Nearshoring en México
Nearshoring in Mexico: Advantages for U.S. Manufacturers and the Regional Supply Chain**
As manufacturers continue to expand their global presence, they increasingly recognize the benefits and competitive advantages of producing in regions with more convenient geographic locations.
For North American companies, this concept has gained significant traction over the past decade. The U.S.-China trade war and the ongoing COVID-19 pandemic have heightened these concerns, prompting many countries to rethink their strategies for creating more diversified, less risky, and more resilient value chains to foster growth.
Here are 10 reasons why proximity to Mexico is the most valuable option for nearshoring:
No export costs and significantly low tariffs.
Free trade in North America is ensured through the USMCA (updated NAFTA), with clear rules and deeper integration among partners.
Mexico-NAFTA Trade
Source: Banco de México
A gateway to global markets
In addition to the T-MEC, Mexico has 12 other free trade agreements with 48 countries, connecting the Mexican economy to more than 1.3 billion consumers (60% of global GDP).
Source: Secretería de Economía de México
Labor costs in Mexico remain competitive compared to labor costs in China.
Since 2008, the trend of moving production to Asia began shifting back to North America due to the significant rise in labor costs in China.
This directly impacts the manufacturing sector, with factories operating on thin margins rapidly relocating to other competitive countries.
The T-MEC includes a wage adjustment for the region, and even with this improvement, manufacturing wages in Mexico remain competitive.
Average Real Wage Index for Emerging G20 Countries, 2008-2022
Source: ILO estimates
Skilled workers / Mexican talent
In recent decades, economic regions in Mexico such as Hidalgo-State of Mexico and the Bajío have worked closely with manufacturing clusters and universities to prepare a workforce that meets labor market demands.
The result of this effort is a young, competitive, and highly skilled workforce in Mexico, with over 110,000 engineering students and technicians graduating each year.
Number of graduates in engineering programs
Source: OECD
A more convenient time difference.
Enhance your supply chain strategy.
Fast shipping, efficient logistics services, and fleet management in a better geographic location allow all types of products to reach your customers more quickly.
Maritime days to selected destinations.
Source: The Boston consulting Group in De La Madrid (2014)
Logistical Advantages
More than 50 entry ports between the U.S. and Mexico will enhance your logistics strategy, compared to the high shipping costs between China and the United States.
Source: GMB Global Value Chains Disruptions
Índice de Facilidad para hacer negocios
Rankings published by The Boston Consulting Group, PWC, and Savills indicate that Mexico holds a strong position in terms of competitiveness, considering low input costs, quality infrastructure, and reliable services.
Source: PwC Analysis with data from The World Bank, Trading Economics and official statistics.
An innovative, well-developed, and diversified industrial sector.
Mexico is a global leader in manufacturing sectors such as automotive (4th largest exporter in the world), aerospace (6th largest supplier of aircraft parts to the U.S.), and medical devices (8th largest exporter in the world).
Manufacturing capacity, automotive sector
Source: PwC Analysis with data from The World Bank, Trading Economics and official statistics.
Industrial warehouses in Mexico
The Mexican industrial real estate market is the largest in Latin America. In the second quarter of 2020, there were more than 23 million square feet available, with the manufacturing sector being the primary driver of demand. Availability rates are around 1.8%, and the average asking price has remained at USD $4.94 per square foot over the past year.
Source: CBRE Market Research
Sources
1. MEXICO – A TRUSTED ECONOMIC PARTNER. Mexico’ Secretariat of Economy (SE).
2. Distribution of graduates and entrants by Field. OECD.
3. Global Wage Report 2018/19. International Labour Organization.
4. Beyond China: How Could Mexico Benefit from a Rearrangement of the GSC. PwC.
