Monday, May 20, 2024

Where are companies choosing to nearshore in Mexico?

Mexico has become a top destination for relocation, as companies from across the world look to move their operations closer to the United States. Mexico has a skilled workforce and low production costs, making it an attractive option for manufacturers and distributors.

But once in Mexico, where are the best spots to relocate? Companies that have already made the leap to nearshore in Mexico are mostly concentrated in the country’s north, west and central regions. These locations are best for nearshoring in Mexico because they have access to natural resources such as water and energy, are close to the United States, have favorable logistics and infrastructure conditions and concentrate a strong talent pool.

Mexico’s skilled workforce means that businesses from automobiles to robotics have chosen the country to serve as a production and distribution hub for the United States. (Gobierno de Guanajuato/Facebook)

Here is a list of the best nearshoring spots in Mexico divided into four areas: northern Mexico, southern Mexico, western Mexico, the Bajío and Mexico City.

Northern Mexico 

Several states in the North stand out when it comes to nearshoring, for several different reasons. According to a report by organization Caminos de la Libertad, Nuevo León, Chihuahua and Coahuila are attractive for their energy security, reduced bureaucracy, easier business startup processes and legal security. 

Nuevo León

Nuevo León has become a leading destination for nearshoring. By the end of 2023, the state had successfully attracted US $45 billion in foreign direct investment (FDI), largely due to nearshoring. Most of this investment has been directed towards the state’s capital, Monterrey.

Monterrey has been by far the biggest winner in the nearshoring boom. (David Liceaga/Unsplash)

To date, 76% of nearshoring in Mexico is concentrated in Nuevo León. Perhaps even more impressively, 45% of nearshoring in Latin America is also concentrated in the northern state. 

The industries using the most real estate in Nuevo León are the automotive, electrical, electronics, construction and supply chain sectors.

Coahuila

Another popular state for nearshoring in Mexico is Coahuila. Until May 2023, it had received US $2.2 billion worth of FDI, and the previous year, it became the second-highest exporter of goods from Mexico

Coahuila is known for its mining industry. The state is the world leader in refined silver production and holds Mexico’s largest steel producer.

The industry that has boosted nearshoring the most in Coahuila is the automotive sector, mainly located in the cities of Saltillo and Torreón.

Coahuila has become an auto manufacturing hotspot, predominantly for Asian firms. (Municipio de Torreón/Facebook)

Chihuahua

Last year, the state of Chihuahua received an impressive $2 billion in FDI, with more than 35 new investment projects. According to official numbers, 25 of these projects were the result of nearshoring. 

These new investments have led to significant growth in the state’s industrial real estate sector. In 2023, Ciudad Juárez, the capital of Chihuahua, began constructing 458,000 square meters of new industrial space to meet the increased demand.

The industries that have attracted nearshoring in Chihuahua include automotive, aerospace, electronics, metalworking, and medical device industries.

Baja California

According to the Nearshoring Score by Mexican bank Banorte, Baja California is among the states with the greatest potential to receive the benefits of company relocation, along with Nuevo León and Chihuahua.

Tijuana has long played an important role in trade between the U.S. and Mexico, but nearshoring is taking it to an even greater level. (Gautman Krishnan/Unsplash)

Wall Street mega-funds like Oaktree Capital Management show a growing interest in Baja California, recognizing the region as key for strategic investments. Such interest has been driven by the notable improvement in the state’s financial health under the management of the Secretary of the Treasury.

Moreover, Mexico’s largest aerospace hub is in Baja California, where more than 100 aerospace companies generate 30,000 direct jobs, mostly around Tijuana and Mexicali.

The Bajío

Rodrigo Folgueras, regional head of real estate consulting firm CBRE in the Bajío, has praised the region as an investment destination thanks to its location, skilled labor force and infrastructure.

Querétaro

According to Banorte, Querétaro is the non-border state that stands to gain the most from nearshoring in 2024. This is attributed to the strategic location of its industrial parks and zones, the potential GDP by state and the influx of FDI over the past three years.

The state is known for its innovative industry, large aerospace cluster and its role in the global supply chain.

The industries that have attracted nearshoring in Querétaro include the automotive, aerospace, warehousing, transportation and food and beverage industries.

Querétaro has seen investment from a wide variety of industries. (Gobierno de Querétaro)

Guanajuato

Guanajuato and Querétaro were the most sought-after states for industrial space, a trend driven mainly by manufacturing companies over the first three quarters of 2023. 

Guanajuato’s Ministry of Sustainable Economic Development (SDES) said the state secured 31 investment projects last year, all related to nearshoring. To attract this investment, the region tackled two primary challenges that often hinder relocation to other states: efficient energy management and attracting skilled human talent.

The industries that have boosted nearshoring in Guanajuato mainly belong to the automotive, food, household appliances and pharmaceutical chemical sectors, as well as the medical cluster.

Aguascalientes 

The Mexican Institute for Competitiveness (IMCO), a think tank, has found that Aguascalientes is the state taking the most advantage of nearshoring. Foreign direct investment from sectors most related to this phenomenon increased by 310% from January to September in 2023, compared to the same period in 2022.

Warehousing space across Mexico is being leased almost as fast as it can be built. (Adalberto Ortega/Vesta)

IMCO highlighted that Aguascalientes’ performance reflects the state’s structural conditions in terms of labor, basic input infrastructure and regulatory quality, making it an attractive investment destination.

The industries that have boosted nearshoring in Aguascalientes are mainly the automobile and truck manufacturing sectors.

Western Mexico 

Jalisco

After Querétaro, Jalisco stands out as the second non-border state that could benefit the most from nearshoring. 

To enhance Jalisco’s appeal for nearshoring, the state’s government has implemented the Jalisco Tech Hub Act, a public policy initiative which includes investments in expanding educational infrastructure and developing highly specialized talent.

Tech-focused Jalisco is looking to receive investment from the digital sector. (Hiram Prigadáa)

In the last two years, the electronics and appliance manufacturing sector has driven the most nearshoring activity in Jalisco. 

Mexico City 

Of the US $32.92 million that arrived in the country in 2023, US $10,580 million went to Mexico City, according to Economy Ministry (SE) figures. 

Although not an industrial city, the nation’s capital is the preferred location for the headquarters of companies operating in industrial cities in Mexico. Experts have stated that Mexico City is the country’s most competitive federal entity, offering a great educational environment and excellent local and international connectivity.

In 2023, IMCO found that 27% of the FDI that arrived in Mexico City was related to nearshoring.

Gabriela Solis is a Mexican lawyer turned full-time writer. She was born and raised in Guadalajara and covers business, culture, lifestyle and travel for Mexico News Daily. You can follow her lifestyle blog Dunas y Palmeras.

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