Infrastructure Shortage Threatens Retail, Nearshoring Benefits

Industry insiders believe Mexico's infrastructure may struggle to handle the growing volume of transactions resulting from the nearshoring phenomenon. This issue extends to the retail and e-commerce sectors, as well.

According to Antonio Arranz, Director General, DHL Express Mexico, over 2,100 storage and delivery companies were created as a result of the COVID-19 pandemic. These companies have driven an increased demand for warehousing. Arranz emphasizes that as consumption habits change and online shopping becomes more prevalent, retailers will require more warehousing and physical stores will be displaced as exhibition floors. 

Despite this being beneficial for retailers in the short term, industrial developers are worried about the lack of land with convenient locations and proper infrastructure. Fernando Solares, Director General, Mexican Chamber of the Construction Industry (CMIC), associates the lack of infrastructure with low investment rates and the quasi-monopoly of SEDENA in federal infrastructure works. According to CMIC, Mexico invests only 1% of its GDP in the development of infrastructure, while it should be at least 5%. “Industrial construction is a great opportunity for Mexico but, without more investment in this subsector, we cannot move ahead. We are worried that the public sector does not consider us to be a strategic economic activity,” he added. 

Industry insiders from other sectors agree with these views. For instance, the recently announced Tesla opening of its gigafactory in Santa Catarina, Nuevo Leon, brought some criticism. Despite Nuevo Leon being an important industrial hub, it still lacks infrastructure. In an interview with El Economista, Fernando Turner, President and Founder, National Association of Independent Entrepreneurs (ANEI), said that Tesla is a “disruptive” company, which requires a comprehensive road infrastructure and mobility strategy that neither federal nor state government have developed as of yet. He added that the problem of traffic bottlenecks in Monterrey’s metropolitan area is growing due to inefficient planning and lack of regulation of public transportation flow. 

Mexico is also lacking the infrastructure to address the electrification of logistics. On May 25, 2023, MBN reported that as the government of California, US, will require all heavy-duty truck sales in the state to be fully electric by 2035 to offset the effects of greenhouse gas (GHG) emissions, industry insiders are worried that Mexico, one of the state’s main trade partners, is lacking the infrastructure to charge those units. The problem is becoming more worrying considering that by 2024, 10% of California’s fleet must be electrified.