Throughout the year we have written several research notes related to nearshoring opportunities for Mexico, under what we call “Zoom Nearshoring – The Banorte Report”. These comments are based on the extensive research we have conducted on this topic.
In the realm of international trade, Mexico stands on the brink of substantial growth, primarily propelled by the nearshoring phenomenon. This surge results from various factors, including the necessity to mitigate risks arising from policies in distant nations, disruptions like the Covid19 pandemic, and geopolitical conflicts. Nearshoring could manifest in two phases: immediate effects during the initial investment and facility construction stages (lasting one to two years), followed by more significant medium- and long-term impacts in production of goods exported abroad and all the spillovers as global supply chains adapt.
Mexico is poised to reap immense benefits from nearshoring, leveraging its geographical proximity to the United States, favourable demographics, competitive logistics, and cost advantages. Some of these benefits are related to lower transportation, logistics and labour costs, in addition to the mitigation of risks in the supply chain, as observed during the pandemic. These attributes make Mexico an enticing destination for companies aiming to relocate their operations closer to consumer markets. Industries that can harness nearshoring advantages encompass passenger vehicles, auto parts, goods vehicles, computers, monitors, cables, electronics, pharmaceutics and medical devices, logistics, warehousing, transportation and more.
Even in the absence of nearshoring, Mexico's non-oil exports have the potential to independently grow at a rate of 6% annually, indicative of the nation's export sector resilience and strength. To fully unlock these opportunities, Mexico must address a range of challenges. The proposed "four-helix" model, comprising all levels of government, the private sector, educational institutions, and society as a whole, seeks to confront issues such as infrastructure, competitiveness, and the rule of law.
In summation, Mexico is stepping into a new era of international trade competition, marked by cooperation and enhancements across multiple domains to maximise the advantages of this evolving global trade landscape. We estimated that Mexico could increase around $168 billion in additional non-oil exports over the next five years (a 30% increase from current levels) derived from nearshoring.
How BANORTE can help
Because no one is better than a Mexican to show Mexico to the world, we at Banorte are ready to receive and support international companies interested in Mexico, based on our maintained position as the second largest financial group and our 122 years of experience in the Mexican financial market.
Banorte's international desk, with a multicultural team along with one of the top trade finance and supply chain departments in the market, aids international businesses on their needs; we offer tailored solutions across industries, regardless of size or origin, enhancing the customer experience during the Mexican business journey.
Banorte is your financial guide in Mexico; for more information please visit us at:
https://investors.banorte.com/en
https://www.banorte.com/wps/portal/banorte/Home/analisis-economico
