The Untapped Frontier: Mexico’s Aquaculture PotentialBy Ross Gordon | Fri, 09/24/2021 - 13:02
With the world population projected to reach 8 billion within the next three years, it's not difficult to see how meeting the growing demand for food is going to be one of the greatest challenges of the early 21st century but also one of the greatest opportunities for investors.
Food demand is projected to increase 50 percent by 2030, and with nearly 90 percent of fish stocks overfished, and upward of 70 percent of the Earth’s surface used for food production, the looming question is: Where are we going to turn to resolve this issue?
Aquaculture is a relatively young industry that is showing promising signs of being a viable and profitable solution that benefits both consumers and investors.
There has been rapid expansion of aquaculture investments around the world, most noticeably in countries like Australia, Chile and Norway, which have pioneered the industry over the last four decades. Currently, Mexico is actively establishing itself as the world’s new frontier for investors in the aquaculture industry. Striving to attract investment and increase investor confidence, Mexico has been leveraging its natural resources and strategic global position with a cocktail of favorable regulatory stances, fostering a strong relationship between industry, government and research institutions, and investing between US$50million and US$70 million in infrastructure to support the aquaculture industry since 2017.
As the second-largest economy in Latin America after Brazil, with a GDP of US$1.2 trillion (2019), Mexico has a growing middle class with a rising demand for premium-quality seafood. Geographically, it is conveniently located right at the doorstep of two strong economies with a large and growing demand for sustainably sourced, quality seafood: the US and Canada. The country is also the gateway to the growing Asian and European markets through the port of Los Angeles. All of these factors add up to not only offer a large domestic market with strong demand, but also access to lucrative markets around the globe.
Albeit, this strategic location for trade would be worthless if the country didn’t possess the adequate natural resources and healthy coastlines necessary for aquaculture production. Luckily, Mexico has the 13th-longest coastline in the world, at just over 9,300km between the Pacific Ocean, Sea of Cortéz, Gulf of Mexico and the Caribbean Sea. Almost half of its coastline is concentrated around the Baja California Peninsula (3,600km) and the state of Sonora (1,200km) in the northwestern region of the country. This 4,800km of coastline is situated along some of the most pristine and productive waters that offer ideal conditions for biomass production and access to landings for processing and distribution. There is an important history of fisheries and aquaculture that has produced plenty of well-trained technical human resources and knowledge that support investments.
In addition to its strategic location, favorable conditions for production, and abundant talented and skilled workforce, the government has been very cooperative and helpful with investments, working to establish itself as the “place to be” for aquaculture in North America, having provided facilities, water and electrical installations to projects in the past.
The country’s government and private sector are working hand-in-hand to build an industry that can be an alternative to the current lack of offshore fish-farming in the US, proving more attractive to investors who find Mexico has a more favorable regulatory environment, with permits being issued within one year. In doing so, the country has achieved a 16 percent growth over the past five years, according to an article by Aquaculture Alliance. A number of US-based mariculture companies have decided to farm their fish offshore in Mexican waters in the last couple of decades; notable investments have come from Umami Seafoods, Pacifico Aquaculture, Earth Ocean Farms, King Kampachi, and Ito Aquaculture.
Mexico is a very different country than it was 15 years ago. It has been doubling its efforts to develop a strong aquaculture industry, aiming to achieve this sooner than later by becoming an attractive option for investors. One of the largest stumbling blocks that we have seen at Aquaculture Advisory when talking with investors is the hesitancy to put their money in Mexico because of the lack of knowledge and experience running aquaculture investments. Having the skill sets and experience to develop economic models and allocate capital resources is fundamental to establishing a profitable business, with technology being a primary factor for scalability and volume. As a matter of fact, many early investors see Mexico as a land of opportunity, and many of these investors have already seen excellent results with pilot grow-out programs or full-blown production operations.
For those who really understand the dynamics of the country, it is easy to see that Mexico holds a great future as an aquaculture-producing nation. As with any investments, mitigating risks as much as possible as well as forecasting capital requirements and cash flows is paramount to success in the long term. Having experienced advisory to navigate the regulatory and legal landscape, as well as to leverage the existing networks, is a must when investing in Mexico. A key factor to keep in mind in Mexico is that what you know is as equally important as who you know when it comes to business and working with government entities.
Thriving global markets with an appetite for sustainably sourced, quality seafood are waiting to have their demands met. Mexico is an untapped frontier that has already shown its merits as the land of opportunity for investors who are eager to lay an early stake in the ground and capture as much of the market as possible.