Where to Manufacture in Mexico?

What is a maquiladora?

Since the early 1970’s, foreign manufacturers have set up operations in Mexico with the intent to export the majority of their production. These manufacturers are commonly referred to as “maquiladoras.” Well over 56% of maquiladoras are located in one or more of the 6 Mexican states bordering the U.S., namely Baja California, Sonora, Chihuahua, Coahuila, Nuevo Leon, and Tamaulipas. The other 44% are located throughout the other 26 Mexican states, including Mexico City. In 2017 and 2018, over 65% of new maquiladoras in Mexico have set up along a border state.

In contrast, foreign manufacturers that set up an operation in Mexico and sell their products within Mexico are not technically maquiladoras because they are not exporting the majority of their production. For example, a non-maquiladora foreign manufacturer could be a Tier 1 automotive supplier who invoices most of its production to one or more automotive OEMs located in Mexico.

Mexican Border Cities vs. Mexican Border States

An important logical note: a border state is not a border city. There are pros and cons of locating a manufacturing facility in a border city, versus a city in the interior of a border state, versus a city in any other Mexican state.

The most common industrialized border cities for foreign manufacturers (west to east) are:

• Tijuana, Baja California
• Mexicali, Baja California
• Nogales, Sonora
• Ciudad Juarez, Chihuahua
• Nuevo Laredo, Tamaulipas
• Reynosa, Tamaulipas
• Matamoros, Tamaulipas

The most common industrialized cities in the interior of border states (west to east) are:

• Hermosillo, Sonora
• Guaymas/Empalme, Sonora
• Chihuahua, Chihuahua
• Monterrey, Nuevo Leon
• Saltillo, Coahuila
• Torreon, Coahuila

The most common industrialized states in the interior of Mexico are:

• Mexico City
• Guanajuato
• Jalisco
• Queretaro
• Puebla
• Estado de Mexico
• San Luis Potosi
• Aguascalientes

Considerations for the Site Selection Process

Beyond deciding on a region and city, choosing a location requires selection of a manufacturing site. The site selection process should evaluate the advantages and disadvantages of operating in one of three general types of locations: a standalone building, a building within an industrial park, or a building in a manufacturing community, which is an industrial park enhanced with comprehensive, embedded manufacturing support services.

Additional site selection criteria to be considered in the site selection process include:

• Labor availability, skill set, compensation, turnover, and competition
• Proximity to major highways, land ports of entry, airports, seaports, and rail spurs
• Proximity to the supply-chain
• Proximity to customers
• Labor union climate/contracts

All of the above should be evaluated in terms of both short- and long-term effects on your manufacturing objectives in Mexico.