Without a doubt, nearshoring and industrial policy are key drivers to boost Mexico's competitiveness. A couple of weeks ago, I had the opportunity to participate in a recent event organized by the Mexican Institute for Competitiveness (IMCO), were the need for developing an industrial policy that leverages the opportunities presented by nearshoring was discussed, especially as the reorganization of global supply chains takes center stage.
Regionalization
The concept of nearshoring, understood as the regionalization of supply chains, is a global trend, and the idea of relying less on distant markets, like China, and focusing on strengthening regional productive capacity underpins Mexico's recent growth. Thanks to its geographical proximity and close economic ties with the United States, Mexico is in a privileged position to attract investments.
However, it is important to have a clear vision of what kind of investments can be captured. Although there are sectors where small and medium-sized enterprises (SMEs) have real growth potential within value chains, there are limitations in high-tech areas, such as advanced electronic components production, which still largely depend on China.
Despite these challenges, Mexico has proven to be a strategic partner in the agribusiness sector, where it is not only competitive but also plays a crucial role in the United States' food security. This type of complementarity strengthens the argument that both countries are part of the same economic region, which needs to be recognized and treated as such.
SMEs and Their Integration into Supply Chains
A recurring theme at the IMCO event was the role that SMEs play in the nearshoring process. Although large companies usually reap most of the benefits from trade policies, successful cases of small companies managing to integrate into the supply chains of multinationals were also highlighted.
The growth of SMEs is not only possible but necessary for Mexico’s economic development. However, it is essential that these companies have the right conditions to compete, as two of the most pressing challenges are simplifying the regulatory environment and improving access to financing.
As mentioned during the event, access to capital remains one of the greatest obstacles for small businesses to acquire advanced technology and compete on equal footing with global players.
The Role of Industrial Policy
One of the key takeaways from the event was the need for a coherent industrial policy to promote strategic sectors. Mexico must develop its own supply chain of parts and components, not just services, as the goal should be to create a robust advanced manufacturing ecosystem that can supply essential inputs to the large companies operating in the country.
Adopting an industrial policy focused on electronics is crucial, as this is a sector where significant dependencies on Asia still exist. Therefore, encouraging investment in semiconductors and key technologies should be a priority. It was even suggested that Mexico should offer long-term tax exemptions to attract investments in critical technological areas.
Additionally, infrastructure plays a vital role in industrial development. Without adequate access to basic resources like water, electricity, and efficient logistics, the country’s competitiveness could be compromised. The creation of well-equipped and connected industrial parks must be an integral part of any industrial policy strategy.
Towards a Modern Industrial Policy
Nearshoring is not just a temporary trend but a structural opportunity for Mexico to redefine its industrial policy. The economic relationship with the United States is a strategic asset that must be maximized, especially in sectors where Mexico has already proven to be a reliable partner, such as agribusiness and manufacturing.
However, to fully harness the potential of nearshoring, the country must develop a more ambitious industrial policy that promotes technological innovation and the creation of modern infrastructure.
Nearshoring is a reality, and industrial policy must be the vehicle that allows Mexico to capitalize on this opportunity and establish itself as a key player in the regional and global economy.
