Vital Vectors to Mexico's Nearshoring Competitiveness

To ensure sustained growth and competitiveness amidst Mexico’s nearshoring transformation, companies must develop a strategy that encompasses energy, infrastructure, and talent, according to industry experts. Addressing these aspects holistically is imperative for businesses aiming to fortify their positions in Mexico's nearshoring ecosystem. This approach serves as a proactive means to navigate the challenges and opportunities that lie ahead.

In the pursuit of nearshoring excellence, fostering a strategy centered on innovation becomes paramount. This involves not only leveraging technological advancements but also cultivating a collaborative environment where energy efficiency, infrastructure development, and talent cultivation converge. By strengthening these elements, companies can effectively capitalize on synergies between these vital vectors, thereby enhancing their competitive edge and positioning themselves as frontrunners in the nearshoring arena.

 This necessitates a comprehensive understanding of the unique advantages inherent in each region, explains Armando Zúñiga, President, COPARMEX CDMX. He emphasizes the geographical diversity across regions, emphasizing the need to capitalize on these differences through the formation of regional blocs to maximize investment opportunities. However, Zúñiga underscores the importance of states collaborating to attract investments and address common challenges prevalent in Mexico's nearshoring landscape. "State strategies," he asserts, "must encompass not just energy accessibility, but also focus on renewable energy, robust transmission infrastructure, and the cultivation of skilled talent, shifting away from reliance solely on low-cost labor,” Zúñiga added.

Energy

Luis Roberto Arechederra, Minister of Economic Development, State Government of Jalisco, underscores the pressing need for states to align with decarbonization policies driven by large corporations. He emphasizes that an established decarbonization pathway is essential for states to fully meet the expectations of these corporations. "This strategy," Arechederra asserts, "must permeate the entire supply chain and be reinforced through the adoption of energy-efficient practices and technological investments." By aligning with these corporate sustainability initiatives, states can not only attract investment but also foster a more sustainable business ecosystem.

Drawing from the experiences in Veracruz, Enrique Nachón García, Minister of Economic and Port Development, emphasizes the necessity of a triple helix approach involving government, industry, and academia to harness synergies in energy infrastructure development. Nachón highlights the increasing adoption of Environmental, Social, and Governance (ESG) guidelines by companies, underscoring the importance of aligning governmental policies and academic research with corporate sustainability objectives.

Veracruz's significant energy surplus, producing three times more energy than it consumes, positions it as a compelling destination for industries seeking reliable energy sources. Nachón emphasizes the potential of energy surplus in Veracruz as a magnet for industrial relocation. Furthermore, he stresses the significance of infrastructure development projects, such as the Tehuantepec isthmus project, as crucial opportunities for regional collaboration. This project, while promising, requires coordinated efforts with neighboring states like Oaxaca, highlighting the necessity for interregional cooperation in infrastructure development. Arechederra adds, "For effective collaboration under the triple helix model, governments must take proactive steps to deploy relevant public policies that integrate all stakeholders."

Talent

The availability and quality of talent are paramount in shaping the infrastructure planning and development crucial for successful nearshoring operations, especially within energy-intensive industries. A highly skilled workforce not only drives innovation but also significantly impacts the design and optimization of infrastructure tailored to meet the diverse needs of various sectors. Therefore, companies must prioritize talent development initiatives alongside infrastructure investments to cultivate a conducive environment for sustainable growth and operational efficiency.

In this context, the state of Durango has grappled with talent outflow. Arturo Ortiz Galán, Vice Minister of Economy, State Government of Durango, highlights that approximately 45% of the state's talent migrates elsewhere in pursuit of opportunities. He identifies the historical underutilization of investment attraction as a key factor contributing to this trend, albeit presenting a newfound opportunity. "Despite missing out on investment opportunities for two decades," Galán notes, "this gap has transformed into an advantage."

Conversely, Durango boasts a wealth of available talent, supported by 72 universities and 78 technical schools. Galán underscores that these educational institutions equip professionals with the requisite skills to capitalize on opportunities within the state. Furthermore, he emphasizes Durango's potential to strategically shape and diversify its industrial landscape, leveraging its abundant talent pool.

Triple Helix

Government support plays a pivotal role in fostering a holistic approach to infrastructure development and talent cultivation essential for Mexico's nearshoring activities. By implementing policies that promote energy efficiency and workforce development, governments can create an enabling environment conducive to nearshoring ventures. Collaborative efforts between the public and private sectors are imperative to address infrastructure gaps, enhance regulatory frameworks, and establish industry standards that ensure the long-term viability of nearshoring ventures.

“In Veracruz we recognized that to act the most important thing was to first have a diagnosis and we also learned a lot from other states. Another strategy that worked in our state was to pay special attention to the paperwork process and create a unit that united the different people involved in these processes so that when the investments arrive, we all listen to the projects at the same time and find ourselves on the same page,” said Nachón.

The consensus among government officials underscores the significance of actively engaging with companies and guiding the orderly development of the industry. Implementing public policies that foster a triple helix model—embracing collaboration among government, private sector, and academia—is deemed essential. Ulises Fernández, Minister of Innovation and Economic Development, State Government of Chihuahua, identifies the circular economy as a promising avenue for decarbonization and industry development. He highlights the potential of repurposing industrial surpluses and optimizing processes to foster sustainability and resource efficiency.

 “There are important issues of use within companies to develop a circular economy. For example, surpluses from industries such as the automotive industry can be reincorporated, or industrial processes can be circumscribed for the use of other industries, that is an interesting strategy to explore,” said Fernández.

Capitalizing on Strengths

From Chihuahua, Fernández elucidates that nearshoring is not merely viewed as a solution but as a profound opportunity to strategically direct new investments and cultivate the business ecosystems of the future. "In Chihuahua," Fernández explains, "we have implemented intelligent specialization strategies, focusing on key automotive sectors such as electronics, aerospace, automotive, and medical equipment. Capitalizing on the development of specialized talent in these sectors is paramount." Fernández emphasizes the importance of retraining personnel to adapt to evolving operational processes, ensuring alignment with the demands of incoming industries.

In the central region of the country, San Luis Potosí emerges as a vital logistical hub. Salvador González, Head Representative, Government of San Luis Potosí in Mexico City, highlights the state's recent resurgence in investment activity. González attributes this resurgence to the state's strategic geographical location at the heart of the country, facilitating crucial processes within the industrial production chain. “With these investments in mind, we have promoted infrastructure on the priority agenda and established a commitment to various sectors, generating direct communication with users of the industrial sector to attract more investments and develop satellite companies, the productive chain,” says Gonzalez.

Furthermore, government ministries underscore the importance of crafting State Development Plans that articulate clear strategies for orderly economic development, leveraging the unique strengths and opportunities of each state. Additionally, Zúñiga acknowledges that despite potential differences in political affiliations, economic development ministries across Mexican states are collaboratively steering efforts to maximize the benefits of nearshoring. This concerted approach aims to harness valuable knowledge and experience to propel regional development during this critical period.