One need look no further than BMW’s recent announcement of its new $1 billion production facility in San Luis Potosi for evidence of the strengths of Mexican manufacturing. On announcing the new plant, Harald Krueger, BMW’s global head of production, called the decision to build in Mexico “easy” citing “a driving and thriving economy, a solid network of suppliers, and a highly motivated workforce.”
What makes Mexico so attractive to OEMs like BMW? There are several obvious reasons: open trade that makes the country a terrific manufacturing hub for the western hemisphere, cost-effective labor (in parts of central Mexico like the state of Zacatecas, hourly wages for directs can be as low as $4.50-$7.00), or the industriousness of Mexican workers, found to be more productive per hour than their Chinese counterparts, according to the Boston Consulting Group.
Mexico deserves credit for not only putting into place policies to encourage foreign investment, but also for an ongoing commitment to education and training. A good example of this is taking place in the centrally located state of Querétaro, San Luis Potosi’s neighbor to the south.
Mexican Manufacturing Taking off in Querétaro
Querétaro is one of the smallest states in Mexico, but it’s also ground zero for the country’s aerospace manufacturing cluster, with an equally strong presence in the automotive sector. Over the past decade, Querétaro has experienced exceptional, yet sustainable, growth, with GDP doubling to $24.8 billion, FDI growth of 208% and an inflation rate well below the national average for more than a decade.
These statistics are courtesy of Hugo Mandujano, Director of Investment Promotion for the State of Querétaro who we recently interviewed for our ongoing podcast series on Mexican manufacturing. Hugo has worked for the government (in investment promotion) as well as the private sector (working with manufacturers and other international companies setting up in Mexico; Visit the Entrada website to hear the full interview with Mandujano about the quality of life as well as opportunities in Querétaro.)
Querétaro and the State of Education
“Our goal is to have the highest percentage of educated people in the whole country,” Hugo said in our recent interview. “Previous administrations helped set up goals and milestones in terms of trying to achieve competitiveness within the state. So we have made great efforts to put the proper infrastructure and support for education in place,” he added.
Querétaro’s investment in education is paying off, offering small to midsize manufacturers a large and highly skilled workforce to draw from. Pairing that with the state’s location in the middle of Mexico yields a recipe for success.
“Querétaro is the demographical center of the country,” Hugo noted. “We are very close to a lot of cities, reaching 45 million people within a 350-kilometer radius. This gives manufacturers a surplus of talent to draw from when more qualification is required, especially for capital-intensive operations.”
A Great Place to Work and Live
Santiago de Querétaro is the capital of the state of Querétaro. The list of competitive advantages the city offers is long but, according to Hugo, economic growth is not the sole reason companies choose Querétaro over other worthy locations. For him, the vibrant cultural and quality-of-life factors also appeal to businesses and foreign nationals alike. Indeed, many claim that Querétaro offers the best quality of life in all of Mexico.
“The first impression visitors have of the city of Querétaro is how clean it is compared to other parts of Mexico,” said Hugo. “Querétaro offers a nice balance between modern urban living and a rich culture, which is reflected in the job area as workers are comfortable here and enjoy a higher quality of life.”
With desirability and opportunity, of course, come heightened interest, and Querétaro is not immune to growing costs. Situated within the State of Querétaro, though, are a number of cost-competitive alternate locations, catering to the needs of arriving manufacturers and suppliers. “The growth of the metropolitan area of Querétaro has increased about 42 percent within the past ten years and industry has grown too, with more than 1,300 companies located here today. But there are also other areas of the state that can be very competitive as well,” said Hugo. “San Juan del Río is the second major city in the state, offering the logistical advantage of being located near the NAFTA 57 Highway and the International Airport of Querétaro. It’s here you’ll find the more labor-intensive operations – areas in automotive such as wire harnesses – which find San Juan del Río to be the right fit,” Hugo added.
Bright Outlook
The building blocks in place bode well for Querétaro’s future on the global manufacturing map. In fact, Arkansas State University will soon have a brand new campus, situated in the heart of Santiago de Querétaro. It will be the first fully American university in Mexico, offering the educational and technical training to help meet the demands of the manufacturing industry. But looking forward, Hugo sees further growth hinging on expanding the supply base in the area.
“The important thing for us now is filling in the supply gaps,” said Hugo. “To remain competitive we need better manufacturing suppliers, and more of them. The operations here now, they do not all have the economic support that the larger companies have, so having a stronger supply base here is key to our continued success. That means we have to continue to be proactive in ensuring Querétaro stays an attractive destination for small and midsize suppliers,” added Hugo.
Note: The full interview with Hugo Mandjuano, along with our entire podcast series, can be found at entradagroup.com/resources/podcasts/.
Doug Donahue is Vice President at Entrada Group, a US-based company that provides setup and ongoing support services for manufacturers establishing operations in Mexico.
