Key challenges of the manufacturing industry in Mexico
Innovation and digital transformation, as well as financing challenges, are affecting the manufacturing industry in Mexico.
As has affected companies everywhere else in the world, the manufacturing industry in Mexico was not adequately prepared for the disruption to its activities that was brought about by the Covid-19 pandemic.
In response to the crisis, companies were forced to confront the need to alter supply chain processes to affect the flow of material inputs and finished goods for manufacturing companies, their suppliers, and their customers. In some instances, companies had to stop operations partially, while in other cases, the epidemic required complete plant shutdowns.
This state of affairs resulted in many projects in the manufacturing industry in Mexico being delayed or even canceled. This situation impacted flows of foreign direct investment, exports, as well as the direct employment generated by industry, according to Mario A. Hernández, a leading partner of international consulting firm KPMG’s IMMEX maquiladora industry practice in Mexico.
He went on to say that “However, the sector is demonstrating that it has the capacity to meet the current challenges that it faces, as well as has great resilience to get ahead of the crisis that is affecting our efforts. It is one of the most competitive, successful, stable, and important pillars of the Mexican economy. Its ability to withstand the difficulties that the coronavirus pandemic has created is largely due to the well-established planning models that companies had in place.”
Besides the recovery of investor confidence in the manufacturing industry in Mexico, financial service companies will implement flexible financing programs and investment in innovation and technology advantageously in addressing the industry’s challenges in the new reality that will emerge after the pandemic subsides.
The manufacturing industry in Mexico as a growth detonator
The signing of the Treaty between the United States, Mexico, and Canada (USMCA) in July of 2020 was an important message for investors. It signaled a high level of confidence in the Mexican manufacturing industry, according to the study that was entitled “Perspectives of Senior Management in Mexico 2021.”
While there are significant challenges that will arise from the agreement (increased value-added requirements and wage level requirements for the signatory countries, for instance), one positive aspect of the USMCA is that the manufacturing industry in Mexico will continue to play an essential role in stimulating the country’s economic recovery.
Funding to deal with the crisis
On the other hand, concerning sources of financing to deal with the crisis, it is necessary to divide the productive sector into two main categories: manufacturing companies with domestic investment and those with foreign-sourced capital resources.
As for the latter, it is not common for such companies to resort to the local financing system; however, there are fewer limitations for them concerning this consideration. As for firms comprised of domestic capital, efforts must be made to ensure that they can obtain sufficient credits from the financial system and thus revive the economic capacity of Mexico’s domestic capital industry.
Innovation and digital transformation
Other essential factors that play a role in ensuring the global competitiveness of the manufacturing industry in Mexico are innovation and digital transformation. Continuing to increase investment in technology under the concept of industry 4.0 brings great value to lift organizations to a reach a high degree of competitiveness according to global consumer trends, explains Hernandez.
As a result of the Covid-19 pandemic, “it is clear that the world has become subject to major changes: Accelerating technological disruption has transformed business habits and has transformed consumption patterns. In consideration of this new reality, the manufacturing industry in Mexico has to adapt and be disruptive. It must progress to enhance its competitiveness and optimize the economic growth that this important sector can bring.”
