Mexico and Nearshoring: Between Greatness and Failure

The reconfiguration of global supply chains has put Mexico in a privileged position. But let's not fool ourselves: this is an opportunity that has an expiry date. The question is not whether Mexico can take advantage of nearshoring, but whether it has the political capacity and the decisiveness to invest in development, that is, making an economically intelligent decision to do so. This is where the figure of President Claudia Sheinbaum comes into play.

Sheinbaum is not an improvised politician; her career in the government of Mexico City shows that she has the capacity to implement large-scale projects, with a strategic focus on energy and sustainable mobility. The question is whether her administration will succeed in turning this vision into a national plan to catapult Mexico into the economic big leagues.

Because yes, Mexico could become the 10th largest economy in the world, but it could also get stuck if it does not resolve its historical problems: obsolete infrastructure, a water crisis, energy dependence, and an uncertain trade relationship with the United States. The reality is that it needs strength, a cool head, and – why not? –  to change the internal rules of the game to establish a Mexico platform based on solid principles and investment.

Nearshoring: The Opportunity of the Century

Nearshoring is not a passing trend. It is the consequence of a world that has understood that dependence on China is a strategic vulnerability. Mexico, with its proximity to the United States, its network of trade agreements, and its manufacturing strength, is the ideal candidate to attract investment. But these investments will not come on their own.

The government must guarantee modern infrastructure, efficient logistics, and legal stability. Currently, the lag in infrastructure is evident: According to the OECD, Mexico invests only 2.5% of GDP in infrastructure, when countries like China exceed 7%. Without these elements, companies will prefer to go to Vietnam, India, or Brazil. Sheinbaum has a responsibility to transform the country into a competitive destination, and that means making bold decisions.

The Importance of Supply Chains and Geospatial Services

Supply chains are the circulatory system of the global economy and optimizing them through geospatial technologies could make all the difference for Mexico. Data intelligence applied to logistics and distribution can reduce costs and improve delivery times. Advanced geolocation makes it possible to predict transport disruptions, optimize distribution routes, and anticipate logistical crises.

Companies that are committed to the digitization of the supply chain can more easily integrate into global production networks. If Mexico promotes the development of these services, it will be able to consolidate its position as a key logistics hub in world trade.

The Bi-Oceanic Canal: The Wasted Opportunity

One of the most ambitious projects that could place Mexico at the center of global trade is the Bi-Oceanic Canal of the Isthmus of Tehuantepec. This route could be a real alternative to the Panama Canal, reducing costs and transportation times for companies. However, lack of investment and political will have turned it into an unfinished dream.

In 2023, the government announced an initial investment of MX$120 billion (US$5.8 billion) to develop this logistics corridor, but partnerships with the private sector are still needed to make it viable. If Mexico wants to play in the big leagues, it needs to develop logistics infrastructure on a par with an economic powerhouse. Without a functional bi-oceanic canal, nearshoring will not be enough to sustain the country's growth.

Water and Energy: Without Resources There Is No Future

The water problem is real and threatens to slow down any industrial progress. Monterrey and Queretaro have reported a decrease of up to 40% in water availability in the last five years. In 2023, the government of Nuevo Leon implemented scheduled water cuts due to extreme drought, affecting more than 5 million inhabitants and limiting industrial production.

Without innovative solutions, such as desalination plants, smart water management, and recycling technologies, and an adequate policy on the management of irrigation water to technification agriculture, nearshoring could remain an impossible dream. Countries such as Israel have managed to supply 70% of their drinking water through desalination plants. Mexico needs to follow that example.

In energy, Mexico has enormous potential in renewables, but it needs an aggressive strategy to modernize its infrastructure. Currently, 75% of the energy generated in the country still comes from fossil fuels, while countries like Brazil have managed to get 84% of their electricity from clean energy sources. Sheinbaum has shown interest in the energy transition, but her challenge will be to turn that interest into effective policies that guarantee clean and cheap electricity for industry.

Avoiding the Loss of Investment Grade

Mexico continues to be an attractive destination for foreign investment, but the poor public policies of the past have left scars that are difficult to erase. Market confidence is fragile, and if the country loses its investment grade, attracting capital will be more difficult. In 2023, Fitch Ratings maintained Mexico's rating at 'BBB-', the lowest level before losing investment grade. This means that any sign of instability could cause the country to fall into a speculative category, increasing the cost of debt and scaring off key investments.

To avoid this scenario, Mexico must consolidate its regulatory framework and avoid expropriations or abrupt changes in energy and fiscal policies. If it does not protect its financial status, it could lose the confidence of the markets and with it, the opportunity to consolidate itself as an economic power.

Mexico Power or Mexico Without a Future?

Mexico has a real chance of becoming the eighth or 10th largest economy in the world, but that will not happen by inertia. A coherent political and economic strategy is needed, with investment in infrastructure, energy, water, and technology. Sheinbaum has the capacity to lead this process, but she will face political and economic resistance.

If Mexico makes the right decisions over the next five years, it will be able to consolidate its position as a global power. But if it continues to opt for half-baked solutions, it will miss this historic opportunity and will remain the eternal promise that never comes to fruition.

Mexico's future is at stake. The decision is in our hands.