Source One Execs Address Mexican Conference on Developing New Business Opportunities

As a result of recent upheavals around the world (both natural and man-made) more U.S. companies are viewing Mexico as a viable near-shore alternative to help offset potential disruptions to their global supply chains.

In March, Source One executives addressed many of the key issues relating to this phenomenon when they became the first U.S. business representatives ever invited to speak at the National Congress Manzanillo (CONAMA) 2011, a key international business conference held in the state of Colima.

Steven Belli, Chief Executive Officer for Source One, told the assembly that Mexican companies which can demonstrate a high level of industry expertise, creativity and reliability - and are able to market themselves effectively to prospective U.S. business partners - have reasons for optimism.

Belli, along with Source One's Director of Operations William Dorn, also met with representatives from Mexican industry; government officials representing the federal Commerce Department, the Central Bank of Mexico, the Department of Tourism; and a number of top university officials who organized the international consortium.

Belli cited three key changes that are helping to guide the development of Mexico as a key near-shore source for supplies and manufactured products:

• Change #1: -- The Evolution of the Maquiladoras. Beginning in the 1960s, the Mexican government developed the maquiladora system to foster greater industrial and jobs growth. This involved assembly plants built along the U.S.-Mexico border to give U.S. manufacturers access to high quality, low-cost production services. Today, federal officials want to further leverage Mexico's perceived advantages - geographic proximity, NAFTA benefits, and a young, well-educated workforce - to develop a more powerful, long-term engine for economic development.
• Change #2: -- Major Change in the Tax Structure. Companies established under the maquiladora structures typically were governed by PITEX, which placed import duties and related taxes on items as they moved among individual factories in the manufacturing process. The newer IMMEX tax structure reduces or eliminates these taxes, thereby allowing more assembly and production among manufacturing facilities working together without being impacted by value-added taxes along the way.
• Change #3: -- Fine-tuning of NAFTA. When NAFTA passed in 1994, Mexican trucks were not allowed to travel more than 20 to 30 miles beyond the U.S. border. In retaliation, Mexico placed tariffs on U.S. goods. Recently, the presidents of the U.S. and Mexico agreed to lift the trucking bans and tariffs. The new agreement should lead to lower costs and greater ease of movement for goods and products between the two countries.

• A reduction in the cost of manufacturing in Mexico
• The opportunity for cheaper deliveries and a faster, more accurate quoting process
• Greatly reduced lead times for product delivery, thereby enabling U.S. retailers, for example, to enjoy enhanced inventory planning and the ability to more readily capitalize on "hot" products
• Overall, an opportunity for companies to diversify their low-cost company sourcing strategy and further mitigate risk from sources in the Far East.

• 1) Make sure they are working with a Mexican business that is properly registered under IMMEX
• 2) Get in early to lock up existing resources that may be limited, depending on their specific focus
• 3) Make the necessary government contacts or work with a partner that has the contacts in order to take advantage of the various programs and initiatives that exist.