Mexico’s Competitive Advantage: 4 Factors According to Prologis

Prologis, a global leader in logistics real estate, highlighted four factors that play a significant role in Mexico‘s competitive advantage.

First is its location. For example, Monterrey, Mexico’s main manufacturing center, is located three hours from the U.S. border, which favors companies that supply U.S. consumers.

As a second factor, global trade policy plays an important role in the nearshoring trend. Mexico is the only developing country that has free trade agreements with the United States, Canada, the European Union and Japan.

In particular, adds Prologis, Mexico is particularly integrated with the United States, with 27-45% of the value of its trade in the form of intermediate goods that require further processing before reaching final retail consumers.

A third factor is regulation. Recent regulatory pushes advance alignment between North American supply chains.

Although certain round-trip tariffs between the U.S. and China were implemented in 2018 temporarily, most of them were set on commodities, such as metals and agricultural products.

Competitive advantage

More recent regulatory decisions-such as restrictions on advanced chip sales, tax credits for solar panels/electric vehicles/semiconductors made in North America, and legislation aimed at improving supply chain transparency, etc.-will continue to bring manufacturing supply chains for high-value goods closer to U.S. consumers.

For example, during 2021-2022, more than $70 billion in electric vehicle factories were announced to be built in the U.S., four times 2017 levels, following these regulatory changes.

Finally, there is the workforce. Mexico has a young workforce by global standards: 42% of its population (49 million workers) is between 20 and 49 years old.

Also, Mexican manufacturing workers earn a similar wage to the Chinese (25% lower when adjusted for productivity or approximately 20% of the cost of a U.S. manufacturing employee.

Given the labor shortages in the United States and other developed countries, this large skilled workforce represents a considerable advantage for Mexico.

As of December 31, 2022, Prologis owned or had invested, either wholly owned or through co-investment companies, in properties and development projects expected to total approximately 1.2 billion square feet (111 million square meters) in 19 countries.

Prologis leases modern logistics facilities to a diverse base of approximately 6,600 customers, primarily in two main categories: business-to-business and retail/real estate.