Nearshoring to Mexico: advantages and savings for foreign companies

By Editorial

Mexico City

October 31, 2022

During the last two decades, the offshoring phenomenon -- which consists on having production contracts with overseas suppliers, mainly located in Asia -- has lost appeal. Everyday there are more companies considering to relocate part of their supply chain to countries geographically closer to their last mile warehouses.

This phenomenon it´s very clear in North American region and is known as nearshoring.


Nearshoring: Paradigm Change

According to the analysts, the main reasons that made the global enterprises stop looking Asia region as an investment destination for manufacturing operations are the cost increments – especially in workforce – and the trade war with the United States.

Regarding the first point, the “World Salaries Report” of the International Labour Organization, reveals that real salaries in China doubled between 2008 and 2019, far exceeding the global growth rate. 

Wage growth rate, 2006-2019

All this happened while there were problems with intellectual property piracy, cases of labor exploitation and supply delays caused by environmental disasters or health emergencies as the COVID-19 outbreak.

All these cases, create a problem for the worldwide supply chain.


Why is Mexico so important in Nearshoring?

For Mexico and the United States, the understanding come mainly from the trade agreement signed by the two countries and Canada (T-MEC). Trade that consolidates North America region as one of the biggest supply regions in the world. As a result, Mexico since 2020 remains to be the main comercial ally for the United States, with a commercial exchange of 86 billion dollars, according to the United States’ Commerce Department report.

Nearshoring to Mexico have huge benefits for strategic areas of the Mexican economy, such as the automotive industry. Michelin Tires manufacturing factory in Leon, Guanajuato is an example: starting operations in 2016 and has attracted many suppliers and contractors to Bajío region.

This example is just one of many in a country that demands a quick growth of all industrial sectors with a high-quality infrastructure. Therefore, Frontier Industrial has become a Proven solution for Industrial real estate market and a solid consultant for any companies that requires an industrial facility, industrial land lot with all services “shovel-ready” or a Build -to- suit project in the most active markets of Mexico.



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