Manufacturing in queretaro. everything you need to know
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1 Manufacturing in queretaro everything you need to know
2 Table of Contents INTRODUCTION AUTOMOTIVE AND AEROSPACE INDUSTRIES LOCATION 1 2 NEARBY MANUFACTURING AND MATERIALS SOURCING LABOR AND WORKFORCE ECONOMY TRANSPORTATION INFRASTRUCTURE EDUCATION 4 DEMOGRAPHICS 9 5 CONCLUSION 10
3 Introduction Over the last few decades, a growing number of manufacturers have set up shop in Mexico to take advantage of the country s relatively low labor costs, its proximity to the U.S. and Canada, its participation in numerous free trade agreements and its overall excellent transportation infrastructure. Indeed, Mexico is now a leader in the manufacture of everything from automobiles and electronics to medical devices and aerospace parts and equipment. Between 2008 and 2014, Mexico saw a 14 percent increase in manufacturing output, the third highest worldwide after China and South Korea. As the national manufacturing engine continues to pick up steam, Mexico has become an attractive location for investment but what is the ideal site? An interior region such as Queretaro offers numerous advantages for nearshore manufacturing. BETWEEN 2008 AND 2014, MEXICO SAW A 14 PERCENT INCREASE IN MANUFACTURING OUTPUT, THE THIRD HIGHEST WORLDWIDE AFTER CHINA AND SOUTH KOREA. Page 1
4 Location Queretaro is centrally located in Mexico, covering approximately 4,500 square miles across the Mesa Central. One-third of Queretaro is covered by the Sierra Gorda. The landscape is dotted with pit caves and limestone erosions that are assets to the local mining economy. The relatively small state s population is only 2 million people, but nearly 45 million people live within a 350-kilometer radius of the Capital and most populous city, Santiago de Queretaro. Accordingly, there is a large regional workforce for manufacturers to draw upon. Santiago de Queretaro is less than an hour from Mexico City, and 80 minutes from Monterrey, by plane. Road and railways provide additional connections to Mexico City and to Ciudad Juarez. It is also connected to Mission, Texas, by the Mexico Federal Highway 101. QUERETARO IS CENTRALLY LOCATED IN MEXICO, COVERING APPROXIMATELY 4,500 SQUARE MILES ACROSS THE MESA CENTRAL. Page 2
5 Automotive and aerospace industries Over $1 billion was invested in Queretaro by foreign firms in 2015, much of it in manufacturing. The state is particularly wellknown for its strong presence in both automotive and aerospace. For example, foreign direct investment in aerospace is higher in Queretaro than in any other Mexican state. Queretaro s aerospace cluster included 34 companies in 2013, up from only 2 organizations in This local sector is growing faster (15 percent) than the aerospace industry in Mexico as a whole (10 percent), and it employed nearly 5,000 people as of May Like many other parts of Mexico, Queretaro also has a sophisticated automotive industry. Critical components such as wire harnesses are manufactured in San Juan del Rio, Queretaro. THE STATE IS PARTICULARLY WELL-KNOWN FOR ITS STRONG PRESENCE IN BOTH AUTOMOTIVE AND AEROSPACE. Page 3
6 Transportation infrastructure Queretaro is home to over 2,000 miles of highways as well as 300 miles of railroad tracks. Whereas most Mexican states invest between 5 percent and 7 percent of their annual budgets on transportation infrastructure, Queretaro has historically spent up to 16 percent. Public transit moves 650,000 people daily in the state. For comparison, the Bay Area Rapid Transit system in Northern California has weekday ridership of only 420,000. Manufacturers can count on workers having relatively easy routes to sites in Queretaro. MOST MEXICAN STATES INVEST BETWEEN 5 PERCENT AND 7 PERCENT OF THEIR ANNUAL BUDGETS ON TRANSPORTATION INFRASTRUCTURE, WHILE QUERETARO HAS HISTORICALLY SPENT UP TO 16 PERCENT. An international airport and the Terminal de Autobuses de Queretaro links the state to the rest of Mexico and the world. Mexican Federal Highway 57 connects San Juan del Rio to Mexico City from the south and Piedras Negras to the north. Page 4
7 Education There are more than 2,000 remedial education facilities and 115 high schools in Queretaro, in addition to 22 universities and technical trade schools. As a result, Queretaro s educational system produces highly skilled employees who are ready to contribute to local manufacturing industries. QUERETARO S EDUCATIONAL SYSTEM PRODUCES HIGHLY SKILLED EMPLOYEES WHO ARE READY TO CONTRIBUTE TO LOCAL MANUFACTURING INDUSTRIES. A prime example of Queretaro s advanced educational system is the Universidad Aeronautica de Queretaro (UNAQ). UNAQ has been a reliable source of engineers and technicians and was pivotal in attracting investment from Canadian aerospace giant Bombardier. It has also been instrumental to a major developing partnership between Delta and Aeromexico. Local authorities in Queretaro continue to prioritize education. A Director of Investment Promotion for the State of Queretaro has stated that one goal is to have the highest percentage of educated citizens in Mexico. Page 5
