You’ve decided that a nearshore solution is the best choice for your company, so that’s good. You must have given Mexico some thought as a potential location for your future activities. The benefits and drawbacks of nearshoring to Mexico are as follows:
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Pros
More talent available
Sometimes the person you’re trying to hire—the perfect applicant for the job—lives across the border. Herein lies the role that nearshoring plays. This method gives you access to a significantly wider selection of highly qualified software specialists. By doing this, you may create amazing products in partnership with highly skilled engineers for a fraction of the cost of recruiting in-house staff.
Importantly, a million people in Mexico have degrees in computer science and IT, with 68% of them men and 32% of them women, according to data from the Mexican statistical office’s most recent study (INEGI). According to Oscar Suchil, Mexico is currently one of the world’s top producers of engineers. In addition, 56% of these professionals are under the age of 35, with the youngest, recently graduated professionals making up the largest group (20 – 24 years old). For recruiters around the world, it represents a big chance to tap into a vast talent pool.
IP rights are strongly protected
In terms of intellectual property protection, US firms are well-protected in Mexico. These efforts were strengthened even further with the assistance of the Free Trade Agreement (FTA) that Mexico has with other nations with the signing of the United States-Mexico-Canada Agreement (USMCA). The USMCA has a number of provisions that modernize the mechanisms for protecting and enforcing intellectual property (IPR) in Mexico, including registration, preservation, and enforcement systems. The agreement guarantees that rights holders in the United States will obtain IP protection equal to that found in the United States, even though the regulatory institutions that oversee IPR in Mexico differ from those in the United States.
The USMCA Chapter 20 discusses intellectual property law. A wide range of topics relating to IP are covered in this chapter. Here are a few of the most noteworthy IPR clauses: Conditions relating to copyright, the Notice and Takedown System, trade secrets, geographic indicators, industrial designs, etc.
Also, according to NAPS, US firms enjoy far better intellectual property rights protections in Mexico, owing to a long history of securing IPR protections through international treaties.
Access to Infrastructure
When seeking for a nearshore partner, infrastructure accessibility is just as important as locating specialized software engineering teams. Therefore, it is essential to pick a site that suits a business’ needs, taking into account utilities like electricity, readily accessible technological centers, water, transportation, etc.
Mexico used to be known for its maquiladoras, inexpensive assembly plants, and affordable exports. However, the country’s focus has changed as a result of technological advancements, and it currently has Latin America’s most promising tech sector.
The Mexican government announced plans to invest more than $40 million in infrastructure in 2019. Mexico has invested significantly in infrastructure development to create a worldwide industrial foundation for Mexico. Thus, established industrial areas in Mexico offer crucial services to businesses looking for foreign direct investment. The leading cities right now are Mexico City’s tech scene, Monterrey, Guadalajara, Queretaro, and others.
Cons
Adhere to Mexican regulations
It could be difficult for US businesses to stay current with recent changes to Mexican regulations that affect their sector. Normas Oficiales Mexicanas (NOMs), which are government standards, are one of them. Normas Mexicanas (NMXs) are the voluntary standards used in Mexico, Federal Labor Law (FLL) regulates labor issues, and IMMEX (Industry Manufacturer Maquiladora y de Servicios de Exportación) provides tax benefits to US manufacturers.
Businesses must be mindful about these limitations when nearshoring to Mexico because they could make things difficult in terms of time.
Knowledge of Investment Costs
Nearshoring is used to save costs while increasing profit margins. The entire effort will be in naught if the company is unable to achieve this main goal.
Companies must calculate the cost of establishing operations in a new country through a well-planned financial business strategy that considers all touchpoints: labor, logistics, service, taxes, infrastructure, etc. in order to seize and benefit from the nearshore process. Nothing can escape responsibility.
Nearshoring to Mexico can have advantages and disadvantages, just like any other company decision. Examine each one of them under a microscope.
To overcome obstacles like Mexican law, investment expenses, and cultural adaptability, businesses must plan strategically. Choose where to start by using the knowledge that has been provided above.
