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Mexico Nearshoring Report Summary
At Redfern Consortium Group LLC (“RCG”), we believe in staying up to date with industry reports and trends. We have summarized the data from a recent report on nearshoring in Mexico by the Swiss-Mexican Chamber of Commerce and Industry1, published in 2022. In this summary, we explain what nearshoring is, the benefits of choosing Mexico for your business, and potential challenges you may encounter. We help educate clients in our advisory practice to ensure they know the associated benefits and risks.
What is Nearshoring?
Nearshoring does not mean production plants close and move everything to a different country. Instead, companies transfer their business processes to a third-party country, like Mexico. This transfer process allows companies to integrate their supply chains and produce products in a country that is closer to their target market. Experts define this strategy as “a company transferring part of their production to third parties in other countries located in nearby target markets with similar characteristics”1.
Why Choose Mexico?
· Mexico is the 15th largest economy with 14 Free Trade Agreements with 48 countries and a gross domestic product of $293 billion USD (2021)
· More than 75% of Mexico’s trade goes to the United States, Mexico’s main trading partner, due to the USMCA/T-MEC/CUSMA (United States, Mexico, and Canada Free Trade Agreement)
· Preferential access to the North American market
· Bajio region (including Querétaro, Guanajuato and San Luis Potosí), Chihuahua, Nuevo Leon, and Baja California contain specialized clusters of new capital in the automotive, aerospace, and industrial sectors
· Eliminated tariffs
Benefits of Nearshoring in Mexico
Geographic location
11,000km of coastline (facilitates access to worldwide consumption)
3,145km land border with the United States (quick shipments and efficient logistics)
Maximum of 4-hour time zone differences (less traveling time)
Competitive labor salaries and skilled labour
More than 11,000 engineering and technical graduates each year
Ease of doing business
Low input costs, quality infrastructure, reliable services
Developed and diversified industrial sector
World leader in the automotive sector
6th largest aircraft supplier to the US
8th largest exporter of medical devices worldwide
Challenges of Nearshoring in Mexico
Infrastructure
Southeastern region (Tabasco, Campeche, Yucatan, Quintana Roo) lacks adequate infrastructure
Connectivity and Security
Connectivity of internal railroads, roads, and ports in Mexico could be strengthened
Security of goods transportation can be costly
Technology and digitalization of internal processes can be lacking
Skilled labor
Variable labor conditions and pool shortages depending on the region
Lack of federal policy for developing new talent (city programs cover this case by case)
RCG offers expert advisory services tailored to companies aiming to expand their operations in Mexico, whether through partial expansion (nearshoring) or establishing a complete local presence. With a profound understanding of the intricate Mexican business landscape, RCG is equipped with the necessary expertise and resources to facilitate a seamless and triumphant market entry. Our integral suite of soft-landing services includes advisory, foreign trade facilitation, human capital management, legal support, and tax guidance. Contact us to explore how RCG can be your strategic partner in your Mexican endeavors.
1 Source: Mexico Nearshoring Report – Swiss-Mexican Chamber of Commerce & Industry (2022)