In theory, Mexico should be a privileged investment destination for nearshoring, however, an analysis by the Swiss financial services company UBS showed that macroeconomic data still do not show a change in terms of investment or activity.

Due to the geopolitical situation, the desire of companies to shorten production lines and relocate to closer locations has increased, so Mexico seems to be able to take advantage of its geographical proximity to the United States, its membership of the T-MEC and its relatively low costs. of labor

According to a survey conducted by the UBS Evidence Lab, more than 90% of executives, whose companies operate part of their production in China, have already started or intend to relocate. Of these, 23% consider Mexico as an option, which has positioned it as the fourth country that generates the most interest in nearshoring investments.

Despite the positive outlook, Rafael De La Fuente, chief economist for Latin America at UBS, pointed out that, although there is an opportunity for Mexico in nearshoring, it is also possible that it will not benefit, an opinion that he maintains based on some of the internal weaknesses of the country.

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He noted that the main driver of the relocation of companies is automation, so the advantages in labor costs for Mexico would be less relevant.

However, one of the indicators that demonstrate the true impact of this trend in Mexican territory is the expansion in industrial infrastructure, which would become the weakest link, since it is still 4% below pre-crisis levels. although it is still one of the winning sectors.

"Investment in industrial developments is growing rapidly, becoming the most dynamic subsector," he said. Although this is a positive sign, the rise in industrial construction is below the levels of activity seen in the past decade.

Another factor analyzed to demonstrate the true impact of nearshoring is the penetration of manufacturing exports in the US market. When adding all the subsectors, imports from Mexico represent 13.8%, with an expansion of 0.1%, since 2028. While China adds 20.1%, with a fall of 4.4%, in the same reference year.

Of interest: The industrial zone in Mexico City expands to the north

Nonetheless, countries like Vietnam and Taiwan have increased their gains in US manufacturing imports by more than 1.0 percent.

Likewise, data from the IMMEX Program do not show that the country has entered a new phase of increased manufacturing. In fact, the pace of growth slowed down during the pandemic (approx. 0.7% per year).

Finally, UBS determined that foreign direct investment (FDI) does not account for a nearshoring paradigm shift either.

“If transactions outside the industrial sector are discounted, FDI would still be below pre-crisis levels. The border and lowland states, the main manufacturing regions of Mexico, are not growing,” the study concluded.

In Solili you can consult industrial warehouses available in Ciudad Juárez, Tijuana and Reynosa

Original note