Can Sustainable Freight Transportation Grow With Nearshoring?

It goes without saying that nearshoring is boosting investment and growth in Mexico. Recently, Deputy Minister of Finance Gabriel Yorio announced that in 2023 we will have 60 new investments, with a total value of US$40 billion, and estimates that the country will capture 50% of the investment in Latin America, coming from relocation projects of companies. These rising numbers in Foreign Direct Investment (FDI) can help to raise the growth forecast for this year and exceed the 3% expected.

The Inter-American Development Bank (IDB) estimated that Mexico could benefit with close to US$35 billion in exports with the nearshoring phenomenon in the short term. The institution estimates US$64 billion in new Latin American exports of goods, where Mexico would be the country that benefits the most, with more than US$35 billion a year, followed by Brazil with US$7.8 billion.

As we can see, nearshoring is boosting the domestic industry on different fronts, one of which is the increase in freight transportation. If Asian companies move to our country, it will be necessary to move their goods to the US, mainly by road. In view of this, the National Chamber of Freight Transportation (Canacar) estimates that nearshoring will result in growth of about 20% for the next three years, which is equivalent to an increase of 6% per year in the volume of cross-border trade that moves by road. Experts from the chamber stated that the nearshoring phenomenon has already led to a 2% monthly increase in the volume of land freight trade between Mexico and the US.

This is good news, but there is a crucial factor to consider, which is the environment, as 80% of international trade moves by road. According to the International Institute for Sustainable Development (IISD), transportation accounts for approximately 64% of world oil consumption, 27% of total global energy use and 23% of global energy-related carbon dioxide emissions.

We must take advantage of the coming boom to encourage sustainable transportation as the demand  for freight transportation rises, meaning pollution levels will increase, and not only CO2 emissions, but also noise pollution and other affectations. 

The Clean Transportation Program of the Ministry of the Environment and Natural Resources (SEMARNAT), in conjunction with the Ministry of Communications and Transportation (SCT), was implemented in Mexico to promote more efficient, safe, competitive, and environmentally friendly transportation throughout the country. Its implementation brings the following benefits:

For transport companies

• Better understand the environmental impact generated by their fleets.

• Reduce environmental impact through the use of recommended technologies and strategies.

• Save money by incorporating fuel saving strategies and technologies.

• Become preferred carriers by freight customers who are or want to be part of the Clean Transportation program.

• Improve its public image by receiving recognition as a company committed to the environment.

For the companies that use the freight service

• Better understand the environmental impact generated by the transportation of their inputs and/or products.

• Reduce their carbon footprint by choosing carriers within the Clean Transportation program.

• Improve its public image by receiving recognition as a company committed to the environment.

For the domestic market, ELAM-FAW has natural gas vehicle equipment, which represents a more environmentally friendly operation and a smaller carbon footprint, but there are also other benefits. These include cost reductions and the fact that the performance of the units is not compromised. But these options are not the only ones: the electrification trend is gaining strength, as is  the use of green hydrogen as fuel. We are on the way to  more efficient and less polluting freight transportation.

In Mexico there are challenges to evolve toward sustainable transportation. Among the main ones is the renewal of fleets. The average age of the Mexican vehicle fleet for cargo transportation is around 17 years old. Trucks that have been on the road for so long  are less safe and generate higher maintenance costs, which can represent up to 18% of the unit's operating cost. This also represents higher fuel consumption, and therefore a greater environmental impact, as well as a considerable impact on the profitability of the carriers. Here, attractive financing strategies should be sought, as well as government incentives aimed at acquiring less polluting units.

The ideal is to see the growth that nearshoring brings us, but not to neglect the impacts it can have on the environment, society and individuals in particular.