{"id":84713,"date":"2024-04-16T21:03:07","date_gmt":"2024-04-17T02:03:07","guid":{"rendered":"https:\/\/imco.org.mx\/en\/?p=84713"},"modified":"2024-04-26T15:54:43","modified_gmt":"2024-04-26T20:54:43","slug":"why-mexico-needs-a-nearshoring-strategy","status":"publish","type":"post","link":"https:\/\/imco.org.mx\/en\/why-mexico-needs-a-nearshoring-strategy\/","title":{"rendered":"Why Mexico needs a nearshoring strategy"},"content":{"rendered":"

\"\"By: Ana Guti\u00e9rrez is Foreign Trade and Labor Market Coordinator, <\/em>published in Mexico News Daily<\/em><\/a><\/strong><\/p>\n

16-04-2024<\/p>\n

Nearshoring vs Reshoring<\/strong><\/h2>\n

Those of us who follow international and economic news are probably familiar with the words \u201cnearshoring\u201d and \u201creshoring,\u201d both of\u00a0which gained traction after the 2020 economic and public health crisis and the commercial and geopolitical disruptions that followed. Those trends consist in bringing supply chains \u201chome,\u201d and are part of a larger worldwide shift towards\u00a0deglobalization<\/a>\u00a0that came about after the crisis of 2008-2009.<\/p>\n

Of the two, nearshoring has a more open approach and seeks to bring supply chains home to a region, not just a country. That region, however, needs to meet certain requirements: the countries in that region need to be close not just geographically but politically and, most of all, in terms of commercial allyship. Close ties are fundamental. By contrast, reshoring usually refers to the action of bringing back supply chains to a specific country.<\/p>\n

For Mexico, nearshoring represents an\u00a0exciting opportunity<\/a>. It\u2019s seen as a path to further integration with North America, which would not only result in higher trade flows with the United States and Canada but also in a higher exchange of knowledge and skills and an advancement in our productive capabilities which \u2014 using those new skills \u2014 could be modernized.<\/p>\n

If nearshoring materializes fully, it could mean another economic boost for Mexico, in the vein of what the country saw after the North American Free Trade Agreement (NAFTA) took effect in 1994.<\/p>\n

How has nearshoring affected Mexico\u2019s economy?<\/strong><\/h2>\n

So far, Mexico has seen some encouraging results.<\/p>\n

In 2023,\u00a0foreign direct investment (FDI)<\/a>\u00a0linked to nearshoring spiked 93%\u00a0compared to 2022 \u2014 namely investment directed to sectors like\u00a0automotive production<\/a>, pharmaceutical products and\u00a0semiconductors<\/a>, among others with ties to global value chains.<\/p>\n

That performance compares quite positively with the (-)31% year-over-year decline seen in FDI flows directed to other areas of the economy, such as the telecommunications and financial sectors.<\/p>\n

Foreign investment directed to automobile and truck manufacturing \u2014 the largest nearshoring-related sector in the country \u2014 increased by 72% during that period. For activities related metal ore mining, also integrated into global value chains, FDI inflows almost tripled.<\/p>\n

The country has also had a high number of new investment announcements: since the beginning of 2021, just when nearshoring was beginning to gain traction, over a hundred new investment projects associated with it have been announced in Mexico, with a total estimated investment of more than US $30 billion.\u00a0Even if some of them fall through \u2014 currently, about 43% of those projects are still in the announcement stage \u2014 six out of every 10 projects are either already operational or under construction.<\/p>\n

Large investment sums are expected to continue to arrive in the coming years. It would seem, then, that we\u2019re capitalizing on the opportunity.<\/p>\n

Is Mexico realizing its full potential?<\/strong><\/h2>\n

However, as is often the case in Mexico \u2014 in its economic growth, its fight against poverty and its efforts to reduce inequality, to mention a few instances \u2014 it also looks like we\u2019re not really reaching our full potential.\u00a0Even though Mexico seems to be thriving as\u00a0an FDI host<\/a>, it pales in comparison to the FDI inflow growth seen in other countries.<\/p>\n

When we look at the results seen in Brazil, for example, we see a year-over-year increase of 70% in FDI reception between 2021 and 2022; in Chile, that same figure was 50%. Both countries are located in Latin America, yet both have higher increases than Mexico, where FDI inflows grew 12% in the same period. Additionally, Brazil\u2019s FDI more than doubled that of Mexico in 2022, even though it was only 0.4% higher back in 2020.<\/p>\n

What is Mexico doing wrong? Why is its FDI not increasing at the same rate as that of other countries? The answer doesn\u2019t necessarily lie in what the country\u2019s doing wrong, but in what it\u2019s failing to do.<\/p>\n

Mexico needs a strategy, not assumptions<\/strong><\/h2>\n

When the world and the United States started thinking about nearshoring, many in Mexico assumed that we would naturally be included as an integral part of the puzzle. We assumed that, due to Mexico\u2019s geographical and cultural closeness with the U.S. and its participation as a partner of one of the largest, most comprehensive free trade agreements in the world, the United States-Mexico-Canada Agreement, we\u2019d be prioritized as an ally in the effort to create more resilient supply chains.<\/p>\n

