Northern Mexico, Great Asset for Nearshoring: CBREBy Jorge Ramos Zwanziger | Wed, 05/05/2021 - 15:27
Nearshoring is catching the eye of large economies worldwide after the COVID-19 pandemic shook global supply chains. Coldwell Banker Richard Ellis Group, Inc. (CBRE) suggests that Mexico’s northern region is in a key position to capture investment and companies interested in operating in North America.
"Nearshoring represents great opportunities for the North of Mexico due to its healthy industrial market, which despite the current contingency remains resilient and optimistic," says Lyman Daniels, President of CBRE Mexico and Colombia, according to CBRE´s website. Nearshoring is the process of relocating companies to countries closer to the main consumption centers, usually in third countries that offer benefits such as smaller labor costs. For years, many companies turned to South East Asia or Latin America to reap the benefits of lower production costs, explains CBRE on its website. But the pandemic dealt a huge blow to many supply chains, particularly in countries like China, which faced disruptions in stock and payments. This disruption forced the reconfiguration of supply chains and created more opportunities for nearshoring in different countries, previously reported MBN.
According to CBRE, two factors that benefit Mexico in terms of FDIs and nearshoring are the trade war initiated by Trump between China and the US and the USMCA. The current commercial dispute between the world’s two largest economies could be to Mexico’s benefit, as it could grow its exports to its northern neighbor, said TECMA. Thus, the USMCA is expected to increase FDI in Mexico, particularly due to the new regulations in terms of Regional Content Value and Laboral Content Value, something previously addressed by MBN.
Mexico’s geographical location that allows it to share a 3,185 km border with the US greatly favors the country. “Only during 2020, US$328.9 billion were exported to the US,” CBRE explains. The main beneficiaries of FDI in terms of nearshoring have been Monterrey, Tijuana and Queretaro. According to CBRE, the main industries seeing this nearshoring trend were furniture, household appliances and electronics, medical equipment, machines and tools and auto parts. Over 50 percent of these investments went to Nuevo Leon, a strong industrial state in the country that happens to be on the border.
Nearshoring is expected to continue attracting great investments thanks to the strengths it offers. Daniel Chavez, CEO of Dextra Technologies, shared with MBN that one aspect that makes Mexico more competitive for companies looking to participate in the US is the agility it offers through its location. “Mexico [...] shares the same time zones as the US, provides a great benefit to US companies in this area. Ultimately, this provides cost benefits. An Indian or a Chinese company may provide a lower price but in the end, it comes down to the total cost of ownership.”