|
|
|
|
|
|
and gas to accommodate heavier manufacturing processes, as well as water and sewer sufficient to meet both domestic and process requirements, is much less plentiful. One of the most important due diligence issues for a company is ensuring that capacity for all utilities-power, gas/fuel, water, sewer and telecom- is not only available, but also expandable. The quality and capacity of utilities is an ongoing problem throughout Mexico. Stories abound about companies discovering after the real estate transaction is complete, they cannot get sufficient power or water. Or worse still, after the operation is up and running and the company is successful enough to warrant expansion, they discover they cannot obtain additional utility capacity at the current site. If they wish to expand, the site selection process must be repeated.
The same applies to quality industrial space available for lease. Speculative space is constructed in the most popular areas on the border, in Monterrey and in a handful of other hot locations for foreign investment. However, given the demand, the pickings are often slim, and the location and support services do not always match the company's requirements, especially if the requirements are more than the typical light manufacturing specifications so common for maquiladoras.
The cost of industrial real estate also can be a surprise to newcomers to Mexico. Because the demands for land with the amenities most foreign companies expect is so high, the cost of real estate is often well beyond initial expectations. Land prices of $150,000 to $200,000 per acre and leases of over $5.50 per square foot for basic assembly space are not uncommon in the popular maquiladora locations. Other unanticipated real estate costs are the various taxes and fees associated with a real estate transaction such as the transfer tax, appraisal fees, registration fees and notary public fees. Fortunately, land, real estate improvements and equipment generally are exempt from the 10 percent to 15 percent value-added tax for properly registered maquiladora operations.
Logistics
The time and distance to market and the cost of shipping product is the third matter to consider. As more manufacturing and related companies locate in Mexico, the shipping services available to move goods are improving. However, there are several issues that
|
|
|
|
|
|
|
|
|
|
|
should be investigated before narrowing in on a specific property or community.
Along the border, time to market generally is affected only by the border crossing itself, along with custom brokerage issues. Although there are numerous border crossings stretching from Tijuana to Matamoros, not all crossings are created equally. Some bridges and customs areas are extremely congested, with crossing times of over eight hours. The specific trucking service and customs broker used, not to mention the time of day the crossing is made and the specific bridge crossed, can make a big difference in the time it takes to move goods across the border.
As more companies explore beyond the border, the transportation and logistics issues take on increasing importance. Although up and coming areas such as Torreon, Chihuahua and the Bajio region generally have fewer of the labor concerns and exorbitant real estate costs experienced near the border, they do not offer the same easy access to the U.S. There are precious few good highways connecting the Mexican interior to the border and the distances from the interior to the border can be great. This means a trucker traveling 400 to 450 miles a day to Torreon will need one to 1 1/2 to 2 1/2 days. With the potential of another half to full day at the border crossing, a company in the interior may have product in transit three days before it has even entered the U.S.--at the far southern tip of Texas! While completely acceptable for some products, it is certainly not the just-in-time delivery so many customers have come to expect.
Add to the time involved the cost of shipping product long distances--over $1.30 a mile is not uncommon-the cost of custom brokerage and handling at the border, which can amount to $500 to $800 per truck, and the potential for lost product along the way, and the siren of low-cost labor can become a little shrill for some operations.
Despite these drawbacks, the interest in Mexico has never been greater and, barring a significant downturn in the U.S. economy, the pace of industrial investment by foreign companies is unlikely to abate any time soon. The opportunity to find a great location in Mexico that provides abundant, low-cost workers, fully-serviced real estate and acceptable logistics certainly exists, but finding it requires more careful due diligence and planning.
|
|
|
|
|
|
|
