “continued appetite for nearshoring” with a 32 percent of those surveyed reporting they had recently moved production facilities nearer to their customer markets.

Fifty-five percent of the North American companies said they preferred to locate in the U.S. in order to be closer to their markets while 31 percent favored Mexico.

The firm’s research showed Mexico’s popularity with manufacturers had declined in 2015 from 49 percent three years earlier, possibly due to security concerns.

Asked about security concerns in Mexico, the number of respondents saying they “expected improvement in those areas” dropped from the previous year’s survey.

 

The offshoring trend that has dominated manufacturing footprint strategy for the last 30 years was based on solid benefits: lower labor costs, access to raw materials, inexpensive rent, etc. However, many factors such as the significant travel involved in managing overseas business, proximity to the U.S. market, perpetually shifting regulations and intellectual property concerns are significant deterrents for companies to offshore their manufacturing lines. OEMs with constantly scaling or smaller volumes find it especially hard to justify the hassle and expense involved in offshoring. As a result, many OEMs are reversing the trend and moving to a reshoring strategy, and they have sound rationale for doing so. While the United States manufacturing industry has plenty to celebrate with this trend, the movement is more broadly focused on North America as a whole, and Mexico is an especially attractive location for manufacturers.

According to a Deloitte report, 66 percent of survey respondents have offshored manufacturing work overseas in the last two decades. Among those, a third are now considering relocating operations to North America, with Mexico being their first choice and the United States their second.

Mexico offers several key benefits that make it especially attractive: lower labor costs, advantageous land and facility cost structures, more favorable transportation logistics expenses and increased proximity to the U.S. market are a couple of examples.

However, some of the obstacles and concerns manufacturers had about Mexico years ago remain today – transportation infrastructure, security concerns in certain areas and access to skilled labor are a few examples. That is why the component distribution model employed in the U.S. can’t be easily replicated in Mexico and that is also the driving force that led TTI to create a sustainable model that would allow it to fully serve this growing market buyers.”

How International Issues Affect Foreign Investment in U.S. Real Estate

There’s no doubt that international buyers love U.S. real estate. In 2015, 15.4 percent of all commercial real estate buyers in the U.S. were from overseas, according to financial and professional services firm Jones Lang LaSalle.

On the residential side, the National Association of Realtors reports international buyers purchased 4 percent of existing homes sold in the U.S. in 2015, which made up 8 percent of the total dollar amount of existing homes sales for the year at $104 billion. The biggest foreign residential buyers in 2015 were from China ($28.6 billion), Canada ($11.2 billion), India ($7.9 billion), Mexico ($4.9 billion) and the U.K. ($3.8 billion), according to a study examining Chinese real estate investment conducted by the nonprofit Asia Society and real estate economics firm Rosen Consulting Group.

Foreign investors have long viewed U.S. real estate as a good place to diversify their portfolio and benefit from theworld’s strongest economy. But in recent years, hard assets in the form of U.S. property has also become an option to safely store money. “We’ve become what is today, I guess, the largest offshore loca- tion in the world,” says Ed Mermelstein, an international real estate attorney based in New York.

But what happens to an investor’s interest in U.S. real estate when international events affect his or her home country and lead to uncertainty over the future?

From economic meltdowns abroad to terrorism to squabbles over European Union membership, the growing international role in major U.S. real estate markets means we’re more likely to see the impact of those issues, says Ross Milroy, owner and broker at Ross Milroy Realty in Miami.

“The Miami real estate market – and I think New York is very similar as well –we’re so dependent on the international buyers, and they’re such a huge part of our market,” Milroy says. “A lot of our real estate markets do not follow traditional patterns, and a lot of our demand is dependent on what’s going on in those home countries of our buyers.”

 

“We’ve become what is today, I guess, the largest offshore location in the world,”

Ed Mermelsteinand, Managing Partner at Rheem Bell & Mermelstein, LLP

Mexico's Tourism and Foreign Investment Rankings Climb

Mexico got some good economic news this week on two fronts as new international surveys showed the nation moved into the world’s top 10 tourism countries and also boosted its ranking for U.S. foreign investment.

The United Nations World Tourism Organization (UNWTO) said Mexico had moved back into its list of the 10 most visited countries in the world. This is very good news, since tourism accounts for more than 8 percent of Mexico’s GDP. By contrast, oil accounts for only about 6 percent of GDP.

In this sense, increasingly the tourism sector becomes vitally important for the country, especially in a context of a strong dollar and weaker oil market. That is why the news released a few days ago by the UNWTO is so well received by officials and policy makers.