Nearshoring” refers to the practice of a company transferring its business operations or services to a nearby country, often one that shares a border or is in close geographical proximity. This strategy is adopted to take advantage of lower production costs, favorable business environments, and proximity to the company’s home country.
Following the disruption caused by the pandemic, companies are pursuing shorter and more resilient production chains capable of maintaining continuous operations.
Companies are not going to completely exit Asia; they are simply aiming to be closer to what is still the world’s largest market: the United States.
México is not only a neighbor to the United States but also part of the United States-Mexico-Canada Agreement (USMCA). This makes it a more appealing destination for companies aiming to be closer to the U.S. market.
The Inter-American Development Bank (IDB) estimates that Mexico could attract around 35 billion dollars through relocation.
International Companies with investment expansion in Mexico
With its low costs and its location next to the U.S. market, Mexico emerged as an attractive alternative, which, following the pandemic, has drawn manufacturing in sectors such as automobiles, electronics, textiles, and furniture.
BMW announced an investment of 800 million euros in the plant they have in San Luis Potosí, where they will assemble electric cars. The German automaker BMW will invest 800 million euros (approximately 864 million dollars) in a new platform to produce high-voltage battery production for electric cars at its San Luis Potosí plant, as part of a plan aiming for more than half of its global sales to come from fully electric vehicles by 2030.
TESLA will build a plant in Nuevo Leon. Musk’s interest in investing millions of dollars in Mexico comes as the country begins to claim the spotlight as a gateway for ‘nearshoring’.
Volkswagen will invest 763 million dollars to produce electric vehicles in Puebla
Volkswagen will invest 763.5 million dollars in the modernization of the Puebla plant to start production of a new mid-size gasoline SUV by the end of 2024 and electric vehicles before the end of the decade.
Group Head de International Banking de Scotiabank
The Group Head of International Banking at Scotiabank Mexico has positioned the country as one of the most robust options for economic development and investment in recent years. Currently, over 300 Canadian companies are considering nearshoring due to the United States being the world’s primary consumer market. Part of the credibility and confidence Mexico is generating among Canadian investors is due to Scotiabank’s International Banking strategy. Their campaign states, ‘We will host events in Canada to promote investment opportunities in Mexico, as well as in Mexico, where we will attract clients from around the world who see this country as a significant expansion opportunity and an entry point into the North American corridor. Our goal is to position Scotiabank as the primary reference for considering the North American corridor as a growth opportunity for our clients.’ The Mexican market has become crucial for the bank, and within a 5-year plan, they aim to generate over 800 million Canadian dollars in additional profits, with Mexico accounting for nearly half of that growth, making it the most important country in their international expansion after Canada.