Nearshoring, the new commercial strategy between Mexico and the US

Throughout history, world economy has been evolving and adapting to new productive, logistical, and financial needs, derived from international phenomena.

Covid 19 has exposed problems in the supply chains in a globalized world, high cost in transportation from the point of manufacture to the sales point, caused a series of important shortages in business. As response to this dynamic, Nearshoring plays a significant role in these matters.

But What is Nearshoring? And why is this important for Mexico? 

Nearshoring is a commercial practice where a company moves its production system to the closest point to the final consumer. In other words, it means to relocate their assembly and production facilities to reduce expenses in transportation regarding to the final market.

Due to the impact of covid 19 in China, time in manufacture process and international seaborn transportation suffered severely, basically because most of the North America suppliers are located in Asia.

In this context, Mexico emerges as remarkable objective in terms of production because of two significant commercial aspects. On one hand, it has more than 11,000 kilometers of coastline surrounded by 2 mains oceans in the world, the Pacific and the Atlantic. This means, competitive advantage that only 19 countries shared worldwide.

Secondly, Mexico’s first commercial ally and neighbor is the biggest consumer globally, the United States of America.

According to data from Inter-American Development Bank, Mexico is expected to attract around 35 billion of dollars due to the relocation of the companies in search of a closer location to the US. Outstanding examples of this strategies are the aeronautical industry in Queretaro where Bombardier and Safran lead the exportations with 98% of the sales to North America. More recently, the upcoming opening of Tesla facilities in Nuevo Leon will increase exponentially the export in the automotive sector to the US.

Some of the advantages of nearshoring between Mexico and the US are the complicated commercial relations with China, the USMCA as potential factor to increase and facilitate commerce, as well as the low labor cost in Mexico that according to the Competitive Center of Mexico is established in 4.82 dollars per hour.

The pursuit of economic recovery after Covid 19, has encourage to international trade to search for new alternatives to improve supply chains. Nearshoring aims to be one of the most beneficial solutions today.

Contributor: Irving Zamora

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About Allyn International

Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North and South America, Europe and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China and Prague, Czech Republic. For more information, visit www.allynintl.com