Latin America vs. Factory Asia - what are the benefits?
For many years, China, India, and other South Asian countries have been the default destination for US companies to manufacture their products. But now, many corporations are considering leaving Asia and diversifying their supply chain by transferring their production factories to other regions like Latin America.
In fact, this trend has already started. According to data from the 2019 U.S. Import and Export Merchandise Trade Statistics, the United States imported more from Latin America last year than from China. The same is true for the year before. Latin America is revolutionizing the market with a superior supply solution.
From faster turnaround times, high-quality products, and lower shipping costs, Latin American suppliers offer buyers a great alternative to the pains of sourcing from Factory Asia.
Manufacturing rates in many Latin American countries are as good as Asia, but with higher standards. In addition, local regulations in the region allow much more stable wages, making it easier for companies to anticipate manufacturing costs and have better long-term financial planning. By contrast, labor costs in Factory Asia have been increasing in recent years, often growing by 10-15 percent annually.
When comparing minimum wages in Asia vs. Latin America current average salaries in China range from about USD $140 to USD $346 per month, changing from one province to another. Meanwhile, South American minimum wages vary across nations and range from about USD $115 to USD $353.
However in the region, the labor cost doesn't translate into poor working conditions, since the wage is only one part of total labor compensation. This factor also makes it possible for Latin America to have higher labor productivity associated with a stable average wage.
Another advantage for preferring trading in the Americas also allows US companies to take advantage of the Free Trade Agreements that the country has with 11 nations in Latin America. Under this deal, the products coming from Colombia, Mexico, Chile, Peru, and Panama can enter the United States tax-free.
Having business partners and suppliers in a neighboring region have a lot of benefits for turnaround times and communications, making logistics easier.
The average container ocean lead time from China can take 40 days, but when sourcing from Latin American, this period can be reduced to 10 to 15 days. With this, proximity can make the lead times of your products reduced to less than half from Factory Asia.
Also, the connection with the supplier can be smoother when operating in the same time zone. From meetings, emails, contracts, to production changes, the communication will be faster and the relationship with the manufacturing process will be more solid.
But it isn’t only about the time, the infrastructure and accessibility is also an incentive to source from Latin America. When sourcing from Asia, prolonged transit times and rough conditions of the transportation route can affect the product quality and conditions at the destination. However, the LatAm region possesses port access through the Atlantic and Pacific oceans making the delivery process faster and safer.
Latin American suppliers can provide products that meet high environmental standards and possess superior quality.
The regional regulations and the adjustments in production conditions driven by the trade agreements have provided incentives for factories to improve their overall production conditions. Thanks to those agreements to maintain ethical working conditions, Latin American factories provide more reliable sourcing.
Most of the local manufacturers also work with social impact and corporate responsibility projects, providing responsible manufacturing all throughout the supply chain.
By leveraging connections with South American manufacturers, Exporta has secured a network of 4000+ suppliers that provide a superior sourcing experience compared to the Factory Asia. Our manufacturing network already supplies dozens of large brands in the United States with reliable and higher quality products.