That mindset has led to a lack of strategy or efforts aimed at becoming the most competitive and convenient ally for North America. Consequently, we haven\u2019t yet done the work needed to ensure that we have the\u00a0necessary infrastructure in terms of electricity and water, housing and connectivity,<\/a>\u00a0and we\u2019ve neglected our\u00a0compliance with trade commitments<\/a>, including those contained in USMCA.<\/p>\n

Every relationship requires work, and maintaining our close ties to our North American partners is not the exception; without that work, it\u2019s irrational to think that we\u2019ll naturally take precedence over other countries.<\/p>\n

The danger in assuming that we\u2019ll be prioritized without having to make an effort to become more competitive is that we could let the nearshoring opportunity pass without leveraging it to boost growth and economic development. If we don\u2019t want that opportunity to come and go \u2014 and if we want to be considered as part of the North American \u201chome\u201d that the United States wants to bring supply chains back to \u2014we need to do the work.<\/p>\n

Foreign Trade and Labor Market Coordinator at the\u00a0Mexican Institute for Competitiveness (IMCO)<\/a>\u00a0Ana Bertha Guti\u00e9rrez is an economist trained at the National Autonomous Technological Institute (ITAM), the University of California at San Diego, the Harvard Kennedy School of Government, and the Organization of American States. Previously, she was Research Coordinator for M\u00e9xico, \u00bfc\u00f3mo vamos?, an NGO focused on tracking national and state economic figures.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

By: Ana Guti\u00e9rrez is Foreign Trade and Labor Market Coordinator, published in Mexico News Daily 16-04-2024 Nearshoring vs Reshoring Those of us who follow international and economic news are probably familiar with the words \u201cnearshoring\u201d and \u201creshoring,\u201d both of\u00a0which gained traction after the 2020 economic and public health crisis and the commercial and geopolitical disruptions … Continue reading Why Mexico needs a nearshoring strategy<\/span><\/a><\/p>\n","protected":false},"author":143,"featured_media":84746,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"footnotes":""},"categories":[1],"tags":[],"aioseo_notices":[],"yoast_head":"\nWhy Mexico needs a nearshoring strategy - IMCO_en<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/imco.org.mx\/en\/why-mexico-needs-a-nearshoring-strategy\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why Mexico needs a nearshoring strategy - IMCO_en\" \/>\n<meta property=\"og:description\" content=\"By: Ana Guti\u00e9rrez is Foreign Trade and Labor Market Coordinator, published in Mexico News Daily 16-04-2024 Nearshoring vs Reshoring Those of us who follow international and economic news are probably familiar with the words \u201cnearshoring\u201d and \u201creshoring,\u201d both of\u00a0which gained traction after the 2020 economic and public health crisis and the commercial and geopolitical disruptions … Continue reading Why Mexico needs a nearshoring strategy\" \/>\n<meta property=\"og:url\" content=\"https:\/\/imco.org.mx\/en\/why-mexico-needs-a-nearshoring-strategy\/\" \/>\n<meta property=\"og:site_name\" content=\"IMCO_en\" \/>\n<meta property=\"article:published_time\" content=\"2024-04-17T02:03:07+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-04-26T20:54:43+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/imco.org.mx\/en\/wp-content\/uploads\/2024\/04\/794525_Recinto-Portuario-de-Manzanillo-3_web-1.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1920\" \/>\n\t<meta property=\"og:image:height\" content=\"1278\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"IMCO staff\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"IMCO staff\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/imco.org.mx\/en\/why-mexico-needs-a-nearshoring-strategy\/\",\"url\":\"https:\/\/imco.org.mx\/en\/why-mexico-needs-a-nearshoring-strategy\/\",\"name\":\"Why Mexico needs a nearshoring strategy - IMCO_en\",\"isPartOf\":{\"@id\":\"https:\/\/imco.org.mx\/en\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/imco.org.mx\/en\/why-mexico-needs-a-nearshoring-strategy\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/imco.org.mx\/en\/why-mexico-needs-a-nearshoring-strategy\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/imco.org.mx\/en\/wp-content\/uploads\/2024\/04\/794525_Recinto-Portuario-de-Manzanillo-3_web-1.jpg\",\"datePublished\":\"2024-04-17T02:03:07+00:00\",\"dateModified\":\"2024-04-26T20:54:43+00:00\",\"author\":{\"@id\":\"https:\/\/imco.org.mx\/en\/#\/schema\/person\/0235efe3dc71dededad390a6076ae7a2\"},\"breadcrumb\":{\"@id\":\"https:\/\/imco.org.mx\/en\/why-mexico-needs-a-nearshoring-strategy\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/imco.org.mx\/en\/why-mexico-needs-a-nearshoring-strategy\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/imco.org.mx\/en\/why-mexico-needs-a-nearshoring-strategy\/#primaryimage\",\"url\":\"https:\/\/imco.org.mx\/en\/wp-content\/uploads\/2024\/04\/794525_Recinto-Portuario-de-Manzanillo-3_web-1.jpg\",\"contentUrl\":\"https:\/\/imco.org.mx\/en\/wp-content\/uploads\/2024\/04\/794525_Recinto-Portuario-de-Manzanillo-3_web-1.jpg\",\"width\":1920,\"height\":1278,\"caption\":\"El Ejecutivo visit\u00f3 el Recinto Portuario de Manzanillo. 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