Can Mexico boost US corporate pandemic nearshoring? | International Trade News

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Mexico City, Mexico – United States Business Association of E-Commerce (USBAEC) CEO Tayde Aburto has a message for the Mexican government: Encourage more U.S. companies to relocate the companies they relocated to China and South Asia. Southeast closer to home.

“Some of our members have been successfully practicing relocation to Mexico for several years,” Aburto told Al Jazeera. “About 5% of our members had opted for nearshoring before the pandemic.”

The entrepreneur and founder of the Hispanic Chamber of E-Commerce said Mexico said grumbling and supply chain disruptions caused by the COVID-19 pandemic fueled an uptick in outsourcing to Mexico , keeping the USBAEC busy.

“When there is an opportunity, we connect businesses with Mexican suppliers that we know have the quality and capacity to meet the needs of American businesses,” he said.

The US-based association also practices what it preaches, hiring tech professionals in the city of Morelia, Michoacán, to support its operations.

Some of our members have been successfully nearshoring in Mexico for several years.

by Tayde Aburto, CEO, USBAEC

The case for U.S. companies near Mexico has been building for years. The US-China trade war that developed under former US President Donald Trump has raised the costs of a host of China-based inputs for US companies. Washington has also imposed restrictions on some products from China, fearing they could contribute to human rights abuses. Rising fuel and shipping costs resulting from the pandemic have also made Chinese products less attractive to American businesses.

And while China’s star of manufacturing outsourcing is fading, Mexico’s is shining brighter. The country is part of a free trade agreement with the United States and Canada that allows duty-free imports and easier transactions. It also has a cultural affinity with its northern neighbor, a strong manufacturing base and a growing talent pool of skilled tech workers.

“It’s a country with a lot of resources that these companies are finally recognizing,” Aburto said. “The federal government must take this opportunity to make Mexico’s strengths visible.

Deloitte’s latest economic outlook for Mexico indicates that offshoring currently presents Mexico with a critical opportunity, “which, if seized in time, has the potential to help the country reverse years of weak investment growth and, in fact, to propel it to higher growth in the years to come.”

Deloitte cites jeans manufacturers who, following for example a 23.8% drop in shipments from Indonesia to the United States in 2021, “are looking for nearby suppliers in order to avoid bottlenecks in the chains supply and higher transport costs”.

Decoupling

A boost to nearshoring would be welcome by Mexico. Its economy fell into recession at the end of 2021, after contracting for two consecutive quarters. Unlike the United States and other countries, the government of Mexican President Andres Manuel Lopez Obrador has not put in place a major spending program to help support the economy during the pandemic. And he has even less leeway to throw money at the problem now. Annual inflation is above 7%, due to shortages caused by supply chain issues.

Meanwhile, the United States-Mexico-Canada Agreement (USMCA) cuts both ways for Mexico, said Ignacio Martínez Cortés of the National Autonomous University of Mexico.

It is a country full of resources that these companies are finally recognizing.

by Tayde Aburto, CEO of the United States Business Association of E-Commerce

Although the USMCA pact facilitates trade between Mexico and the United States, it also requires that more auto parts be produced in the United States rather than in Mexico. But Cortés also points out that some of the fastest growing industries on the Mexican border now include medical supplies, aerospace parts and electronics, as American, Asian and European companies set up new operations.

Mexican officials are trying to highlight the case of nearshoring. Economy Minister Tatiana Clouthier has promoted the country as a possible location for manufacturing semiconductor chips – essential for car manufacturing, and currently in short supply globally.

Mexican banker and USBAEC adviser Sergio C Muñoz told Al Jazeera that if the Mexican government wants to give a serious boost to offshoring, it needs to build more business-friendly infrastructure in cities beyond the current centers.

“If you have relocated to cities that are not CDMX [Mexico City], Guadalajara and Monterrey, for example, and you need your employee to have 5G internet access to do the job, to transfer heavy files, and the government hasn’t invested in infrastructure recently, why would you the cost of providing expensive equipment to someone who won’t be able to use it? ” He asked.

“The government must prioritize providing the proper infrastructure so Mexican workers can operate at the same level as if they were in Palo Alto,” Munoz added.

Aburto said he expects interest in nearshoring in Mexico to increase. Just recently, “we were contacted by a company that is relocating production from Korea,” he said.

“They sent their products from Korea to a port in Europe and then from Europe to South America and also the United States,” he said, noting that now “they are moving that distribution center from Europe to Mexico”.

For Muñoz, “With all the logistics, operational and environmental issues in Asia, [nearshoring] really feels like a great opportunity for Mexico and educated Mexican youth to jump on the ladder of economic growth for the next ten years.

“I beg the Mexican government to support the next generation with all the resources they need to succeed,” Muñoz said.

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