Despite a slight drop from the third quarter of 2018, Mexico’s manufacturing sector still reflected a strong growth trajectory in the first quarter of 2019, posting $14.7 billion GDP (gross domestic product) according to Trading Economics’ econometrics models.1 Their data indicates that this number will increase to $15.4 billion by 2020. This is not surprising for a country that manufactures and exports as many goods as the rest of Latin America combined and holds a record number 12 free trade agreements with 46 countries.
Among the main growth industries in Mexican manufacturing are automotive, aerospace and medical devices, followed closely by food and beverage.
In 2018, Mexico exported vehicles worth $115.5 billion; electrical machinery and equipment worth $81.9 billion; machinery (including computers, phone system devices, optical readers,TV receivers and monitors, etc.) worth $74.5 billion; and optical, technical and medical equipment worth $19 billion according to the website
World’s Top Exports.2 (“Mexico’s Top 10 Exports List”) Additionally, in the first half of 2018 alone, the country attracted foreign direct investments (FDI) of $17.8 billion according to the Mexican Ministry of Economy, an increase of 14 percent over the same time period in 2017. Forty-three percent of these investments were made in the manufacturing sector. These are all indications that Mexico is poised to become a tier 1 manufacturer in various industry segments that produce high-value goods that will enable it to compete on a global scale.
Mexico’s manufacturers, however, are not with- out their challenges, specifically those relating to the deployment of automation, workforce development, and the optimization of their factories’ quality controls and processes. Gaining a better understanding of these challenges and how they are being addressed provides a clear view of what it will take for the country’s manufacturers to compete effectively.
Initiatives Underway by Government, Academia and Industry
Mexico’s governments (national, regional, local) are bolstering manufacturers with key initiatives. The federal government’s drive to liberalize the economy in the late 1980s and early 1990s laid the foundation for today’s export-driven economy which continues to expand into middle- and high-end manufacturing sectors. Economically, this trend is driven by Mexico’s participation in multiple free trade agreements. The most significant of these is the United States-Mexico-Canada Agreement (USMCA), formerly known as the North American Free Trade Agreement (NAFTA).
One early incentive given to foreign manufacturers was the establishment of the Maquiladora program. This program continues to allow factories to operate under special tariffs and rules negotiated between Mexico and the United States. Under this program, manufacturers
can import materials and equipment duty-free for the purpose of assembly and processing of goods to be exported to the United States. The USMCA now allows for these goods to also be sold in Mexico.
The incentives have since expanded to include federal and state government initiatives including tax breaks for companies, real estate concessions and public co-investment options for privately-held companies. Additionally, programs offer foreign manufacturers the opportunity to establish a Maquiladora in a short period of time by taking over all legal, accounting, tax and labor-related functions while the manufacturer focuses on product quality and plant operations.
The modernization of manufacturing facilities that accompanies production and process automation requires a highly-skilled workforce. This requirement is especially visible in Mexico’s automotive, aerospace, medical device, and electronics manufacturing sectors. As Mexico’s manufacturing further evolves, its design, research and development, and engineering capabilities become paramount, all of which are dependent on an educated workforce.
The government, industry and academia already recognize the need for education and are addressing it on several levels. Mexico’s universities have established strong science, technology, engineering and mathematics (STEM) programs, and are graduating large numbers of engineers every year. Federal programs such as Proyecta 100,000, managed by the Secretaría de Educación Pública (SEP), aimed to have 100,000 Mexican students studying in the U.S. by 2018 on full government scholarships. The only requirement was that the students return to Mexico and apply their newly-gained knowledge.
Some Mexican states have been equally active in educating tomorrow’s workforce. The state of Sonora, for example, looking to further grow its aerospace industry, is exploring educational partnerships with U.S. universities.
Mexico recognizes that college is not the only way to receive a valuable technical education. It has, therefore, embraced dual educational and vocational training through the direct cooperation of industry leaders and educational institutions tasked with vocational training. Among these schools are Colegio Nacional de Educación Profesional Técnica (CONALP), Centro de Bachillerato Tecnológico Industrial y de Servicios (CBT) and Centro de Estudios Científicos y Tecnológicos (CECYTE). These programs typically have three semesters of basic training, followed by three semesters focused on a specialization, and one semester of a mandatory company internship.
