With aviation export growth averaging 15% per year between 2008 and 2018, Mexico is steadily emerging as an important regional and international player in the aerospace industry. Demand for commercial aircraft is expected to double globally by 2035, according to research from aircraft giant Boeing, and the country is well situated to leverage its position to increase domestic and foreign investment in the industry.
Growing demand for commercial, military and space aircraft is set to provide new opportunities for Mexico’s skilled, cost-competitive workforce. International firms and investors are playing a central role in the development of the sector, with a strong increase in foreign-owned aerospace manufacturers opening production facilities, particularly in the states of Baja California, Sonora and Chihuahua. Furthermore, new opportunities are emerging thanks to the development of the country’s nascent space industry.
Mexico is still a relative newcomer to the aerospace sector. However, decades of development as a major international centre of automobile production have had a spill-over effect. Its proximity to, and close trade ties with, the US and Canada, coupled with its highly trained, specialised workforce and competitive labour costs, have also supported rapid growth in the sector. Mexico is now home to more than 330 aerospace companies, which operate in 18 states and employ over 40,000 people, according to data from manufacturing consultancy and investment group El Grande. The sector’s exports expanded by around 179.4% over the decade to 2018, to reach $8.6bn, making the country the 12th-largest exporter and 15th-largest producer worldwide, according to the Ministry of Economy. Aerospace exports are expected to total $9.7bn in 2019.
“Mexico is competitive on a global level in the aerospace sector,” Luis Lizcano, managing director at the Mexican Aerospace Federation, told OBG. “Mexican companies are incorporating themselves into global supply chains and the country can benefit a lot from the expansion of the sector, but we have to put the work in.” Speaking at the Mexico Aerospace Summit in August 2019, Felipe Sandoval, president of the Mexican Aerospace Industry Federation (Federación Mexicana de la Industria Aeroespacial, FEMIA), stated that he expected the country to build on growing international demand to become one of the largest aerospace players in the medium term.
Mexico is the world’s third-largest recipient of foreign direct investment (FDI) in the aerospace industry, with the sector accumulating more than $2.7bn in FDI in 2018, according to the Ministry of Economy. International firms have steadily increased their presence, inaugurating major new production facilities. In February 2018 Safran, a France-based company, opened a $100m facility in Querétaro state. During the same year German manufacturer Aerotech Peissenberg announced a $267m joint venture with Mexico’s Grupo Punto Alto to build turbine parts at a new facility in Hermosillo, Sonora.
This was followed in 2018 by the announcement that Airbus planned to build a $12.5m maintenance, repair and operations centre in Querétaro. Most recently, in June 2019, ITP Aero, a subsidiary of Rolls-Royce, opened a new aerospace component manufacturing facility in the same state. The same month Boeing acquired EnCore, a company with operations that span the US border in both San Diego and Tijuana. Tomás Sibaja, the chairman of the Baja California Aerospace Cluster, told local media, “We have accumulated a wealth of experience and knowledge, and now we need to move into developing more complicated projects with more advanced opportunities. We have all the ingredients to innovate and create.”
Another emerging centre of aerospace production is the state of Chihuahua. As of 2019 the state was home to 40 aerospace production facilities, with exports from the sector generating more than $1.5bn per year, according to figures from the Chihuahua Aeronautical Cluster. Furthermore, the state’s aerospace industry attracted more than $331m in FDI between 2013 and 2018. Firms currently operating in Chihuahua include Bell Helicopter, Honeywell and GKN Aerospace – which produces parts for Gulfstream Aerospace, Cessna, Airbus and Boeing.
An important characteristic of the aerospace sector is its ability to add significant value to exports, positioning the country’s industrial sector higher up in global value chains. Indeed, the sector boasts 18% added value, more than any other in the country, Sergio Barrera, president of FEMIA, told local media in August 2019. Some of the world’s most advanced technology is being used to produce highly innovative products and achieve these returns.
While aerospace has experienced significant growth and investment over recent years, the industry still struggles to expand the presence of local players. As of late 2019 just 5% of companies in the supply chain were Mexican, according to Barrera. The aim is to boost this to 50-60%, which is the corresponding figure in the country’s automotive industry. Thus the regular, reliable growth of specialised small and medium-sized enterprises (SMEs) is of increasing long-term importance for the sector.
However, many SMEs have to contend with finance issues, which is especially difficult in an industry requiring high levels of technological development and technical expertise. In certain states significant progress has been made in terms of participation of SMEs. For example, SMEs attached to the AeroClúster Querétaro recorded a 44% increase in turnover in 2018, and they now represent 52% of the cluster’s companies. While there are some positive signs for SMEs and the industry more broadly, stakeholders have called for an all-encompassing, nationwide strategy to take the sector forward.
Over the past few years state and federal governments have worked to expand Mexico’s space industry capabilities, focusing efforts on developing the capacity to produce scientific satellites and introduce more technologically advanced manufacturing processes. As part of these efforts, state agencies have hosted a number of conferences to bring together experts in the field and disseminate information to manufacturers and investors. For example, in 2016 the state of Jalisco – a major industrial centre – hosted the 67th International Astronautical Congress, attracting over 3000 attendees from 80 countries in the state capital, Guadalajara.
This was followed in November 2017 by the successful launch of NanoConect1, a cargo-carrying nano satellite. The project was undertaken by the Mexican Space Agency, while the design of the nano satellite was developed by the Space Instrumentation Laboratory and the Institute of Nuclear Sciences at the National Autonomous University of Mexico. It was launched from the facilities of the Council of Science, Technology and Innovation, located in Hidalgo.
Mexico’s state-level governments have played key roles in the development of over a dozen specialised aerospace clusters. These clusters are set to continue attracting investment, buoyed by Mexico’s close proximity to customers and production partners in the US and Canada, high-quality human resources, and demonstrated track record of low-cost, highly technical production.
However, unlike the automotive industry, Mexico’s aerospace sector is not affected by any major new changes to proposed updates to the North American Free Trade Agreement. By 2020 Mexico could achieve aerospace-related exports of $12bn and become the world’s 10th-most important aerospace producer. Furthermore, aerospace industry group FEMIA estimates that the number of people working in the sector could grow from 55,000 to 60,000 by the end of 2020. While aerospace still accounted for a relatively small portion of Mexico’s overall economic output in 2019, if current trends continue, the country could consolidate its position as one of the world’s most important destinations for aerospace industry development.
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