In northeast Mexico the development of the aerospace industry is recent, but the pace at which it is developing is accelerated. This industry is currently on a boom cycle that represents opportunities for American companies to supply manufacturers established in the area.

      During the last five years there has been a rapid increase in U.S. aerospace companies that have opened plant operations in Mexico, where the aerospace sector had previously been non-existent. Mexico’s government has recognized the advantage that the country represents and the capabilities already developed for the automotive and electrical/electronic sectors that make the aerospace development a natural avenue for Mexican manufacturing. The development of regional clusters that attract foreign investment in aerospace has been a priority for the governments of the states involved.

      The aerospace industry is developing mostly in western Mexico in such states as Baja California and Sonora; central Mexico, specifically the state of Querétaro where Bombardier established a facility and is now attracting suppliers to the area; and northeast Mexico where the states of Nuevo León, Chihuahua and San Luis Potosí have the highest level of activity.

      According to Eduardo Solís, chief of the Office for Investment Promotion in Mexico’s Ministry of the Economy, there are almost 150 aeronautical operations in Mexico that employ 16,500 workers.

      Mexico’s main manufactured products in the aerospace industry include:

      •Engine components

      •Harnesses and cables

      •Landing systems components

      •Plastic injection

      •Heat exchangers

      •Precision machining

      •Electronic components

      •Audio and video systems

      •Fuselage insulation

      Most of the supplies imported by the aerospace manufacturers in Mexico come from the United States. Over the last four years, statistics show an impressive growth in exports to Mexico for the aerospace sector.

      The trend will continue as more aerospace companies establish manufacturing facilities in Mexican territory. This becomes evident in trade statistics of aircraft, spacecraft and aircraft parts into Mexico.

      Growth of the aerospace sector in Mexico’s northeast region has been registered among three main types of companies.

      The first group of companies is made up of suppliers that were encouraged to come to Mexico by their main clients. New arrivals can take advantage of Mexico’s supplier Migration Program that provides tax incentives.

      A second group of companies come to Mexico looking for small national companies that can act as their potential suppliers.

      The third kind of aerospace strategy in northeastern Mexico is to form an alliance between foreign and Mexican companies. FRISA-Wyman Gordon is an example of this model. FRISA is a Mexican company that had been manufacturing rings and blanks to Mexican machine shops since 1971. In 2003, FRISA established FRISA Aerospace as a joint venture with Wyman Gordon. The company now manufactures hi-temperature and corrosion resistant rolled ring forgings for the aerospace industry.

      Aeronautics firms are finding their favorite landing sites in Mexico. The economic development offices of the states of Nuevo León and Chihuahua eagerly promote their regions to aeronautics companies as a part of aerospace clusters being developed. Although in the last two years this promotion effort has paid off with more companies establishing in northeastern Mexico, central and western states remain the fastest developing clusters.

      As an example, Baja California has more than 40 aeronautics manufacturing and engineering operations. Tijuana and Mexicali are home to operations that include Gulfstream, Hutchinson, and Rockwell Collins. Honeywell System Integration Lab and Test Annex is the most recent addition to the group.

      Northeast states in Mexico are keeping with the pace mostly drawing from their previous experience in the automotive, electronics and medical industries.

      Chihuahua pioneered the aeronautics industry in northeastern Mexico with Safran’s Labinal. This is currently the largest aeronautical employer in Mexico. It includes a Research and Development center that houses 100 engineers. Honeywell also has presence in Chihuahua, with an 800-employee plant that will build turbine parts.

      Following this trend, a new French aerospace company has announced a $20 million investment in the state of Chihuahua.

      In Monterrey, government authorities and the education sector are teaming to develop an aerospace cluster. For this purpose, the state government has implemented a new law for investment and state promotion that aims at attracting new companies from the aerospace sector by providing tax incentives. The incentives for aerospace companies to invest in Mexico include: income tax credit on projects involving Research & Development, immediate capital investment deduction, reduced income tax and trade facilitation programs for export oriented companies, and payroll tax credits.

