Pending Priorities: OECD on Mexico's Nearshoring Appeal

The Organization for Economic Cooperation and Development (OECD) has advised Mexico to improve its water management and infrastructure to increase its nearshoring appeal. In addition to these priorities, the OECD also emphasized the importance of creating new fiscal framework to facilitate investments in water management, education, and digitalization.

Alberto González, Deputy Head of Mexico, OECD's Department of Economics, highlighted Mexico's water scarcity, emphasizing the importance of water availability for attracting investments. He stressed the need for improved information on water resources, governance reforms, and infrastructure upgrades to tackle water-related issues such as water leakage, which currently stands at around 46%.

Despite these challenges, the OECD's latest Economic Outlook report noted that industrial parks near the US border are nearly at full capacity, inflating warehouse rental prices and despite additional industrial space construction. The report also mentioned that Mexico's manufacturing exports will continue to benefit from greater value chain integration.

"For Mexico, the nearshoring phenomenon offers new opportunities, some of which we see beginning to materialize, but fully leveraging these opportunities requires addressing structural challenges that have been hindering productivity growth for some time,” González added. 

González suggested creating more fiscal framework to invest in areas like education, digitalization, and logistics, without the need for new taxes or rate increases. He also highlighted the potential of accelerating the country’s transition towards renewable energy sources, emphasizing the need for public and private investment and favorable regulations.

Additionally, increasing women's participation in the labor market is crucial, as closing the gender gap would help maximize Mexico's talent pool. To achieve this, González suggested expanding early childhood education coverage and strengthening care programs for the elderly to enable women to complete their education or access jobs.