Mexico expecting US$40bn in nearshoring investments this year

Mexico is expecting US$40bn in nearshoring investments this year, up from a previously projected US$30bn.

"In 2023, more than 60 new investments have been announced … and it is estimated that the demand for nearshoring in Mexico represents 50% of total demand" in Latin America, finance undersecretary Gabriel Yorio wrote in a column for El Economista.

In June, the government expected more investments to come and add to the potential. Finance minister Rogelio Ramírez de la O said 20 companies had announced nearshoring investments of around US$13bn, of which 54% related to the car industry. The highlights are plans by Tesla and BMW to expand operations and produce electric cars in the country.

Yorio wrote that “in most specialized analyses, it is repeatedly estimated that Mexico will capture half of the relocation flow that may reach Latin America.”

Not just geography

The primary reason for Mexico’s attractiveness is its proximity to the US. “We have a border with the United States, but it is a border with high economic integration, and more importantly we share similar business cultures, as well as time zones, which facilitate decision-making and operations,” Yorio wrote.

Second is stability reflected in “qualified talent, a robust financial system and solid technological development, [which] boosted the attractiveness of the country for companies.”

Free trade agreements are also key. "Currently, our country is one of the most open to international trade, but above all, we are allies of the United States and Canada in one of the largest economic blocs," according to Yorio.

With these aspects, "Mexico is bestshoring for companies that want to maintain access to markets in Asia, North America and Europe."

Mexico’s share in US imports reached 15.2% in April, surpassing China’s. Last year, US-Mexico trade reached a record US$780bn, according to official data.

Given this potential demand, “it makes much more sense to invest in trade facilitation, such as investment in infrastructure for ports, airports, trains, border crossings, energy, water, telecommunications (5G spectrum in closed and secure networks) and industrial parks,” Yorio wrote.

He mentioned the interoceanic corridor as a key logistics center under development to connect eastern and western markets.

The economy ministry is promoting the megaproject, which represents the country's first interoceanic link between the Pacific coast port of Salina Cruz and the Gulf coast port of Coatzacoalcos.

"The relocation of companies is not a phenomenon that will only last a couple of years, it is very likely that there will be waves that will permeate the economy," according to Yorio. “The relocation of companies begins with multinational companies, but will continue in other segments and sectors, such as the supply chain, associated services, housing, etc.”