CTU GLOBAL has a widespread network and specialized knowledge across Asia, Europe, and the Americas, enabling us to identify and evaluate the perfect manufacturer for your needs, facilitate the transition to production, or offer comprehensive and scalable supply chain solutions. Learn more about the regions where we offer these tailored solutions.
Mexico borders Belize, Guatemala, and the United States by land and Cuba and Honduras by sea. In 2022, Mexico was the number 14 economy in the world in terms of GDP (current US$), the number 10 in total exports, the number 13 in total imports, the number 74 economy in terms of GDP per capita (current US$) and the number 21 most complex economy according to the Economic Complexity Index (ECI) .
Mexico is heavily dependent on commercial relations with its main trading partner – the United States – which accounts for more than three-quarters of the country’s exports (78.1% in 2022). Other destinations for Mexican exports include Canada (2.7%), China (1.9%), Germany (1.4%), Brazil and Japan (0.9% each). As per imports, the main origins include the U.S. (43.8%), China (19.6%), South Korea (3.7%), Germany (3.1%), and Japan (3% – data INEGI). Mexico has signed a dozen free-trade agreements with about forty different countries of the world. Other trade advantages of Mexico include the United States–Mexico–Canada Agreement (which replaced NAFTA in 2020), its free-trade agreement with the European Union since 2000, a trade agreement with Japan since 2005 and the 2012 foundation of the Pacific Alliance along with Colombia, Chile and Peru.
The country’s trade balance is structurally negative. In 2022, exports of goods reached USD 578.1 billion against USD 626.3 billion in imports (-7.6% and +19.8%, respectively). Concerning services, exports stood at USD 36 billion (+32.7%, mostly due to the positive performance of the tourism sector), whereas imports totalled USD 46.8 billion (+20.8% y-o-y). According to preliminary data from INEGI, merchandise exports stood at USD 577.7 billion in 2023, against USD 604.6 billion in imports.
Mexico’s participation in trade agreements such as NAFTA and its successor, the USMCA, offers significant advantages for businesses sourcing from Mexico. These agreements provide favorable tariff rates, reduced trade barriers, and enhanced market access to North American markets, including the United States and Canada.
Mexico has created a business-friendly environment, implementing policies to attract foreign investment and promote economic growth. The country has streamlined regulations, implemented incentives for foreign businesses, and established special economic zones, providing businesses with a favorable operating environment. Numerous companies have demonstrated the economic advantages of sourcing in Mexico. For instance, Automotive manufacturers like General Motors, Ford, and Honda have manufacturing operations in Mexico. This is to take advantage of lower labor costs, proximity to the United States market, and trade agreements like USMCA benefits. Electronic companies, including Samsung and LG, have set up production facilities in Mexico to capitalize on the country’s skilled labor force and favorable business conditions. Proximity to the United States market allows for faster product delivery to meet customer demands. Apparel and textile companies, such as Levi’s and Under Armour, have shifted sourcing and manufacturing to Mexico. This is to benefit from competitive labor costs, reduced transportation expenses, and proximity to the United States consumer market.
Sourcing materials and manufacturing in Mexico offers tangible benefits beyond cost savings. It provides a competitive edge, enhances customer service, strengthens supply chain resilience, and fosters business growth. The advantages of co-locating American operations near vital end markets, such as Mexico, are clear. Therefore, businesses must carefully evaluate their sourcing strategies. This will enable them to capitalize on proximity benefits in meeting consumer needs and mitigating supply chain risks.
As global markets become increasingly interconnected and consumer expectations rise, proximity cannot be overstated. Businesses that prioritize proximity in their sourcing and manufacturing strategies will thrive in today’s dynamic and competitive landscape.
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