The Festo Didactic Business Unit focuses on technical training and is currently working with several state government institutions in charge of workforce development. For example, Festo is supporting El Instituto Estatal de Capacitación (IECA) in the State of Guanajuato, Instituto de Capacitación para el Trabajo (ICATEP) in the State of Puebla, Instituto de Capacitación y Educación para el Trabajo (ICET) in the State of Nuevo Leon, and Instituto de Capacitación para el Trabajo (ICAT) in the State of San Luis Potosí by supplying equipment, curricula, and instructors to educate trainers, who in turn, can provide high quality training in their respective industries. Universidad Politécnica de San Luis Potosi is another example of a designated Festo Authorized and Certified Training Center (FACT Center). Through this program, the university facilitates the transfer of important industry knowledge to the surrounding industry including German car manufacturers located in the region.
To stay competitive in the long-run, Mexican manufacturers also will need to embrace Industry 4.0, the fourth industrial revolution, that focuses on interconnectivity, automation, machine learning, and analysis of real-time data.
These and other technologies such as the Internet of Things (IoT) and cyber physical systems, inform and operate smart factories. Solutions must be faster, more flexible and intelligent. There is also a heightened need for manufacturing systems to offer increased availability, be more energy efficient, and be capable of fulfilling just-in-time production requirements.
There are several forthcoming regional initiatives intended to prepare the workforce for a fully-automated and networked factory environment. The State of Nuevo León government started a Program for International Teacher Assessment (PISA) and Qualification for Industry 4.0 (PITAQ4.0). As a participant in this program, Festo provides game-based competence development training for vocational teachers and instructors in the field. The goals of this program are to:
• Increase the knowledge of 300 teachers/trainers in Industry 4.0 through a method based on online games;
• Hold two training camps on Industry 4.0 to train Master Teachers in the Festo Industry 4.0 program;
• Train 60 teachers in skills training camps to become Master Teachers in Industry 4.0;
• Provide 20 technical/vocational schools with expert teachers and equip them with Industry 4.0 laboratory equipment; and
• Provide 3,000 students per year with training to develop skills for Industry 4.0 during their vocational training which can then be applied to industry.
The knowledge will subsequently be applied utilizing virtual and real skills competitions involving gaming elements, learning platforms, and training camps.
The ultimate goal is to educate 1,500 vocational teachers about Industry 4.0 and train 300 teachers in intensive, hands-on skills training camps to become master trainers for Industry 4.0. Further, the objective is to assist as many as 100 technical/vocational schools in gaining skilled Industry 4.0 teachers and related lab equipment. Approximately 10,000 students annually are expected to be trained in Industry 4.0 related skills, which will provide relief for manufacturers and advance these students’ career opportunities.
To assist manufacturers in developing systems that offer greater availability, energy efficiency, and are capable of fulfilling just-in-time production requirements, sophisticated pneumatic and electric automation solutions are being deployed in modern factories. Manufacturers are applying high-quality products such as actuators, servo motors, sensors, valves or robots and other equipment to address manufacturers’ automation needs. Customized systems designed to address manufacturers’ specific production line needs are also being developed to help give Mexico’s manufacturers a competitive edge. They are relying on engineering solutions, supported by high-quality design and engineering services, to address production line challenges in order to increase production, facilitate more competitive pricing, enhance worker safety, and reduce their environmental impact. For example, automation has provided a wide range of solutions to the Mexican car industry.
One of these solutions, Festo’s Robot Installation Plate (RIP), is being used by major auto body plants in Mexico. The RIP controls and monitors the compressed air and cooling water supply for individual welding tongs and has proven to increase efficiency while reducing water waste up to 90 percent. Other components of this automation are focused on supporting worker safety while protecting equipment. Another element of these components is Festo’s soft start quick exhaust valve which can instantly cut off power to critical components when an emergency stop is triggered.
Another product enjoying a high adoption rate in the Mexican automotive industry is an energy efficiency module incorporating smart technology (i.e., service units, sensors and fieldbus). This Industry 4.0 solution automatically monitors and regulates the compressed air supply enabling manufacturers to meet key sustainability goals and reduce operating costs.
Mexico’s young labor force, geography and professional education system are positioning the country well to compete in the global manufacturing market. As Mexican manufacturers continue to ascend in the manufacturing value chain, it will be critical to embrace advanced automation and the continued professional education of the workforce.
Bernd Noak is general manager of Festo Mexico. Festo is a leading global manufacturer of high-quality process control and industrial automation solutions.
1. https://tradingeconomics.com/mexico/gdp-from-manufacturing
2. http://www.worldstopexports.com/mexicos-top-exports
