Mexico holds great potential as a supplier of offshored services, given its low costs, proximity to the United States, fast-growing pool of university graduates, and promising domestic market. Mexico’s advantages start with low labor costs, which, at around one-quarter of US levels, were the fifth lowest among the 28 low-wage countries we studied. Even after accounting for the relatively high cost of electric power, Mexico is a less expensive offshoring location than low-wage centers in Eastern Europe. Indeed, for a company motivated primarily by cost, Mexico holds the most attractive position among the Latin American countries we studied.