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Nearshoring Hopes Versus Nearshoring Reality

Alejandro Montes Jacob - EC Rubio
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Cinthya Alaniz Salazar By Cinthya Alaniz Salazar | Journalist & Industry Analyst - Tue, 04/11/2023 - 11:53

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Q: With the increase in nearshoring opportunities from international companies to Mexico, what legal trends do you see emerging? 

A: EC Rubio has clients across industry sectors, in which a variety of legal priorities have emerged. The manufacturing and automotive sectors, among others, have been particularly interested in clear and consistent legislation at the federal level to capture foreign investment. 

Agribusiness companies are also turning to Mexico, although maybe not for the same reasons as manufacturing companies. Companies in the agribusiness sector want to be closer to the US and want legislation that supports this industry and projects confidence to create greater dynamism. 

 

Q: How is the country's infrastructure development keeping pace with demand and what are some of the key legal challenges and opportunities that arise from this trend?

A: The infrastructure exists and has been there for a long time. However, there are some concerns that Mexico’s current energy infrastructure will not be able to meet the surging demand for energy generation in key industrial clusters. Furthermore, there are concerns among potential newcomers about Mexico’s dependence on fossil fuels for energy generation. These companies are also concerned about the country’s stalled energy transition toward sustainable technologies, which contrasts with the compliance regulations established by their home countries and their own ESG commitments. With these reservations in mind, the federal government may become obligated to mitigate this barrier by using intermediate energy generation technologies to signal its commitment to adopt sustainable energy. 

The good news for any company or investors looking to place a bet on Mexico’s nearshoring potential is that it has a robust supplier network with a proven track record. This ensures that companies of various sizes are able to find suppliers that correspond with their needs as they scale up or down. 

 

Q: How are companies in real estate, construction, energy, logistics, financing and other sectors positioning themselves to take advantage of these opportunities?

A: The answer will differ depending on the industry itself, their projects and their demand expectations in the medium and long term. In construction, companies are working at an accelerated pace to build parks for smaller warehouses and manufacturing facilities to cater to SMEs. This is occurring in parallel to the construction of large industrial parks to cater to large players that need over 10,000-20,000ft2 of surface area, namely to accommodate more high-volume industries like e-commerce and manufacturing. In logistics, companies are attempting to accelerate their digital transformation strategies and cybersecurity controls to showcase their traceability, efficiency and reliability. 

 

Q: From a legal standpoint, what should international market entrants understand as they seek to do business in Mexico? 

A: Waiting periods have become an issue during this federal administration, as bureaucracy has been gridlocked by inefficiencies. Consequently, goals that were previously doable and achievable within an average of seven to 10 days have grown exponentially, to the frustration of companies. These delays are turning simple administrative tasks that would normally take days into multiquarter follow-up processes with federal institutions. Furthermore, despite constant requests, the federal government has shown no indication of facilitating or expediting these processes, creating frustration for state governments. Some states have deviated from this standard, attempting to make their administrative process more efficient by hiring more personnel and restructuring their administrative processes, but this appetite is not shared across the three levels of government. 


 

EC Rubio is a full-service Mexican law firm specialized in national and international business transactions in the industrial sector and in foreign investment.

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