MANUFACTURING IN MEXICO:

Transcription

1 MANUFACTURING IN MEXICO: OVERCOMING THE OBSTICLES TO REAP THE BENEFITS In the past few decades Mexico has transformed itself into a manufacturing paradise. The only trouble for those who want to set up shop there is the shortage of skilled workers, and the language barrier. Fortunately, there are some simple solutions

2 ...manufacturers are having diffi culty fi nding enough skilled workers there to keep complex machinery up and running... In the last few decades, Mexico has transformed itself into a manufacturing haven. It has signed 11 trade agreements with 44 nations more than any other country in the world giving it duty-free access to 60% of the world s economic output. In addition to this deliberate trade liberalization, wages and energy costs are now lower in Mexico than in China, and the peso is lower than it has been in recent memory. All this makes it an ideal place to set up manufacturing. However, there is a problem: manufacturers are having diffi culty fi nding enough skilled workers there to keep complex machinery up and running. The obvious solution is to train new staff in Mexico to maintain the lines, but the language barrier makes that extremely challenging. Companies that want to set up manufacturing in Mexico need a solution that will help them equip new staff with the electrical troubleshooting skills needed to keep production lines going, and that will do it in their native language.

3 Mexico is the new Canada. Since 2008, Canada s non-oil exports have dropped by 10%, while Mexico s have risen by 50%. MEXICO IS BOOMING Source: Mexico is on fi re. In the last 25 years the country has experienced a transformation that has made it just about the hottest option for manufacturers looking to set up shop outside the US. There was a time when Canada was the biggest supplier of manufactured goods to the US. Particularly during times when Canada was experiencing slow economic growth, low oil prices, and a cheap dollar as it is now you could count on increased US manufacturing there. But not anymore. Mexico is the new Canada. Since 2008, Canada s non-oil exports have dropped by 10%, while Mexico s have risen by 50%. 1 But it s not just Canada. Mexico s economy is also outperforming those of other nearby low-cost regions such as Brazil and Argentina. This is thanks mainly to its booming manufacturing sector. 2

4 OVER TWO DECADES OF TRANSFORMATION Mexico s success can be traced back to the late 1980s and early 1990s, when the nation underwent a seismic economic and political shift in its approach to business. Trade integration and liberalization transformed the country from a closed system into an industrial economy focused on exports. 2 That shift included the privatization of state-owned companies and the signing of the North American Free Trade Agreement (NAFTA) in 1994, and resulted in a manufacturing belt that mushroomed near the border in response to the increase in US-Mexico trade. 1 NAFTA was only the beginning. Since then, Mexico has negotiated 11 more free trade agreements involving over 44 countries more than any other country in the world! Source:

5 When you consider that the duty on exporting a $50,000 BMW from their South Carolina plant to Europe is $ % you get an idea of how attractive Mexico s duty-free access is. As a result, Mexico s global exports increased 475% between 1994 and 2011 from USD$60.8 billion to $349.6 billion. 1 These trade agreements give manufacturers in Mexico a huge advantage: duty-free access to markets that contain 60% of the world s economic output. 4 When you consider that the duty on exporting a $50,000 BMW from their South Carolina plant to Europe is $ % you get an idea of how attractive Mexico s duty-free access is. It s actually a bigger incentive for relocation even than the difference in labor costs. In addition to its trade liberalization policy, there are a number of other reasons for Mexico s meteoric rise: The sinking peso. Canada s low dollar had made it an attractive option for US manufacturing, but that advantage has been wiped out by the low peso, which fell by over 20% against the US dollar in 2015, and is still in freefall. Low wages compared to China. In 2000, Chinese wages were about a quarter of Mexican wages. As China s middle class became more prosperous, wages crept up. By 2015 Mexican wages were 30% lower than China s, making Mexico even more enticing. 5 It is one of the countries experts predict will play a part in replacing China as a low-cost manufacturing region. 6 Low energy costs compared to China. Natural gas prices in Mexico are tied to those in the US, which are currently very low. China, on the other hand has to pay anywhere from 50% to 170% more for natural gas. 5 Quality. The quality of goods produced in the country has been steadily improving. 1 A younger workforce. It s more productive, and they actually have higher graduation rates from trade and engineering schools than affl uent countries like Canada. 1 Clusters of expertise. In the last two decades, Mexico has developed some fi elds of expertise, namely in auto and appliance manufacturing. Improved effi ciencies stem from that expertise; for example, 89 of the world s top 100 auto parts makers now have production facilities there, and because those companies are geographically close together, transportation costs are lower. 5 In short, Mexico is now such an appealing environment for US businesses to set up manufacturing that it s a safe bet the trend will continue. As manufacturing moves south, however, companies will fi nd that many of their new staff do not possess the accumulated knowledge and skills of their US counterparts.

