Nearshoring Boom Means Mexico Needs Investment

May 27, 2024

 

Nearshoring Boom Means Mexico Needs Investment

 

Nearshoring is likely to supercharge Mexico’s economic growth and add up to 3% to its GDP in the next five years, but concerns are mounting over the country’s ailing infrastructure.

The current nearshoring trend is for US companies to move or outsource manufacturing to locations within Mexico to gain economical benefits, or even for Chinese companies to do the same to provide better access to the US market.

It is widely believed that nearshoring offers Mexico a once in a generation opportunity, due to the ever increasing customs tariffs that the US have been placing on Chinese products, and the freedom that the USMCA (United States Mexico Canada) agreement has brought to market.

The trend is catapulting business opportunities in the country to new heights, but experts believe Mexico is crying out for investment to cope with the associated challenges. These include capacity constraints at ports and airports, rail and road infrastructure issues, labour shortages, outdated equipment, and over-capacity at border crossing points.

The Pacific Coast sea freight ports of Manzanillo and Lazaro Cardenas have already been experiencing capacity bottlenecks due to a surge in import growth from China. While the trucking sector is in need of modernisation and is hamstrung by a shortage of about 50,000 drivers.

A lot of investment may be needed if Mexico is going to take full advantage of this opportunity.

 

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