Nearshoring is relocating manufacturing operations or other business processes to nearby or neighboring countries rather than far-off places. This trend, accelerated by recent global disruptions like the COVID-19 pandemic, minimizes supply chain risks and reduces lead times. Below are the top reasons why global multinationals are relocating to Mexico:

1. Cost Efficiency

• Mexico offers a significant cost advantage with its competitive labor rates compared to the United States and Canada. The country has a large, skilled, and low-cost labor force, which translates to lower production costs.
• Mexico’s Free Trade Agreements (FTAs) with 46 countries, including the USMCA, enable tariff-free access to international markets, making it a cost-effective hub for manufacturing and exports.
• The lower costs of real estate and utilities also contribute to cost efficiency.

2. Geographical Proximity

• The geographical closeness of Mexico to North American markets allows for shorter lead times and faster delivery.
• Proximity enables better coordination and communication between suppliers, manufacturers, and customers.
• Nearshoring allows companies to maintain a Just-In-Time inventory system, reducing holding costs and increasing flexibility in responding to market changes.

3. Supply Chain Resilience

• Nearshoring in Mexico enhances supply chain resilience by diversifying the supply base and reducing dependencies on far-flung suppliers.
• The shorter supply chains are less vulnerable to disruptions caused by geopolitical tensions or natural disasters.

4. Quality and Compliance

• Mexico has developed a robust manufacturing sector with a reputation for high-quality production.
• The country adheres to international standards and regulations, ensuring quality and safety requirements compliance.

5. Trade Policies and Infrastructure

• Mexico’s engagement in numerous international trade agreements fosters a conducive environment for foreign investments and operations.
• The USMCA (United States-Mexico-Canada Agreement) facilitates seamless business operations across North America, providing a significant advantage for companies looking to nearshore in Mexico.
• Mexico has invested in modern infrastructure and technology to support the manufacturing sector.
• The country's developed transportation network facilitates the efficient movement of goods, and technological advancements support the evolving needs of modern manufacturing.

6. A Skilled Labor Force and a Collaborative Ecosystem

• Mexico has a young, dynamic, and technically skilled workforce that can meet the demands of various industries.
• The education system in Mexico is increasingly aligning with the manufacturing sector's needs, producing a steady stream of qualified professionals and engineers.
• The collaborative ecosystem between government, industry, and academia fosters innovation and continuous improvement in business processes.
• Mexico has seen a growth in clusters of industries that facilitate knowledge sharing and collaboration, thus enhancing competitiveness and innovation.

Our Outlook Remains Positive for Nearshoring in Mexico

By bringing manufacturing closer to home through nearshoring in Mexico, North American companies can leverage these advantages to optimize their operations, mitigate supply chain risks, and better respond to market dynamics. Through nearshoring, companies can lower costs and foster more robust, resilient, and responsive supply chains, thereby achieving a competitive advantage in the global market.

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