6 Hiring challenges are one of the major growing pains Mexico is now experiencing. They just can t fi ll all of the skilled job openings that are fl ooding there. GROWING PAINS: SKILLED TRADE SHORTAGES AND THE LANGUAGE BARRIER Hiring challenges are one of the major growing pains Mexico is now experiencing. They just can t fi ll all of the skilled job openings that are fl ooding there. In 2015, Mexico made the top 10 list of all countries having a hard time fi nding talent. In a 2015 global survey of nearly 42,000 hiring managers, 54% of companies in Mexico reported diffi culty fi lling jobs, compared to the global average of 38%. That statistic is also notable for being a 10% increase over The survey also looked at the type of jobs that are the most diffi cult to fi ll. Skilled trades, engineers, machine operators, and technicians were four of the top 10 categories. 7 Top 10 Jobs Employers are Having Difficulty Filling 1 Sales Representative 2 Secretaries, PAs, Receptionists, Admin Asst. and Offi ce Support Staff 3 Skilled Trades 4 Engineers 5 Production Operators / Machine Operators 6 Technicians 7 Accounting and Finance Staff 8 Sales Managers 9 Management / Executive (Management / Corporate) 10 IT Personnel Those positions just happen to have the core skills needed to run and maintain an assembly line effi ciently. Manufacturers know how critical it is to keep their complex machinery up and running. Every minute the machines are down is a costly minute of lost productivity. The extremely high demand for skilled workers will make them very expensive, if they can be had at all.

7 Manufacturers know how critical it is to keep their complex machinery up and running. Every minute the machines are down is a costly minute of lost productivity. Manufacturers interested in relocating production to Mexico, with all of its attractive qualities, must ask themselves how they will transfer the skills, knowledge, and experience of their current US workers to the new staff. The answer, of course, is training, but there are obstacles. For example, who will do the training? And in what language? In fact, the language barrier remains one of the most signifi cant hurdles to relocating to Mexico for English-speaking companies, especially in industries requiring skilled workers. Despite higher-than-average education spending and years of schooling, Mexico has very poor English profi ciency. It is ranked in 40th out of 70 countries surveyed (rated low overall), and many regions of the country are rated very low. 8 It s clear that training must take place in Spanish, and businesses are looking for solutions that will help them do this.

8 SIMUTECH MULTIMEDIA Simutech Multimedia offers businesses a solution for both the shortage of skilled electrical workers in Mexico and other Spanish-speaking countries, and the need to train new staff in their native language. Simutech s award-winning Troubleshooting Skills Training System helps to build skilled electrical trades. It equips general maintenance professionals with the practical, hands-on experience and skills to effi ciently troubleshoot the complex electrical problems that can literally bring production to a grinding halt. The Troubleshooting Skills Training System consists of a series of modular electrical troubleshooting training programs. They teach employees a systematic, methodical approach to electrical troubleshooting, providing users both theory and practical experience in a safe, simulated environment. Electrical troubleshooting is a high-risk activity, and protecting trainees while they are learning is paramount. Simutech provides a safe, simulation-based learning environment in which trainees can acquire mission-critical skills without risk of injury, letting trainees go home at night knowing that the actual systems are up and running well. SIMUTECH SPANISH EDITION It was actually customer demand that prompted us to translate our highly successful slate of English-language programs into Spanish. They wanted a cost-effective way to train electricians and general maintenance staff safely and effi ciently in their own language. In spring of 2016, Simutech introduced the Spanish version of the fi rst course, Troubleshooting Electrical Circuits (TEC), and will make the complete Troubleshooting Skills Training System available by fall 2016.

9 ABOUT SIMUTECH MULTIMEDIA Since 1995, Ottawa-based Simutech Multimedia, creator of the Troubleshooting Skills Training System, has been helping companies get the most out of their equipment and reduce downtime by providing simulation-based training software that teaches people how to troubleshoot electrical problems. Simutech Multimedia s courseware offerings include: Troubleshooting Electrical Circuits (TEC), Troubleshooting Control Circuits (TCC), Troubleshooting Motor Circuits (TMC), Troubleshooting PLC Circuits (PLC), and Troubleshooting Industrial Controls (TIC). For more information on Simutech Multimedia, visit or call

10 SOURCES: 1. How Mexico s manufacturing sector is eclipsing Canada s. Canadian Business. Sept. 9, global-report/how-mexicos-manufacturing-sector-is-eclipsing-canadas/ 2. Mexico s Manufacturing Sector Continues to Grow. Forbes. April 8, M. Angeles Villarreal. Mexico s Free Trade Agreements. Congressional Research Service R40784.pdf 4. Why GM Will Make the 2016 Cruze in Mexico. Forbes magazine. April 14, Peter Coy. Four Reasons Mexico Is Becoming a Global Manufacturing Power. Bloomberg Business, June 27, bloomberg.com/bw/articles/ /four-reasons-mexico-is-becoming-a-global-manufacturing-power 6. George Friedman. The PC16: Identifying China s Successors. Stratfor. July 30, Manpower Group, 2015 Talent Shortage Survey. JPERES&ContentCache=NONE 8. EF English Profi ciency Index