Mexico: The Epicenter of Nearshoring in Latin America. Part 1 (5 International Competitive Advantages)

Introduction

In an increasingly globalized world, nearshoring has emerged as a key strategy for companies looking to optimize their supply chains, reduce costs, and enhance operational efficiency. Mexico, with its strategic location, favorable trade agreements, and skilled workforce, has rapidly positioned itself as the epicenter of nearshoring in Latin America.

Mexico's prominence in this phenomenon is no accident. Karen Lellouche, Managing Director and Senior Partner at Boston Consulting Group, emphasizes that Mexico presents an extremely attractive option for U.S. companies due to the benefits of the USMCA (T-MEC), cost reduction, and the elimination of customs barriers. This favorable scenario could generate up to 4 million jobs in the coming years, significantly boosting the Mexican economy. Additionally, reports from Deloitte estimate that nearshoring in Mexico could add up to 0.5 percentage points to the national GDP and create approximately 1.1 million additional jobs. This growth is being driven by foreign direct investment and the expansion of manufacturing production.

It's no surprise, then, that technology giants like Sony and Panasonic, as well as pharmaceutical companies like Medtronic, have chosen Mexico as a strategic hub for their operations, taking advantage of its proximity to the North American market and local talent. Meanwhile, FUMEC (the U.S.-Mexico Foundation for Science) has highlighted Mexico's enormous potential in semiconductor nearshoring, a crucial sector for global technology. FUMEC emphasizes that Mexico has the infrastructure and talent needed to become a key pillar in the semiconductor supply chain, attracting significant investments and further enhancing its role in advanced manufacturing.

With these competitive advantages and a strategic focus on high-tech sectors, Mexico stands as an undisputed leader in the global nearshoring landscape, drawing the attention of companies worldwide and solidifying its position as a central hub for manufacturing and innovation in Latin America.

Mexico and its Competitive Advantage

Mexico has established itself as a leader in nearshoring in Latin America thanks to a combination of factors that make it extremely attractive to international companies. Below are five key pillars that support this competitive advantage.

• Geographical Location

Mexico's strategic location, just south of the United States and with access to both the Atlantic and Pacific Oceans, is one of its greatest assets. This proximity not only facilitates faster delivery times and lower transportation costs but also allows companies to maintain a more efficient and agile supply chain. This is especially critical in sectors like manufacturing and technology, where speed and responsiveness are essential to maintaining global competitiveness.

• Trade Agreements

Mexico has signed an extensive network of trade agreements, with the United States-Mexico-Canada Agreement (USMCA) being the most significant. This agreement not only facilitates tariff-free trade between these three countries but also grants Mexico privileged access to one of the largest markets in the world. Additionally, Mexico has trade agreements with over 50 countries, enabling companies operating in the country to access key markets in Europe, Asia, and Latin America with significant advantages.

• Infrastructure and Logistics

Mexico has heavily invested in its infrastructure in recent decades, developing an extensive network of roads, ports, and airports that facilitate the transportation of goods nationally and internationally. These investments are complemented by world-class industrial parks designed to meet the needs of high-tech and advanced manufacturing companies. This robust logistics ecosystem is a decisive factor for companies looking to establish or expand their operations in the country.

• Skilled Workforce

One of the most attractive aspects of Mexico is its abundant skilled workforce. The country has a young and dynamic population, with access to technical and university education aligned with the needs of the global industry. Sectors like automotive, electronics, and information technology have flourished in Mexico thanks to the availability of highly trained engineers, technicians, and other professionals.

• Costs

Finally, competitive operating costs in Mexico are a determining factor for many companies opting for nearshoring. Compared to other regions of the world, labor costs in Mexico are considerably lower, while the quality of work remains high. This, combined with tax benefits and government support for foreign investment, makes Mexico an economically viable option for companies looking to maximize profitability.

Conclusion

In conclusion, Mexico has proven to be much more than a low-cost manufacturing destination; it has established itself as a strategic epicenter for nearshoring in Latin America. Thanks to its privileged geographical location, extensive network of trade agreements, robust infrastructure, highly skilled workforce, and competitive operating costs, the country has attracted some of the world's most important companies.

Success stories in sectors such as automotive, technology, electronics, aerospace, and pharmaceuticals underscore Mexico's ability to adapt to the demands of the global economy and position itself as a key partner in the global supply chain. These investments have not only strengthened the local economy but also generated high-quality jobs and driven innovation in the region.

Mtro José Alberto Salda?a Juárez

CEO Gestión Tecnológica Avanzada

Asesor de las Naciones Unidas en Economía y Estrategia Empresarial Industrial

correo: [email protected]