UPDATE: KPMG Study Ranks Mexico First In Low-Business Costs

UPDATE: KPMG Study Ranks Mexico First In Low-Business Costs


Mexico claimed the title as the most cost-effective of 10 countries studied in which to do business, according to a new report by audit and tax advisory firm KPMG.

The U.S. leapfrogged its European competitors for third place thanks to the declining dollar.

Of the countries in North America, Europe and Asia-Pacific ranked in the report, costs for doing business in Mexico were 20.5% below those in the U.S., which was used as the baseline. Mexico wasn’t studied last year, while Singapore was – it ranked first in the biennial study’s 2006 rankings.

At the low end was Germany, whose costs were 16.8% higher than in the U.S. Canada was second and Australia was fourth, with both countries’ costs nearly equal to the U.S. Rounding out the list was France, the United Kingdom, the Netherlands, Italy and Japan.

The report said the the Mexican cities of Puebla, Guadalajara and Monterrey offered the lowest business costs. These cities rank ahead of a group of Southern U.S. cities -Atlanta, Tampa and Dallas-Fort Worth. At the other end of the spectrum, San Jose and New York continued to represent the most expensive North American cities in which to do business.

The study found that the Netherlands, Italy, Germany and the U.K. had seen the greatest increases in costs relative to the U.S., though the U.K. had benefited somewhat at the expense of continental Europe thanks to the strong appreciation of the euro relative to the pound.

Mark MacDonald, KPMG’s global director for competitive alternatives, said that “within Europe there is strong evidence of intra-regional competitiveness. The opening of labor markets, more competitive tax rates, and investment in infrastructure implies that while Europe has shifted its position relative to the U.S., there is still strong competition among European countries.”

In Europe, the report said, costs in Paris were comparable to those in some large U.S. cities, while London was the most expensive city examined, “by a wide margin.”

Japan remained one of the most expensive countries in which to do business, but it has gained ground against other countries over the longer term due to low inflation rates and lower volatility of the yen.

The study measured 27 significant cost components that are most likely to vary by location – including labor, taxes, real estate and utilities – as they are applied to 17 business operations over a 10-year planning horizon. The study also compared data on a variety of non-cost competitiveness factors. The six-month research program covered 136 cities.

New to the 2008 report is analysis of a wide variety of non-cost factors that influence the attractiveness of business and site locations. Site selection factors compared in the report include macroeconomic indicators, labor markets and business and environmental regulation.

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