The strategic position of Mexico and the increase in tension between China and the United States, due to geopolitical and economic problems, have caused various companies to have difficulties in shipping their products from abroad. These key factors have positioned Mexico as an attractive country for foreign investment and the establishment of companies. Find out what nearshoring is and how it is benefiting Mexico.
What is nearshoring?
Nearshoring is the relocation of manufacturing to a nearby country or the relocation of certain manufacturing processes to a more immediate location.
As a result, the company can benefit from various factors such as local business hours, cultural nuances, experienced workforce, language proficiency, favorable economic conditions, and political stability of the respective location.
Thanks to nearshoring, it is possible to accelerate delivery times and achieve greater peace of mind due to the proximity between the countries involved. In the aftermath of the pandemic, there has been a heightened demand for shorter and more resilient production chains that can remain operational despite adversities.
Why do countries choose Mexico as a nearshoring destination?
Different characteristics make Mexico an attractive destination for nearshoring:
Proximity to the United States: Mexico shares a land border with the United States, and the two countries share time zones, which allows companies to coordinate operations with both territories and improve production and logistics chains with faster and more agile communication.
Thanks to the free trade agreements between Mexico, the United States, and Canada, tariffs can be reduced. It is not only one of the beneficial commercial conditions, but it also reduces incentives for outsourcing, provides strong labor protections, and improves processes between these countries.
Therefore, many manufacturers are seeking a more regionalized approach due to the USMCA. According to data published in El Economista, almost 80% of the industrial production carried out in Mexico is destined to reach the United States.
Trade conflicts between the United States and China: Mexico began to substitute Chinese production due to the trade conflict between these two countries. This was reflected in the taxes companies had to pay to manufacture in China and then enter the US market.
Shorter supply chain: The pandemic was another consequence. During this crisis, supply chains were disrupted, which generated an increase in the cost of maritime transportation and waiting time to receive products from China. This has generated a lower dependence on the maritime industry that began with delays in its routes, so a location like Mexico was sought where companies do not have to worry about travel or border restrictions. A shorter geographic distance means products arrive much faster.
Labor costs: In recent years, Mexico has offered lower labor costs than China, as wages in the Asian country have doubled in recent years.
Skilled workforce: Companies manufacturing in the United States have faced a shortage of workers, while in Mexico, there is an abundant workforce with highly skilled workers trained in various sectors, which allows companies to access better quality production.
Growth in Mexico due to nearshoring
Mexico’s nearshoring industry has seen a significant increase in interest from foreign companies seeking to relocate from Asia due to the ongoing trade conflict between the United States and China. According to Raquel Buenrostro Sánchez, the head of the Mexican Ministry of Economy, over 400 American companies have expressed interest in establishing themselves in Mexico.
At the beginning of 2023, Héctor Tijerina, executive director of Invest Monterrey, announced that approximately 50 investments throughout Mexico totaling $13.46 billion have been planned. This surge in investments indicates a growing trend towards nearshoring, with Claudia Esteves, General Director of the Mexican Association of Private Industrial Parks (AMPIP), noting that there is an increasing interest from foreign companies, particularly from Asia.
To meet the needs of these foreign companies, Mexico has developed quality infrastructure and industrial zones with all necessary construction and structure services. As nearshoring continues to grow in 2023, VYNMSA, the main industrial real estate developer in Mexico with 29 years of experience, offers comprehensive solutions for companies looking to relocate their production to Mexico. Their industrial real estate offerings include 20 industrial buildings and 36 strategic industrial locations for the growth of various industries.
VYNMSA is prepared to offer comprehensive solutions to companies seeking to relocate their production to Mexico. We have become the main industrial real estate developers in Mexico, we have 29 years of experience in the market building industrial spaces for the successful development of companies. Our industrial real estate offers 20 industrial buildings and 36 strategic industrial locations for the growth of various industries. Contact us and start your operations in Mexico with the best business partner!
