Nearshoring in Mexico

blog | Mar 06, 2023

Nearshoring is becoming more popular in the search to reduce the impact of having factories in locations far from the product market. There are advantages to this trend, which range from bringing productions closer to consumer markets, shortening times, increasing jobs, simplifying logistics and transport processes and even reducing costs. This strategy allows businesses to produce close to their market, increasing proximity and profitability.  

Between 2021 and 2022, logistics costs from Asia to the Americas increased. Shipping a container from China to the West Coast of the United States increased by 361%, and ocean freight transportation time from China to the United States was extended to almost 60 days due to congestion. This makes Mexico an attractive place for investment and relocation of factories in addition to the benefits that the Agreement between Mexico, the United States and Canada can offer, as well as the proximity to the United States. 

In December 2022, logistics spending for US imports from China was estimated at $5.4 per $100 of import while it was estimated at $1.0 dollars per $100 of imports for Mexican imports, which is very attractive for bilateral trade.  

Manufacturing Industry 

Mexico has an experienced manufacturing industry with high quality standards and workforce. In addition, the cost of labor in Mexico is more profitable than in China since Mexican companies pay an average of $372 per month for labor while China pays $379 (according to a study carried out by The Boston Consulting Group (BCG) for the Ministry of Economy).  

Added to this is the cultural and geographical proximity that improves communication processes, as well as facilitating international shipments and speed in deliveries. 

With these benefits that attract different industries to Mexico, the Tesla brand recently announced its project in Nuevo León where an assembly plant will be built, which will be called "Mexico’s Gigafactory". It will be the brand's first car production plant in Latin America and the fifth in the world, after those already operating in Fremont and Austin, United States, Shanghai, China, and Berlin, Germany.  

Trade Between Mexico – United States  

In 2022, Mexico was ranked second among the United States' top trading partners, accounting for 14.7% of the United States' international trade. Canada ranked first with 14.9% while China ranked third with 13.0% of total trade. 

The three main sectors that the United States imports from Mexico include the manufacture of transportation equipment (30.8%), the production of computer equipment, communication (18.0%) and the manufacture of electrical accessories and appliances (9.1%).