In the last 20 years, the concept of the offshoring phenomenon has boomed – which consists of subcontracting part of the production to suppliers from overseas countries, mainly in Asia – specifically the Asian giant China, a country that has lost attractiveness, and each time more companies are considering relocating these links in their supply chain to the country closest to their base of operations and this model is called nearshoring. And Mexico has one of the most important geographic locations in the world.

In the industrial sector, this new practice called nearshoring is gaining momentum in the last two years and Mexico, by sharing a border with the United States, is one of the countries that is taking advantage of its benefits the best.

In addition, Mexico has one of the economies with the greatest commercial openness with free trade agreements with the main economic players in the world, as well as seaports that connect with the main ports around the world make Mexico the Latin jewel for the Nearshoring model.

 

Nearshoring: In response to the change in the market

According to analysts, the main reasons that made global companies stop seeing China as an investment destination for manufacturing were: the increase in costs – especially in labor – and the tariff war with the United States in recent years and recently the logistics costs that increased by 300.

Similarly, the uncertainty generated by the lack of empty equipment in that country generates significant delays in routes as well as stopped merchandise without being able to be loaded onto ships for transit.

 

Why is it important for Mexico?

In the current context of international trade, nearshoring is the business strategy that allows companies to bring production centers closer to their consumer markets, with the aim of generating benefits in logistics and transportation.

With the entry into force of the new Free Trade Agreement between Mexico, the United States and Canada (T-MEC), Mexico became a key element for global companies that seek to maintain a competitive position in the North American market since it remained the certainty of entry of Mexican producers to the US. In addition to this, the logistics costs from Mexico to the US in land and rail transport are very cheap compared to the current maritime freights from China that will continue to rise until 2023.

 

Advantages of nearshoring in Mexico

There are areas with high competitiveness in Mexico; such as Nuevo León, specifically the Mexican giant Monterrey and its entire metropolitan area, the Bajío, Zacatecas, Guanajuato, Querétaro, etc.

These highly competitive areas offer multiple benefits such as:

  • Competitive labor costs
  • Reduced logistics costs
  • Logistics infrastructure
  • Fast and secure supply chains
  • Cost of transit times
  • Direct and fast communication
  • Qualified workforce, we are exporters of engineers and licensed experts in production, design and foreign trade.
  • Highly specialized industrial sectors:
    -Air
    -Automotive
    -Manufacturing
  • Protection of intellectual property
  • Lower tariffs with application of the T-MEC and other free trade agreements

Faced with the new market and the change generated by the different events in recent years, Mexico is a recipient of direct foreign investment and the largest country in Latin America with potential for logistics and foreign trade growth. Without a doubt, this new nearshoring concept has favored countries like Mexico to replace countries like China and become direct suppliers to their border countries.

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