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Mexican Energy Sector National Content Rules Topic Of DebateBy Expert Author: AlanRussell
Increasingly, given labor, as well as logistics and transportation cost considerations, companies located in the Americas are seeking to do more sourcing of the material inputs that go into manufactured products closer to home.
Sourcing in Mexico is becoming a topic of ever growing interest given contemporary trade patterns and tendencies, economic conditions and constraints, and commercial flows. Major players, particularly in Mexico’s automotive industry are making a concerted effort to dedicate the time and allocate the resources required to increase their capabilities with respect to their ability to conduct activities aimed at maximizing their ability to conduct activities related to sourcing in Mexico successfully.
An example of one such company is automotive OEM, Nissan. According to recent reports the Japanese passenger and light vehicle manufacturer has announced its intention to increase its sourcing in Mexico by a factor of three. The company’s stated goal is to up the value of its local buy to seven billion dollars by 2016. If Nissan succeeeds in reaching this level of local consumption, the result will be that eighty percent of the Sentra sedans that it builds at its plant in Aguascalientes will be comprised of Mexican content.
For companies that are attempting to engage in greater sourcing in Mexico activity after having looked predominately to the Far East, and China, in particular, it must keep in mind that sourcing in Mexico is a different proposition. Due to the size of its economy, the supplier base that Mexico possesses at present exists on a smaller scale than that encountered in China. Although sourcing in Mexico may be a much more labor intensive activity than in China, at least at this point in time, rewards can be reaped as a result of doing business closer to home.
Although, at times, identifying potential Mexican suppliers for materials and finished goods can be challenging, if successful, companies that do significant sourcing in Mexico will reap the benefit from some, or all, of the following competitive advantages possessed by Mexico:
• Preferable tariff and duty treatment for items purchased and consumed
• Competitive priced skilled and semi-skilled labor
• Reasonably priced transportation
• Accelerated and more predictable delivery times
As the country’s base of suppliers grows, fueled by the greater deployment of both foreign and national capital, sourcing in Mexico will be the option chosen by companies doing business in North, and to a degree, Central and South America.
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