Companies are looking to expand their productive capabilities to better take advantage of nearshoring opportunities. In this sense, financial instruments like credit are gaining steam as the best option to harness the forecast economic growth.
According to the Mexican Institute for Competitiveness (IMCO), Mexico has only 65 million m2 of industrial space, which is only 3.5% of the current Chinese industrial space. Furthermore, according to Santander’s Nearshoring Data Monitor, over 30% of the Chinese installed capacity is expected to be redistributed in the world owing to nearshoring.
Experts highlight the importance of expanding the local capacities of suppliers, along with infrastructure, energy and local talent, which will require an extensive amount of resources. For this purpose, it is important to be able to access financial options to face the coming challenges and opportunities nearshoring offers. In this scenario, Multiple Purpose Financial Institutions (SOFOMs) could be great allies.
According to José Achar, Director General, Sefirmex Capital, simple credit line availability will be a relevant factor for companies to dive into nearshoring opportunities. Achar forecasted a possible reduction in interest rates, which makes variable-rate credits more appealing than fixed-rate ones. By migrating to such instruments, companies can benefit from lower financing costs, while maintaining healthy leverage, he added.
SMEs are the companies that can benefit the most from such instruments, which could play an important role in overall economic development, as SMEs account for over 99.8% of the companies in Mexico, according to INEGI. Santander’s Data Monitor also highlighted that each company involved in nearshoring attends over 50 clients and requires around 150 suppliers, which are mostly SMEs.
Sefirmex pointed out that SOFOMs, beyond credit lines, offer the possibility of using lines focused on medium and long-term investments to enhance the installed capacities of production plants and make the necessary adjustments to industrial spaces that are required for the expected growth of operations driven by nearshoring.
The company also mentioned that now is a great opportunity for SMEs to use SOFOMs’ instruments for the acquisition of imported equipment, since obtaining international leases for such companies is normally not feasible. However, the current low exchange rate of around MX$17 per dollar, makes this equipment more accessible.
Sefirmex said that owing to the current context, its focus is on strategic sectors like logistics, especially in last-mile delivery, as well as in manufacturing, tourism and wellness.