Nearshoring to Mexico: A New Reality

“Nearshoring to Mexico is a reality today, that generates employment, economic development, social mobility and well-being for Mexicans. The degree of success will be determined by our ability to generate with great agility the conditions that allow us to take advantage of it to its full potential.”

 – Emilio Cadena, CEO of Prodensa

In recent years, the term “nearshoring” has gained great momentum. More and more companies have started talking about the need to implement a nearshoring strategy for their companies. There are several key factors that have accelerated the need for companies to go nearshore. Amongst the most notorious we find the supply chain during the COVID-19 pandemic, consumer decision-making and speed to market, operations control, the China-US conflict, and talent availability in the US.

Nearshoring is the relocation of operations to a nearby country instead of a distant one. It involves taking advantage of the know-how of the labor force in neighboring economies, knowledge of the production culture, and years of experience. Nearshoring is often chosen by companies as an alternative to offshoring, which involves outsourcing to a country located far away from the company’s home country. In this way, delivery times are accelerated and there is greater certainty about the economic reality of neighboring countries.

In this context, nearshoring to Mexico has become a popular destination. Today we find a totally favorable scenario for companies that adopt nearshoring as a relocation strategy. Mexico is popular for several reasons:

• Geographic proximity to the United States, the world´s largest consumer economy, which means that there is minimal time zone difference between the two countries, which facilitates communication and collaboration.
• Low labor costs which make it an attractive destination for companies looking to reduce costs.
• The trade agreement between Mexico, the United States, and Canada (USMCA).
• Skilled workforce which can help ensure high-quality work and strong business outcomes.
• The industrial infrastructure has developed in recent years.
• Cultural similarity which can help ease communication and collaboration between companies in the two countries.

Consequently, nearshoring to Mexico has become the natural destination to take advantage of the transfer of production chains from Asia to America. Nearshoring generated about $30 billion in foreign direct investment in Mexico by the end of 2022. Further on, according to Datamétrica-Aporta, in January 2023, 23 new nearshoring investment announcements were reported in Mexico, totaling approximately US$2.5 billion (GBM, 2023).

Although the northern states of Mexico have been the first witnesses of nearshoring, the economic impact is beginning to be seen in different states of the Bajío region and it is expected that investment will soon reach new regions in the center and south of the country. Moreover, to become more competitive the Mexican government is looking to implement various policies and programs to promote and support the country’s industry.

Overall, nearshoring to Mexico provides an opportunity for companies to reduce costs, accelerate delivery times, and achieve strong business outcomes. If you are a company looking to Nearshore, Grupo Prodensa can help you find the best option by offering comprehensive industrial park development services, real estate consulting, support to companies in their investment projects in Mexico, and advisory services to establish themselves in the country and comply with regulations and legal requirements. The company has more than 30 years of experience in the market and has worked with a wide range of national and international clients.

Bibliography

Prodensa Intelligence

GBM. (2023) ¿Cómo va el nearshoring en México?  Retrieved from:  https://gbm.com/academy/como-va-el-nearshoring-en-mexico/

N.D. (2022) Nearshoring: Discover the top advantages, Connect. 

Lopez Tamayo, D. (2022) Nearshoring, oportunidad histórica para México en comercio exterior, BBVA. Retrieved from: https://www.bbva.com/es/mx/nearshoring-oportunidad-historica-para-mexico-en-comercio-exterior/

García Sepúlveda, S. (2023) Qué es offshoring, nearshoring y reshoring – y cómo se beneficia un estado en México, World Economic Forum. Retrieved from: https://es.weforum.org/agenda/2023/01/explicado-que-es-offshoring-nearshoring-y-reshoring-y-como-se-beneficia-un-estado-en-mexico/

Mahoney, N. (2022, December 27). US-Mexico trade growth to remain steady in 2023, bolstered by nearshoring. FreightWaves. https://www.freightwaves.com/news/us-mexico-trade-growth-to-remain-steady-in-2023-bolstered-by-nearshoring

Noguez, R. (2023, January 24). Nearshoring ha traído a México más de 19,000 mdd de inversiones en el último año. Forbes México. https://www.forbes.com.mx/nearshoring-trae-a-mexico-mas-de-19000-mdd-de-inversiones-en-el-ultimo-ano/