The concept of Nearshoring is not new, but it has often been misunderstood and met with some resistance. To clarify, Nearshoring refers to the practice of relocating production operations closer to consumption markets. This approach aims to minimize risks related to logistics while taking advantage of geographical proximity and cooperation with allied countries (known as friendshoring), enabling companies to respond more quickly to market needs.
The Importance of Proximity to the Market
Nearshoring does not seek to create “global winners,” but rather “regional winners,” prioritizing efficiency in supplying nearby markets. It’s a mistake to think that all countries, especially those far from major consumer economies, will benefit from this model. For example, Asia does not lead in this area due to its distance from the major Western markets.
So, what impact does nearshoring have on Mexico’s economy? At the Nearshoring Observatory, we have gathered data that shows the growth and progress of this phenomenon in Mexico. Below are some key findings.
Progress of Announced Investments
The Nearshoring Observatory holds the most complete database on nearshoring, tracking the dates of investment announcements and the time it takes for those investments to materialize. It’s important to consider that many of these investments require construction periods before they come to fruition. According to our estimates, the average time for these investments to become operational is 14 months.
In the summer of 2024, only 9% of the announced nearshoring investments had been realized, but that number has now risen to 34%. This not only shows continued growth but also emphasizes that nearshoring is becoming an increasingly important pillar of Mexico’s economy.
Growth in the Construction Sector
The construction sector has seen significant growth, both in public and private projects. Non-residential construction, such as warehouses and industrial parks, has particularly surged. This reflects the rising demand for modern industrial spaces needed to support manufacturing and logistics driven by nearshoring.
This boom not only contributes to job creation and economic growth but also promotes the development of high-quality infrastructure and encourages the adoption of advanced technologies in production processes.
Increased Investment in Machinery and Equipment
A key aspect, though often underappreciated, is the increase in investment in machinery and equipment. Led by the private sector, this investment reflects the need to modernize production capacities to meet the growing demand from the United States. Notably, the acquisition of imported machinery, particularly in sectors such as transportation, reflects the integration of advanced technologies and improved logistics efficiency.
Impact on Economic Growth
The Gross Domestic Product (GDP) of a country is a key indicator of its economic growth. One important component of GDP is “gross fixed capital formation,” which is divided into public and private sectors. By the end of 2023, private fixed capital formation accounted for 22.6% of Mexico’s GDP, with a significant increase in the share of private sector investment.
This growth anticipates a major transformation in Mexico’s production capabilities and technological landscape, particularly in export-oriented manufacturing, which is being redefined like never before.
Increased Exports to the United States
Mexico has exceeded expectations, becoming the leading supplier of manufactured goods to the United States, surpassing even China. This success is due to Mexico’s ability to leverage nearshoring and overcome challenges such as the renegotiation of NAFTA (now USMCA) and the disruptions caused by the pandemic.
The growth of Mexico’s automotive industry, in particular, has been remarkable. Thanks to USMCA policies, exports of cars and auto parts to the United States have significantly increased, cementing Mexico’s role as a key player in North American trade.
In summary, nearshoring is driving Mexico’s economic growth, positioning it as a strategic partner for the U.S. market and a key player in the reshaping of global supply chains.
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