Nearshoring: supply chains make Mexico and Latin America rise as investment points

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Regarding economics, nearshoring to Mexico and Latin America has become popular on many newspapers' front pages due to its emphasis on resilient supply chains and improved operational reliability. These two factors are critical in comprehending the shift towards nearshoring.

In a process that started even before the crisis due to the global COVID-19 Pandemic, the differences between the policies of the United States and China made numerous companies look to establish different supply chains to guarantee their operations and reduce costs.  

The rise of Latin America

The strategy was clear: Latin America was key to having a new model of operations and logistics in the Western Hemisphere. The region has great potential, with 26 countries looking to benefit with additional exports of US $64,000 million, according to the 2022 report The rise of Nearshoring in Latin America: a spotlight on Mexico, by Controlrisks, a global specialist risk consultancy with offices in Colombia, Mexico City, Panama City, Sao Paulo, and Georgetown.

The inter-American Development Bank has explained in a document published in June 2022, that nearshoring can lead to US $78,000 million in additional income per annum to the region, considering additional exports of goods (US $64,000 million), and services (US $14,000 million) regionwide in a short and medium term. The advantages the region enjoys, besides the proximity to the United States market, include:  

  • Long-standing bilateral relations with the United States and Canada (the nearshoring trend in the region is often called “friend” or “ally-shoring”).
  • Well-established export-oriented economic models.
  • A digital transformation that can enable more companies to export services.
  • Demographic and social factors, such as a comparatively young working population and relatively low cost of the workforce in some countries (including an expanded talent pool of technology specialists). 
  • An ever-growing domestic consumer market and extensive family ties between Latin America and the United States.

The opportunity for Latin America is due to its location. Being a well-positioned region is not a new fact, but considering the current context, different countries can benefit from the nearshoring trend by contributing to the establishment of more reliable supply chains.

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Total nearshoring opportunities by country. Additional exports of goods (in million US Dollars)

Country Additional expected income in US million dollars
Argentina $3,900m
Bahamas $177m
Barbados $61m
Belize $44m
Bolivia $125m
Brazil $7,800m
Chile $1,800m
Colombia $2,600m
Costa Rica $1,500m
Dominican Republic $1,600m
Ecuador $841m
El Salvador $1,100m
Guatemala $786m
Guyana $400m
Haiti $253m
Honduras $1,200m
Jamaica $139m
Mexico $35,300m
Nicaragua $568m
Panama $802m
Paraguay $251m
Peru $1.400m
Suriname $58m
Trinidad & Tobago $477m
Uruguay $528m
Venezuela $321m

(Source: The rise of nearshoring in Latin America, a spotlight on Mexico)

Conditions In Mexico are particularly attractive, not just because of its proximity to the United States, but for the advanced trade infrastructure and adherence to the rules of the United States-Mexico-Canada Agreement (USMCA).

Nearshoring to Mexico represents a great opportunity for Mexico and Latin America. In the Mexican market, Frontier Industrial offers industrial land and industrial buildings for sale in the most productive areas of the country to develop different industries. If you're planning to establish operations in Mexico, contact us and ask for our portfolio.