Executive Briefings

Even a Nafta Collapse Won't Keep Companies From Moving to Mexico

It wasn't supposed to be like this, but the folks who help U.S. companies set up production in Mexico say they're having a solid year.

Even a Nafta Collapse Won't Keep Companies From Moving to Mexico

Tecma Group has more business than ever in its three decades doing relocation. In just the last few weeks, it aided a maker of cleaning equipment and a packaging company make the move south. Chicago-based Mexico Consulting Associates has three new prospects interested in Mexico. Keith Patridge, who runs McAllen Economic Development Corp., expects at least 12 companies to set up shop in Reynosa alone this year. And another firm, Tacna Services Inc., has assisted two businesses locate in the Baja California area.

President Donald Trump’s vow to scrap or revamp the North American Free Trade Agreement was expected to put a scare into companies considering these kinds of moves. But many are sticking to plans to set up shop in Mexico even if the pact isn’t renewed, according to the experts who help firms relocate and find new plants.

Lots of factors go into the decisions but these companies have made a simple calculation: Cheap labor in Mexico — as much as a $20,000 saving per worker compared with the U.S. — is enough to offset the higher costs of any tariff imposed by Nafta’s demise. That math shows how Trump’s America First effort to revive manufacturing faces hurdles.

“If they just wiped out Nafta and went back to normal trade tariffs, I think that’s manageable,” said Ross Baldwin, chief executive officer of Tacna. “Life would continue on because the labor rate is so dramatically different.”

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Tecma Group has more business than ever in its three decades doing relocation. In just the last few weeks, it aided a maker of cleaning equipment and a packaging company make the move south. Chicago-based Mexico Consulting Associates has three new prospects interested in Mexico. Keith Patridge, who runs McAllen Economic Development Corp., expects at least 12 companies to set up shop in Reynosa alone this year. And another firm, Tacna Services Inc., has assisted two businesses locate in the Baja California area.

President Donald Trump’s vow to scrap or revamp the North American Free Trade Agreement was expected to put a scare into companies considering these kinds of moves. But many are sticking to plans to set up shop in Mexico even if the pact isn’t renewed, according to the experts who help firms relocate and find new plants.

Lots of factors go into the decisions but these companies have made a simple calculation: Cheap labor in Mexico — as much as a $20,000 saving per worker compared with the U.S. — is enough to offset the higher costs of any tariff imposed by Nafta’s demise. That math shows how Trump’s America First effort to revive manufacturing faces hurdles.

“If they just wiped out Nafta and went back to normal trade tariffs, I think that’s manageable,” said Ross Baldwin, chief executive officer of Tacna. “Life would continue on because the labor rate is so dramatically different.”

Read Full Article

Even a Nafta Collapse Won't Keep Companies From Moving to Mexico