5 Trends to Watch: 2024 Nearshoring – Mexico
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SOURCE: Greenberg/Traurig LLP
- Nearshoring in Mexico will grow beyond manufacturing to include higher value-added industries. Companies relocating to Mexico may have been initially attracted to the country’s low manufacturing costs, but their operations may also benefit from several trade promotion and maquila programs available through the Mexican legal framework. With industries evolving into high-tech sectors (i.e., auto and aerospace), the demand for a workforce with a college or advanced degree is also increasing. This translates into a higher number of expats coming to Mexico to establish their parent company’s regional operations. And with more global companies relocating to Mexico, so too are their advisors (i.e., financial and legal advisors with a global footprint).
- Mexico reinforced as a gateway to North America and other regions. Mexico will continue to capitalize on its unique position as part of the world’s largest free-trade zone, the North America region, which accounts for 30% of the global economy. Mexico will also continue to capitalize on the existing regulatory framework, comprising 14 trade agreements and international forums with over 50 countries, with a potential export market representing 60% of the world’s GDP.
- Investments in the semiconductor supply chain will grow. Given legislation passed in the United States to develop the semiconductor industry internally and regionally (i.e., the CHIPS Act), Mexico issued an executive order in late 2023 offering certain tax benefits for the export industry, including electronic components, among other goods. Joint efforts like this, along with other benefits of nearshoring (i.e., proximity to markets), should stimulate the regional semiconductor industry.
- Artificial intelligence and machine learning will help leverage resources. Artificial intelligence and machine learning are expected to help maximize resources by identifying the best resource allocation for a task or project. This may lead to greater automation in some industries, resulting in a shift away from jobs requiring physical strength and data analysis, and a shift towards candidates with higher skill levels and emotional intelligence (i.e., persuasion, social understanding, and empathy). See Harvard Business Review.
- “Made in North America.” Since NAFTA, the first iteration of the free trade agreement for the North America region, and now with the USMCA, there has been a steady growth of supply chains for many types of high-value goods (i.e., car manufacturers, aerospace component manufacturers, etc.). This includes suppliers and original equipment manufacturers who also have set up in Mexico or have a strong regional presence. Going forward, labeling products “Made in North America” may be more accurate than “Made in Mexico” or “Made in the USA.”
About the Authors:
Gabriel Lozano is a shareholder in the firm’s Mexico City office, and as head of the Nearshoring practice group has relocated permanently to Monterrey. He focuses his corporate practice on mergers and acquisitions, private equity and venture capital investments, and private financing. As a dually licensed attorney eligible to practice in Mexico and the U.S. (admitted to the NY state bar), Gabriel has served as a transactional attorney advising clients in connection with domestic as well as cross-border transactions. His cross-border experience includes advising clients in their soft landing in Mexico and Latin America, including legal aspects in connection with the relocation of business operations to Mexico.
Guillermo Sánchez Chao focuses his practice on international trade, customs, supply chain, regulatory and administrative litigation. Guillermo counsels domestic and multinational businesses on the development of projects and optimization of strategies that facilitate and make foreign trade transactions more efficient to promote production, importation and exportation of goods as well as proper compliance with regulations established in local laws and international treaties signed by Mexico.
