Mexico has surpassed low-cost Asian countries and the United States in nearshoring, as highlighted by a recent analysis conducted by United States consulting firm Kearney.The analysis, which compares Asian and Mexican manufacturing imports to United States domestic manufacturing output, reveals Mexicos rising performance.From 2013 to 2022, Mexicos score reached 1.76 points, surpassing Asian countries (1.62 points) and the United States (1.22 points).Nearshoring refers to a specific form of offshoring where companies relocate their operations to neighboring countries to reduce costs.Mexico City.
(Photo Internet reproduction)In the case of North America, Mexico, and Brazil are popular nearshoring destinations.Wage differentials play a lesser role compared to farshoring (relocating to distant low-wage countries), with a focus on cost reduction.The study considers various Asian economies, including China, Vietnam, the Philippines, Malaysia, Indonesia, Pakistan, Sri Lanka, Taiwan, Thailand, Bangladesh, India, Singapore, Hong Kong, and Cambodia.Mexico has gained a significant share of imports into the United States and has even outpaced recent United States domestic manufacturing growth, accounting for inflation in 2021 and 2022.Kearney identifies four types of companies driving the surge in United States imports.
Firstly, United States companies that previously sourced from China are increasing their production.Secondly, many products manufactured in Mexico for the United States market originate from United States or European companies seeking to expand their capacity in Mexico.Companies like Tupperware, Hasbro, Tesla, and Mattel have announced plans to boost production in Mexico.Chinese companies also leverage Mexicos manufacturing capabilities to supply their United States customers and reduce reliance on United States -China relations.Finally, secondary and tertiary Chinese suppliers follow suit, establishing themselves in Mexico to serve original equipment manufacturers.Despite official figures indicating modest Chinese investment in Mexico, the landscape tells a different story, with noticeable industrial park expansions such as Hofusan near Monterrey.Industries experiencing growth in United States imports from Mexico include transportation equipment, computer and electronic products, medical equipment, pharmaceuticals, aerospace, furniture, and building materials.A Kearney survey of corporate CEOs reveals a growing interest in relocating production facilities to the United States , with 96% of respondents in 2022 indicating they have already relocated or are considering relocating in the past three years, compared to 78% in 2021.