Energy Stability Key to Nearshoring Growth

The nearshoring trend can help Mexico to remain a key investment destination and a strong economy. However, development in the oil and gas industry, as well as energy infrastructure modernization, are paramount to ensure nearshoring success, according to experts.

Ernesto Bravo, Researcher at the Institute of Economic Research (IIEc), UNAM, emphasizes the need to ensure stability in Mexico’s electricity supply to attract and retain investments. This stability is crucial  to successfully address nearshoring, which positions Mexico as a key destination for foreign investment. To leverage on this trend, Mexico must ensure reliable energy from both renewable and non-renewable sources.

Arturo Ortiz, a Researcher, IIEc, notes that Mexico’s fuel self-sufficiency in oil production can prove advantageous in attracting investments. By the end of 2024, Mexico is expected to achieve self-sufficiency in diesel and jet fuel, while reducing gasoline imports to 10%. Ortiz explained that Mexico’s self-sufficiency places it in a favorable position, potentially leading to a new phase of industrialization in the country. Additionally, this sufficiency  could be key to securing Mexico’s position in USMCA negotiations.

Despite the current challenges in negotiations and the US electoral context, Ortiz highlights that energy self-sufficiency and nearshoring offer opportunities for renegotiating treaties and enhancing competitiveness. However, he also noted that Mexico must continue its energy transformation process.

Increasing competitiveness in the oil and gas sector remains a central point for various players. AMEXHI considers that relaunching bidding rounds and opening to private participation could generate budgetary benefits of nearly US$160 billion. Alberto de la Fuente, President, AMEXHI, emphasizes that ensuring a reliable electricity supply is paramount to maintain competitiveness in the Mexican industry and capitalize on the opportunities offered by nearshoring.

Ortiz expresses hope that the next government will support these strategies, allowing Mexico to revive the industrialization process once driven by oil. He also anticipates that, with government support, PEMEX could eventually become financially stable, helping to address its debt issues and ensure long-term economic viability.

Javier Zarazua, Managing Partner, JL Nearshoring Mexico, mentioned to MBN that the new government is already sending positive signals with its Shared Prosperity message, with nearshoring as one of the main levers for development. But there is still a lot of work to do if Mexico is to seize this opportunity and achieve a similar success to China with offshoring. Mexico can leverage two existing strategic advantages: being the No. 1 trade partner to the United States and the 2,000 miles of shared border. Mexico also needs to address key challenges, particularly infrastructure, education, the establishment of full supply chains, and the industrialization of small and medium businesses.