      The public and private sectors in northeastern Mexico are working closely with universities, technological colleges and other higher education institutes to provide a specialized workforce for the aerospace industry. For example, starting in August 2007, the University of Nuevo León began to offer an Aeronautics Engineering program. Local universities emphasize their wish to build up a ready supply of human capital in the aerospace industry and their commitment to undertake education, research and consulting services related to design, manufacturing technology, and engineering services with a strong focus on innovation.

      The educational collaboration in this effort is now bi-national. An example of this is the cooperation between the Monterrey Technological Institute (ITESM) and the University of Arizona to offer a Masters Degree in International Logistics in response to the increasing demand for components made in Mexico for the aerospace industry.

      ITESM has also opened a major project related to the aerospace sector called “CAP Aeroespacial.” This is an organization created to aid small and medium sized providers in Nuevo León, and encourages them to enter the aerospace market. It offers discounted laboratory experiments in its facility, and also offers continuous education and certificates of training through the collaboration with ITESM. This project has the full support of Nuevo León and the Economy Secretariat.

      Monterrey’s industrial base has evolved from automotive to aeronautics activities with important domestic companies such as FRISA Wyman-Gordon. The firm manufactures special steel rings for most global turbine manufacturers. The arrival of MD Helicopters to the region has also spurred growth and the expectation that the company will jump from fuselage assembly to full finished product models.

Prospective buyers

      U.S. suppliers to the aerospace industry can take advantage of this development in Mexico to supply parts, products and services that haven’t yet been developed locally.

      For example, there is opportunity for providers of vacuum heat treatment and chemical processing for the aerospace industry. There is low availability of aerospace grade materials for structural welding. Material distribution hubs will have to be developed in the near future. Opportunities also exist for sheet metal fabricators of super alloys, major sub-assembly companies, and structure manufacturers, tooling companies and casting companies.

      In the area of special/chemical processes and non-destructive testing, established aerospace companies want to see more one-stop shops that cut, roll, bend, weld, heat-treat and finish under one roof. Manufacturers will also need the following: machining, chemfilm, heat treatment equipment (vacuum furnaces, atmosphere and quench) coatings, joining (welding and brazing) NDT (fluorescent particle inspection, X-Ray and ultrasonic) and plating (chrome, nickel, silver, nitride).

      There are also opportunities in Mexico’s MRO market, which is expected to increase significantly in the medium to long term. For example, ITR in Querétaro is currently the only fully operating manufacturing, overhaul and repair facility in Mexico. The company reportedly offers integrated solutions for the maintenance and repair of aircraft engines and industrial turbines and for the design, development, manufacture and supply of components.

Market entry

      Aerospace manufacturers in northeastern Mexico have international procurement offices in Mexico. These units are responsible for developing suppliers in Latin America. The trend in Mexico’s manufacturing industry is to develop clusters with suppliers establishing themselves close to the prime manufacturers.

      At present, the local supply base hasn’t fully developed since the industry is in its beginning stages. This condition provides excellent opportunities for U.S. companies to sell to aerospace manufacturers in Mexico.

      Mexico’s aerospace industry growth has been slowed by two main factors.

      In order to develop the aerospace industry, Mexico and the United States will need to sign a Bilateral Aviation Safety Agreement (BASA). According to the U.S. Department of Transportation, BASA “promotes aviation safety and environmental quality, enhances cooperation and increases efficiency in matters related to civil aviation. The agreements are based on recognition of comparability of the U.S. and foreign systems for approval and surveillance of aviation industry.”

      In this way, FAA increases aviation safety globally by building a network of competent civil aviation authorities and concluding agreements with additional countries and/or regional authorities.

      Lacking this agreement hinders the development of this sector since all parts manufactured in Mexico have to be inspected by the FAA to be certified and then sent to the final client, increasing the time of delivery and cost. However, significant progress is being reported in this regard. According to Mexico’s Ministry of Economy, Mexico’s Civil Aviation Agency (DGAC) is in the final stages of BASA formalization and one should expect the first official company certifications in 2008.

      Another obstacle for the aerospace industry development in Mexico is the lack of an aerospace association. The industry would benefit from having strong leadership and a vision to plan for the future of the sector in the country. Mexico’s Ministry of the Economy envisions the creation of a National Association of Aeronautics Manufacturing, Engineering and Maintenance in the near future.

By the U.S. Commercial Service

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