Image credits: Timon Studler
News Article

Mexico: China’s Nearshoring Destination

By Jorge Ramos Zwanziger | Fri, 03/05/2021 - 15:11

In the next three years, one of every two investors in industrial real estate will be of Chinese origin, particularly in the north of Mexico, explained CBRE to T21. “This is not something that happened overnight, there are more and more investors coming from China,” assured Lyman Daniels, President of the CBRE Mexico, during the first annual forum of the Mexican Association of Private Industrial Parks (AMPIP).

Last year, AMPIP’s survey of 34 industrial distributors indicated that China represented 37 percent of Mexico’s new project initiatives in industrial parks in 2020, reported T21. This more than doubles the initiatives from the US, which is the main contributor to FDI in Mexico.

Investment in Mexican industrial parks by Asian companies is increasing due to the growth of nearshoring, which refers to the relocation of companies to countries that are closer to the main consumption centers, explained MBN. Due to its proximity to the US, Mexico is an attractive nearshoring destination. “Ultimately, this provides cost benefits. An Indian or Chinese company may provide a lower price but, in the end, it comes down to the total cost of ownership. Working with a Mexico-based company ensures efficiencies and on-time deliveries. Furthermore, USMCA makes it easier for Mexicans to travel back and forth for work purposes,” explained Daniel Chávez, CEO of Dextra Technologies, in an interview with MBN.

“In China, where the pandemic shut down many factories, there were many disruptions in stock and payments. To avoid future shocks, the pandemic led to the reconfiguration of supply chains and now there is an opportunity for countries in nearshoring,” explained Agustina Calatayud, Main Specialist in Transportation of the Inter-American Development Bank (IADB), during the webinar “2020 Balance and Future Perspectives for the Port Industry in Latin America,” reported T21. Mexico’s nearshoring benefits have become apparent to Chinese investors. According to AMPIP, companies in China are currently doing a cost analysis to determine what is more profitable and less risky when it comes to production. When thinking about moving production closer to the destination market, the US, Mexico comes up as the most attractive destination for investment relocation, reported T21.

“Since 4Q20 there has been a hunger to get into the national market, particularly in the north of the country, due to the growth in demand that has followed ¿ USMCA and the new supply chain based around and for North America,” explained Daniels, according to T21. To Daniels, the treaties and trade agreements Mexico has signed with other regions and countries, besides USMCA, will be vital for the economic recovery of the country. The President of AMPIP, Lorenzo Dominique Berho, also explained that it is important to dialog with the current government to help ease investments in infrastructure and cleaner energies, especially after the power outages that took place last month in the country, reported El Mañana.

The data used in this article was sourced from:  
MBN, T21, AMPIP, El Mañana
Photo by:   Timon Studler, Unsplash
Jorge Ramos Zwanziger Jorge Ramos Zwanziger Junior Journalist and Industry Analyst