Nearshoring: A New Opportunity for Mexico

As a result of the crisis generated by the COVID-19 pandemic, the flow of supply chains from Asia, especially from China, was seriously affected. Several countries in the Americas, especially the United States, have been hit hard. The vulnerability of this phenomenon, known as offshoring, was highlighted, especially when there is exclusivity on suppliers and they are located in the same country.

Given this reality, the scenario would seem to be ideal for manufacturers from different parts of the world to move their production to our country because of its proximity to the United States. This strategy, known as nearshoring, seeks to optimize supply chains and improve shipping costs, which have risen sharply due to increases in fuel prices related to the war in Ukraine.

In the words of Mauricio Claver-Carone, president of the Inter-American Development Bank, “This should be the golden age of investment in Mexico.” According to IDB estimates, Mexico could increase its exports with nearshoring by more than $35 billion a year.

Despite government policies that inhibit and scare off investment, Mexico has great potential to take advantage of nearshoring because of its low labor costs; the United States-Mexico-Canada Agreement; and fast-supply chains, especially in the automotive industry. The increasingly conflicted relationship between the huge Asian country and our powerful neighbor to the north offers a more than propitious moment to side with China over the U.S.

We know that more than 45% of import suppliers originate in the country of the Stars and Stripes; 30% come from China, Japan, Germany and South Korea, which today, due to geopolitical conditions, could be optimized, especially if we think about the opportunities offered by the trade agreement we have with the United States and Canada.

In order for our country to take advantage of the opportunity offered by this situation, it is necessary to create an environment of certainty for companies that are moving their production plants from Russia and China. If Mexico takes advantage of this opportunity, it could improve its current level of economic growth and thus achieve better levels of development.