Overview of Utility Costs in Mexico

In this episode, Ricardo Rascon and David McQueen build on their previous discussions about real estate and labor costs for manufacturers who expand to Mexico. In this conversation, Ricardo and David focus on other costs associated with manufacturing in Mexico: utilities, transportation, and more! Starting with utilities costs, David clarifies that, for most companies, the utilities costs to be considered are electrical power, water, and possibly natural gas. Companies also need to plan for the costs of communications and services, which function a lot like utilities. Ricardo and David talk in the most depth about electrical service in Mexico, which is no different from that in the US in terms of voltage and frequency. The power quality is such that only the most sensitive applications will require power conditioning, up time is pretty good, outages are infrequent, and typical rates (through the main, state-run supplier, CFE) are comparable to or lower than rates in the US. To establish electrical power, a company must make sure to have adequate supply to its building, establish its peak demand, and evaluate transformer capacity. To connect machinery and equipment to its newly established power supply, the company will have to prepare a wiring plan for engineer approval before proceeding with connection to the power source. David explains the fees associated with the whole process of getting electrical power set up, including the bond CFE will ask for in order to get service started. Moving forward, David addresses water, which is not very expensive in Mexico and follows similar discharge regulations as in the US, but can be a problem in terms of volume and availability and is generally not fit for drinking. Some companies may find themselves needing natural gas, and in this case they will have to deal with the distribution issues and possible connection fees, though cost is generally competitive. Regarding communications and systems, David notes that infrastructure in Mexico’s manufacturing regions is similar to that of the US. There is a whole range of available solutions, and some providers are the same as in the US. Finally, David explains some other costs to consider before expanding into Mexico, such as employee transportation. Companies will also have to plan for the costs of goods and services, personal safety equipment, and the like, factoring in the relatively low cost of services and high cost of distribution. Startup costs must also be weighed, but that’s a topic for the next episode! Thank you for joining us on Manufacturing in Mexico!