By Francisco Peyret
The pandemic and the war between Russia and Ukraine accelerated and exposed the need for countries’ economies to handle global energy production and distribution differently. Once it became clear that alternative energy is not yet ready to replace gas and oil, the most-developed economies find themselves in need of lowering their production and distribution costs in any way they can.
During the last three decades, the United States and Europe chose China and Asian countries to locate their companies, given the low costs of production and, above all, labor. But currently these variables have ceased to be a factor. The distances and economic development of these countries, added to the conflict to establish oil prices, are causing global companies to seek new schemes to achieve comparative economies.
In this context, Mexico is strategically located. Its proximity to the United States and Canada is giving Mexico a new opportunity in the economic world for the coming years. Líder Empresarial magazine explains what nearshoring is, also known as “near relocation.” «Nearshoring is the outsourcing strategy by which a company transfers part of its production to third parties that, despite being located in other countries, are located in nearby destinations and with a similar time zone.» It is a model that seeks to improve the logistics of foreign trade.
What is the Situation of Nearshoring in Mexico?
According to a study carried out by Statista on the suppliers of imports in Mexico in 2019, we can see that a little more than 45% came from the United States and almost 30% from China, Japan, Germany, and South Korea. With the pandemic, it is now necessary to change commercial logistics, which is why many North American and Chinese companies are looking to locate companies and branches in Mexico. The search for economic recovery is causing foreign trade, so hit by the pandemic and the war, to find new options to optimize production chains and, in this way, has found in nearshoring one of the most favorable solutions. Many companies around the world are looking for new alternatives in terms of exports, imports, and foreign investment.
It is evident that by 2023 and the following years, Mexico must invest in infrastructure (roads, distribution centers, transportation, and logistics) to get in shape and take advantage of nearshoring opportunities. To give us a small idea, according to Reuters, in 2022, 16% of Mexican companies observed increases in demand for their products or services. The country observed an increase in its Foreign Direct Investment, mainly encouraged by nearshoring.
Due to the growing popularity of nearshoring, the Inter-American Development Bank (IDB) estimates that in the coming years this strategy could increase global exports from Latin America and the Caribbean by US$78 billion dollars annually, of which around 45%, that is, US$35.3 million, correspond to Mexico. Although it is true that North America is the most important market for Mexico, it is essential that we consider the entire American continent, for of all countries, Mexico has an enviable location for companies and governments to seek to do business in our country.
The difficulties between the West and China, the T-MEC (which facilitates trade with the United States and Canada), the performance of the national industry, and low labor costs are offering Mexico a way out of the economic crisis that all countries in the world are experiencing. The Mexican government is announcing investments to promote the nearshoring model, but it seems that not all state governments and businessmen, once again, are paying attention to important economic phenomena. To see the country in a better perspective, it is essential to get out of the media war that currently exists between groups and political parties, which day after day are dedicated to dirtying the national news. The economic, commercial, labor, and social opportunities that are presented to us won’t last forever.
Happy New Year!
