Nearshoring, an opportunity for Mexican companies

CDMX, March 16^th, 2022.- Nearshoring is the arrival of foreign investments that seek to bring production and processes closer to their clients in North America to take advantage of the USMCA terms and conditions, driven by the new rules of content origin, whose percentages are rising.

The American consulting company, Bain & Company, reported that nearshoring could accelerate growth by at least two percentage points, that is, from 4-5% to 6-7% in exports from the Mexican manufacturing sector in the coming years, this would be equivalent to US$8 billion dollars/a year in addition to the amount that the industry usually produces. Monterrey, Tijuana and Querétaro are some of the cities that, due to their already consolidated industrial environment, are attractive places for international companies that could relocate some of their production processes to Mexico. In addition to the United States and China, companies from Germany, Canada, Denmark and France have also begun to relocate operations to Mexico.

Today, Mexico has a strong manufacturing industry, with stable export growth between 4 and 5% per year, predominantly in the transportation, mechanical/electrical devices, and machinery industries. This is relevant in a global context in which almost 75% of companies, in general, have registered interruptions in their supply chain due to the pandemic, and in which the chip and container crises are affecting supply of various products, so companies are looking for new markets to decentralize their production operations (nearshoring) in order to minimize the impact on their finances and guarantee consumers access to their products.

According to the latest Bain research, titled Nearshoring opportunities for Mexican companies, there are four factors that favor Mexico so that more international companies can relocate their production centers to the country:

1. Time zones aligned with the United States, which facilitates communication between production centers compared to the different time zones in China and Europe.

2. More affordable and faster transportation costs and delivery times due to proximity and low complexity. For example, shipping costs from northern Mexico are definitely cheaper than those from China.

3. The USMCA. This trade agreement eliminated tariffs on Mexican exports to the United States, which favors Mexican production in various industries, especially in the manufacture of automobiles and automotive components.

4. An experienced manufacturing industry with high quality standards and a highly trained workforce. The gross added value of the manufacturing industry in Mexico is around 221 billion dollars and contributes 18% to the national GDP.

In this sense, Bain & Company’s data shows that in the last six years Mexico has acquired a competitive cost advantage over China, the largest nearshoring market on the planet, which could generate a significant change in trends of imports from US and European companies in the automotive sector, machinery, electronics, furniture, plastics, among several others.

Cluster Industrial Consulting services

Although global trends are favorable and there are quite solid local factors, Mexico has to address some challenges to consolidate nearshoring as a growth opportunity for the national economy, such as the development of production ecosystems that ensure the supply of raw materials and supplies, continued availability of skilled labor and improvement of logistics infrastructure and security.

In this regard, Cluster Industrial Consulting Services has been of great help with the localization of national suppliers for some Tier 1 companies in the US and Europe, fulfilling their supply projects for the automotive industry in Mexico. Our specialized strategic team helps you find potential suppliers and attractive quotes from a base of over 6,000 companies steaming from our digital B2B platform, Directorio Automotriz, which you can visit and register into right here: https://www.directorioautomotriz.com.mx/

In short, our specialized sourcing services in Mexico allow companies in the United States and Canada to find reliable and responsible suppliers through the work of our business intelligence team. Stop wasting time and start gaining attractive quotes for all your industrial projects located in Mexico.

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