Why More Companies are
Nearshoring to Mexico
Many companies are recognizing the substantial benefits associated with nearshoring their operations
Seen as an increasingly promising alternative to offshoring, some of the benefits of nearshoring in a nearby country like Mexico include a shorter supply chain, duty-free imports, and robust intellectual property (IP) protection.
Top Benefits of
Nearshoring to Mexico
Intellectual Property is critical to the US economy, with industries that intensively rely on IP contributing to roughly 30% of U.S. employment and 52% of merchandise exports according to 2014 data from the Department of Commerce.
That number has certainly only continued to grow over recent years.
Yet concerns over IP protections have increasingly taken the forefront of foreign policy negotiations and is perhaps the most important challenge facing multinational corporations with manufacturing operations away from their home country.
Thanks to the recent passage of the USMCA as well as a long history of taking on IP protections through international agreements, US companies are given much stronger protections for their intellectual property rights in Mexico.
Mexico's competitiveness in agrifood production, but also in the manufacturing and the services industries are responsible for the continuing flow of Foreign Direct Investment (FDI), even during the COVID-19 pandemic. Competitive production costs, proximity to the North American market and highly skilled labor makes Mexico attractive to investments.
In the case of food production, Mexico's weather, it's year-round production of fruits and vegetables, and their food safety certifications have positioned the country as a global leader in the production, processing, and exporting of agriculture and livestock.
Challenges with long-term Supply Chain Disruptions
With the current and possible long-term disruption og global supply chains, Mexico becomes the alternative, even for Asian companies looking to relocate in the North American Region. A myriad of multinational corporations have Mexico in their sights due to it being able to offer preferential market access to more than 50 countries through its varying Trade Agreements with Europe, South East Asia, Oceania, South America, and North America.
The recently enacted United States-Mexico-Canada Agreement (USMCA) heabvily incentivizes businesses based in the U.S. to take advantage of manufacturing in Mexico.
Along with the advantages that the USMCA brings, a business operation in Mexico gains access to numerous markets that Mexico has entered Free Trade Agreements (FTAs) with.