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Mexico: Leading Country in Business Location Competitiveness!

24 March 2011 One Comment

According to KPMG, Mexico is the best site for business locations, among 10 countries and 112 cities studied in North America, Europe, and Asia Pacific. The firm, in its 2010 study, “Competitive Alternatives: Guide to International Business Location”, conducts an analysis measuring the combined impact of 26 significant cost components that are most likely to vary by location, as applied to specific industries and business operations.

“Selecting the best site for a business operation requires consideration of both cost and other factors, that significantly influence the competitiveness of locations for different types of businesses”. In this thorough analysis, KPMG works through both (1) business cost, and (2) costs of living. And considering all through the different industries, Mexico comes through having the highest competitive ranking in front of Canada, France, Germany, Italy, Japan, Mexico, the Netherlands, the United Kingdom, and the United States.

Total business costs in each country are expressed as an index, with the baseline index of 100.0 being assigned to the United States. Countries with business costs lower than the US baseline have a cost index less than 100, while countries with business costs higher than the US baseline have a cost index greater than 100. Rankings are based on ascending business costs, with the lowest cost country ranking first. Mexico is ranked first among the 10 countries. With a cost index of 81.8, this represents an 18.2 percent cost advantage over the United States benchmark. Following it, are Canada and the Netherlands as the cost leaders among the other nine established industrialized countries examined with business costs 5.0 and 3.5 percent below the US, respectively. Australia, the United Kingdom and France rank fourth, fifth, and sixth, respectively.

For calculating this business costs ranking, the firm presents an analysis of all its components, done under more than 1,900 individual Business scenarios.  It considers (a) business environment, (b) labour availability and skills, (c) land/building/office, (d) access to markets, customers, and suppliers, (e) labour wage/salary/benefits, (f) road, rail, port, airport infrastructure, (g) transportation and distribution, (h) utility and telecom/internet service reliability, (i) utilities, (j) suitable land sites, (k) financing, (l) federal/regional/local taxes, and (m) regulatory environment.

On the other side of the spectrum, Germany and Japan have the highest cost structures among the 10 countries examined, with costs 2.5 and 7.4 percent (respectively) higher than the United States.

International comparisons are always subject to exchange rates scenarios, and though historically in Mexico’s case, this has always make room for investment considerations, KPMG states that “Mexico’s cost competitiveness holds across a wide range of future exchange rates. Even if Mexico’s currency was to appreciate by 20 percent against the US dollar, the resulting cost index of 85.3 would still be more than 14 percent lower than the US benchmark”.

Mexico ranks first across all 17 industries studied from three sectors: (1) manufacturing, (2) corporate and IT services and (3) research and development. But surprisingly, though known by its manufacturing advantages, its competitiveness is even greater in the corporate and IT services, and R&D operations.

Mexico offers a high quality business environment while offering important cost advantages that have boosted foreign direct investment last year and is expected to reach 21 billion USD in 2011. What would be possible if we relate powerfully with Mexico and stop enrolling ourselves and others that there is something wrong here? Expansion and growth. It all starts individually with each and everyone of us.

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