8 Economy Like the rest of Mexico, Queretaro has seen tremendous GDP growth in recent decades. Since NAFTA was enacted in the early 1990s, the state s economy has expanded by an average of 5.5 percent per year. Between 2004 and 2014, its total GDP doubled to $24.8 billion and its number of firms more than tripled to 1,300. MANUFACTURING HAS BECOME THE VITAL COG IN QUERETARO S ECONOMY, OVERTAKING AGRICULTURE. Manufacturing has become the vital cog in Queretaro s economy, overtaking agriculture. It represented 28 percent of state GDP in 2014 and was also the main magnet for foreign direct investment in Queretaro. Automotive and aerospace lead the way in Queretaro s diversified industrial sector. Automotive accounts for 10 percent of GDP in Queretaro, while aerospace has been a driver in the development of UNAQ and other educational infrastructure. Page 6
9 Labor and workforce One of the main reasons manufacturers relocate to Mexico is to trim their labor costs. Mexico s hourly wages have steadily declined relative to China and Brazil over the past decade, in large part because of the peso s growing weakness against the U.S. dollar. A sharp drop in the peso-to-dollar exchange rate from 2013 onward has brought Mexico s minimum wage to around $4. This trend has offset the relatively high wage levels in Queretaro within the Bajio region. In interior regions such as Queretaro, cost is not the only advantage when it comes to labor and the local workforce. Employees are also highly educated, able to access reliable transportation options to industrial parks and less prone to turnover than their counterparts at border maquiladoras. EMPLOYEES ARE ALSO HIGHLY EDUCATED, ABLE TO ACCESS RELIABLE TRANSPORTATION OPTIONS TO INDUSTRIAL PARKS. Page 7
10 Nearby manufacturing and materials sourcing Queretaro is close to mines that produce silver, copper and opals. Nearby forests are also potent sources of oak, pine and cedar, giving manufacturers close proximity to a range of raw materials. Moreover, Queretaro s location in the highest-performing aerospace cluster in Mexico means that there is a large concentration not only of engineering and design firms but also suppliers in critical areas such as complex metal component machining, rubber and plastic manufacturing, and chemical production. Local educational and training institutes like UNAQ further cement the geographic advantages of manufacturing in Queretaro. Cities including San Juan del Rio and Santiago de Queretaro are home to numerous automotive suppliers and high-tech manufacturers in metals and chemicals. The concentration of industries in Queretaro also helped drive its aerospace exports from $139.6 million in 2007 to $ million in QUERETARO HAS A LARGE CONCENTRATION OF SUPPLIERS IN CRITICAL AREAS SUCH AS COMPLEX METAL COMPONENT MACHINING, RUBBER AND PLASTIC MANUFACTURING, AND CHEMICAL PRODUCTION. Page 8
11 Demographics The demographic outlook for Queretaro is sunny for the foreseeable future. The metropolitan area near the capital saw a 42 percent population increase between 2004 and This growth has greatly expanded Queretaro s workforce and has also driven improvements in local and regional transportation infrastructure that have direct benefits for manufacturers. Enrollment at universities has climbed in tandem with the double-digit population growth that the state has experienced in the past decades. Nearly half of the residents of Queretaro are concentrated in Santiago de Queretaro, with the rest located in the state s other larger cities and in its rural areas. Many newcomers to Queretaro chose to settle in the capital, near the centers of manufacturing. THE METROPOLITAN AREA NEAR THE CAPITAL SAW A 42 PERCENT POPULATION INCREASE BETWEEN 2004 AND Page 9
12 Conclusion Manufacturers have flocked to Mexico for years, and this trend is primed to continue thanks to the country s numerous advantages in infrastructure, education, demographics, technical expertise and proximity to the U.S. and Canada. While there are many excellent sites throughout Mexico, Queretaro should be at the top of the list for manufacturers in every industry from aerospace to automotive to invest in. It has a skilled workforce, an optimal location, and a strong and growing economy in multiple industries. The Offshore Group can turn your Mexico manufacturing plans into reality. When you partner with our experienced team, you get everything you need to navigate Mexico s complex industrial economy, from top to bottom. Contact The Offshore Group today to explore your options. WHILE THERE ARE MANY EXCELLENT SITES THROUGHOUT MEXICO, QUERETARO SHOULD BE AT THE TOP OF THE LIST FOR MANUFACTURERS IN EVERY INDUSTRY. Page 10
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