July 9, 2015

Economic Reforms Drive Relocation into Mexico

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Economic Reforms Drive Relocation into Mexico

Recent economic reforms have propelled business investment, and thus relocation activity, into Mexico. Three major reforms are under way: two that have taken place within the past three years, and one that has been in place for some time and continues to draw investment from Asia, Europe, the United States, and Canada.

Oil Company Competition in Mexico

For the first time in 80 years, the Mexican national oil company, Pemex, will have competition. The government has legislated that foreign companies may now bid on land leases for oil exploration. Why? Because the government believes that foreign investment and technology will propel higher levels of production to move the economy forward. Many of the leases are offshore and virtually unexplored, meaning that the first barrels of oil are still 10 years away, but part of the legislation also allows Pemex to partner with foreign companies to unleash new technology on existing onshore fields, thus driving additional production.

The impact on relocation is that many of the oil-related locations are in extreme emerging-market locations, with little infrastructure to support expat activity. Lack of housing, schools, and fundamental necessities will challenge HR policy professionals. Security in many of these locations is a prime concern, and no company should send their employees to these parts of Mexico without proper security briefings.

Reforms in the Telecommunications Industry

Economic Reforms Drive Relocation into Mexico A second recent change has been the reform of the telecommunications industry. Up until now, two companies have owned virtually the entire market in a duopoly. Recent legislation is meant to encourage diversity and competition, thereby driving down consumer costs while increasing consumer choice and quality. American telecommunications companies have now invested in Mexico, looking to tap the market and perhaps use Mexico as a stepping stone to Latin America.

Automotive Industry Growth in Mexico

The third industry that has been in Mexico for quite some time, and which is now a global player, is the automotive industry. Favorable trade agreements, low wages, and the ability to ship from ports year-round from a central Western hemisphere location are ideal for automotive assembly. Billions of investment dollars have flooded to Mexico for the assembly of light, compact vehicles. Suppliers to the assembly process follow suit, creating even more jobs downstream. Most auto assembly is clustered in central Mexico, including Queretaro, Cuernavaca, and Puebla, all of which surround Mexico City. The availability of major roads, international airports, and shipping supports the growth of the automotive assembly industry.

The challenges for relocation are twofold. First, due to the overall growth in Mexico, housing is in short supply, as are school placements. Locals who have improved their standard of living now compete with expats for housing and schools. Second, some new auto assembly locations are now extending Mexico City’s borders even further; a major German car manufacturer recently agreed to break ground at San José Chiapa, a town with 4,000 residents that’s an hour away from Puebla. Government incentives have played a huge role in attracting businesses and in helping companies locate in areas where land is cheap, and construction costs and wages are more competitive than they are in China.

Please view our Relocation Guide on Mexico for more information on relocating to Mexico, or search our Resource Hub for information on moving to other locations around the world. If you have any questions, please email us at trustedguidance@cartus.com.

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Posted By

Ken Eng

About Ken

Ken Eng is  the Director of Destination Services in Supply Chain Management.

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