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The winds of nearshoring are driving the Mexican economy

Mexico is largely focusing on nearshoring, a dynamic that has the potential to modify and strengthen various sectors, even in comparison with other national realities that have dominated the global market in recent decades.
Nearshoring is the outsourcing of business processes, especially information technology processes, to another company in a nearby country, in preference to a more distant one.

A definition

This practice enables businesses to move their operation to a closer, more cost effective location. In other words, nearshoring has a threefold advantage: fewer time zone differences and cultural discrepancies, and an increased level of control in decision-making processes. 

The agreement

In line with this strategy, Mexico and the United States are strengthening their partnership to attract business relocation from Asia.
After a meeting between Economy Minister (SE) Raquel Buenrostro and US Secretary of Commerce Gina Raimondo, the SE said that the two countries will collaborate to prepare a โ€œjoint presentationโ€ to the private sector โ€œto disseminate the opportunities and economic and fiscal benefits that both countries offer for the relocation of companies.โ€

The advantages

Back in November, Buenrostro claimed that more than 400 North American companies have shown interest in relocating from Asia to Mexico. In fact, the nearshoring process guarantees several advantages for the US economy, at a time when the trade war between the United States and China is complicating the movement of goods.
In addition to this, the advantages associated with the USMCA free trade pact, which promotes connectivity between Mexico, United States and Canada, the proximity to the US and the affordable labor costs must be added. 

The sectors involved

The meeting between Buenrostro and Raimondo focused on issues related to the printed circuit board and semiconductor industry, a sector that is currently the subject of heavy investment from the United States.
โ€œThrough [the U.S.-Mexico] High-Level Economic Dialogue, both governments agreed to strengthen coordination to create better [economic] conditions and accelerate the arrival of new investment to Mexico,โ€ Buenrostro said. The SE should issue all โ€œpermits and authorizations required for the establishment of new companiesโ€ in Mexico.

Nearshoring is also stimulating the airline industry by encouraging circulation in the regions of Mexico where foreign investment is highest: the Bajรญo area, Central Mexico, and the northern states. The airline industry is the second-most-benefited from the nearshoring phenomenon, following the industrial real estate sector.
Agreements such as the USMCA and the Free Trade Network of Mexico, which provide the country preferential access to 50 countries, have fuelled a portion of air traffic. 
To meet nearshoring demand, the airline industry has promoted coordinated planning with regional airport associations. This dynamic has also favored a reduction in traffic to an almost saturated Mexico City International Airport.

Which sectors will be affected next by nearshoring? Stay up to date on the latest news of the Mexican industry, follow us on LinkedIn!


Read also: Mexico: overview and perspectives of the plastic manufacturing industry

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