According to the Economy Ministry, hundreds of companies are interested in relocating to Mexico owing to the country’s geographical proximity to the United States and to the U.S.-Mexico-Canada Agreement (USMCA).
“More than 400 North American companies have the intention to carry out a relocation process from Asia to Mexico,” Economy Minister Raquel Buenrostro said at an appearance before the Senate on Tuesday.
She said that the interest in relocating to Mexico stems from the importance of the treaty, which has “strengthened the relationship with the U.S. and Canada.” However, she added that an agreement to resolve the energy dispute under the USMCA must be secured to move forward with the investments.
In July, the U.S. requested dispute settlement consultations with Mexico under the USMCA over a series of changes in Mexico’s energy policies. Although the U.S. hasn’t called a dispute panel to rule on the subject, the U.S. ambassador to Mexico said in October that the possibility has not been ruled out.
According to Credit Suisse, if the U.S. was to call a dispute panel to rule on the energy policy dispute, the sanctions resulting from such a decision could interfere with the nearshoring plans of the 400 companies interested in relocating.
Nearshoring has become an important driver of foreign investment in the country. According to the latest study conducted by Credit Suisse, in October alone, Mexico registered an investment of US $2.05 billion from this activity.
So far this year, nearshoring has drawn a total of US $17.2 billion — 25.5% more than the figure reported in the same period of 2021. Most of the investment income has been fueled by companies in the automotive industry such as Volkswagen, Continental, Pirelli, and Michelin.
This is in line with a recent study led by the Bank of Mexico (Banxico) which noted that a growing number of companies are finding a solution in Mexico to the trade conflict between China and the U.S., which is forcing them to move their production and supply chains closer to home.
Recognizing the importance of nearshoring for Mexico, Buenrostro stressed on Tuesday that neither Mexico, the U.S. or Canada want confrontations over the USMCA consultations, “… and least of all now that we are going through a global crisis and when relocation is so important,” she said. She added that Mexico’s geographical location as well as the country’s size and market features, have resulted in Mexico being the U.S.’ largest trade partner.
On Nov. 3, Buenrostro had a video call with U.S. Trade Representative Katherine Tai, in which Tai stressed the importance of making prompt progress in addressing the USMCA consultations. Both reportedly agreed to stay in regular communication about the issues discussed.