Nearshoring Failure Cost Mexico 1.8 Percent Growth Opportunity
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Nearshoring Failure Cost Mexico 1.8 Percent Growth Opportunity

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Emilio Aristegui By Emilio Aristegui | Junior Journalist and Industry Analyst - Thu, 12/15/2022 - 12:11

BBVA prepared a punctual analysis regarding Mexico’s capability to absorb major nearshoring figures moving away from Asia “The BBVA Mexico ‘Regional Sectorial Situation’ report, corresponding to 1H22, highlights that the country compromised significant growth due to not having a policy fpr attracting manufacturing activities through nearshoring. These gains could have represented an additional growth of up to 15 percent per year in manufacturing exports, which would have allowed this sector to grow up to 10 times more in the last four years,” explained BBVA in its analysis.

During 2Q22, leisure, lodging and transportation recorded the largest growth in relation to the national GDP at 63.1 percent, 32.6 percent and 15.4 percent, respectively. In 3Q22, leisure and lodging maintained their lead with annual growth of 55.6 percent and 33.2 percent, respectively. Some sectors presented severe downgrades in 2Q22, including government and support services, mainly derived from the recent labor reform. Construction also presented a minimal contraction of 0.4 percent in 3Q22.

“In regional terms, only seven of the 32 entities reached pre-contingency levels by the end of 2021. Of the six entities with the greatest weight in the national economy, only the State of Mexico has recovered, while Mexico City, Nuevo Leon, Jalisco, Veracruz and Guanajuato lag behind,” said BBVA. 

BBVA’s study covers investment and development opportunities at a regional level, with a focus on manufacturing, trade and services. The study identified the northwestern region of Mexico as an adequate place to fully enhance nearshoring processes. BBVA highlighted that Mexico could thump China’s current transportation equipment, machinery and equipment, basic metal and electrical equipment processes. Currently, Mexico is ranked first in the production of transportation equipment and basic metal works at a global scale. 

The report also evaluates if Mexico is currently prepared for a massive arrival of companies from Asia. China has lost four percentage points in its share of US imports, equivalent to US$117 billion. Meanwhile, Mexico has grown its annual exports between 2018 and 2022 by 15 percent.

Photo by:   Image by postcardtrip from Pixabay

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