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Companies from the United States have built many factories in Mexico near the border. Why have so many U.S. factories moved to Mexico? The mild temperatures speed production. Mexico is a source of cheaper labor. There is no room to build in the United States. The United States has a shortage of skilled laborers.
The main reason for moving so many factories is a combination of abundant cheap labor and lower taxes on capital. Mexico is not as expensive, over all, to live in as compared to the U.S.. Mexico also has some differences in their tax code regarding taxes on capital and investment which further encourage factory migration.
Mexican labor is inexpensive and because of NAFTA, taxes and customs fees are almost nonexistent. The benefit for the profitability of foreign-owned businesses is clear, and most of these plants are found within a short drive of the U.S.-Mexico border
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