In this analysis, Mexico and India are used to showcase which is the best country to invest in. First, Mexico was the first nation to agree to reduce greenhouse gas emissions by 30% (Sustainable Governance Indicators, n.d.). In addition to this, Mexico boasts strict environmental measures from the US and the Paris Agreement, especially on pollution, because it is the second-biggest emitter of greenhouse gases in South America. On another note, India’s sustainability measures and environmental regulations are less strict than Mexico’s (Vaish & Mehta, 2017). This is because the central government is tasked to protect the environment from pollution and the location of industries. Therefore, with the manufacturing of hard drives and computer memory, some laws might apply, such as E-waste Rules enacted in 2011 and the Batteries Rules enacted in 2001.
Cost and Workforce
The cost of production in Mexico is increasing, considering the labor cost per head is $4.82 and an increase from $4.66 (NAPS, 2016). However, in recent times, there has been an increased level of skilled labor because education levels and training have increased. As a result, Mexico has a labor 58% more than China. Compared to India, the cost of computer accessories production is $2 per hour, indicating less than that of Mexico (Bhalia, 2018). The main advantage of having the cost lower is because of discouraging the use of robots to eliminate human capital. In addition to this, the working population in India is 402 million (Bhalia, 2018). Compared to Mexico, only 62% of the entire population is working. This adds up to 76 million compared to India, which has more and is best for setting the US Company.
Government regulations in Mexico are friendly to US companies because US-based companies can own 100% of their business in Mexico without government regulations (Kaplan, 2011). In addition, Mexican tax laws and legal systems are welcoming for US companies, making manufacturing hard drives and computer memory easier. On the other hand, government regulations in India are strict because the central and state governments aim to protect domestic companies that want to venture into this industry (TMF Group, 2021).
Police handle intellectual property risk in India, but judicial delays introduce challenges for new businesses. Courts in India can take a long while to deal with intellectual property cases; thus, new businesses such as this one might incur financial loss (Moran, 2006). Compared to Mexico, this country embraces America’s intellectual property rights. Companies willing to venture into Mexico enjoy intellectual property rights through different enforcement agencies (Jordaan, 2016). This is a suitable working environment for companies willing to invest here because this can lead to financial loss if not addressed.
Mexico embraces a US approach for businesses coming from this region when it comes to reputation. Mexicans view US businesses as partnerships considering they have a productive economic past (Jordaan, 2016). However, compared to India, the reputation can be negative because outsourcing manufacturing companies to this region is perceived as a source of cheap labor. Therefore, the Indian government values its citizens and domestic companies with a vision to protect them from foreign direct investments.
From the comparison, the US-based company willing to transfer its manufacturing section of hard drives and computer memory should focus on Mexico. This is because the two countries have a good relationship when it comes to business. In addition, Mexico has a suitable environment for workers to improve their skills which can be helpful in computer accessories manufacturing. Although the working population in India is more by far compared to Mexico, US companies can thrive with the current 76 million workers. Looking at India, its policies might be beneficial for this company, but the regulations might incur negative implications in the future, such as the risk of intellectual property. In addition, India’s protection towards foreign businesses is higher, thus not encouraging foreign direct investment.
Bhalia, M. (2018). Average cost of factory labour at less than $2 per hour gives India a big advantage of wage arbitrage: Bain and Co. Worldwide Managing Partner, Manny Maceda. The Economic Times. retrieved from: https://economictimes.indiatimes.com/opinion/interviews/average-cost-of-factory-labour-at-less-than-2-per-hour-gives-india-big-advantage-of-wage-arbitrage-bain-and-co-worldwide-managing-partner-manny-maceda/articleshow/63554253.cms?from=mdr
Jordaan, J. A. (2016). Foreign direct investment, agglomeration and externalities: Empirical evidence from Mexican manufacturing industries. Routledge.
Kaplan, D. S., Piedra, E., & Seira, E. (2011). Entry regulation and business start-ups: Evidence from Mexico. Journal of Public Economics, 95(11-12), 1501-1515.
Moran, T. H. (2006). Harnessing foreign direct investment for development: policies for developed and developing countries. CGD Books.
NAPS. (2016). Why Mexico’s electronics manufacturing is growing. Retrieved from: https://napsintl.com/mexico-manufacturing-news/mexicos-booming-electronics-manufacturing-industry/
Sustainable Governance Indicators. (n.d.). Environmental policies. Retrieved from: https://www.sgi-network.org/2016/Mexico/Environmental_Policies#:~:text=Overall%2C%20Mexico%20was%20one%20of,over%20the%20next%2040%20years.
TMF Group. (2021). Requirements for doing business in India. Retrieved from: https://www.tmf-group.com/en/news-insights/articles/2018/may/requirements-doing-business-india/
Vaish, V. & Mehta, H. (2017). India: Environmental laws in India. Retrieved from: https://www.mondaq.com/india/waste-management/624836/environment-laws-in-india#:~:text=Under%20the%20Environment%20Act%2C%20the,regulating%20the%20location%20of%20industries%3B