Mexico Trade boom: Near Shoring US supply chains

Mexico’s Export growth driven by Near Shoring opportunities

 

 

Mexico: Second largest economy in South America

With a population of almost 130 million, a rich cultural history and diversity, and abundant natural resources. The World Bank assess Mexico as among the 15 largest economies in the world and the second largest economy in Latin America. The country has strong macroeconomic institutions, and it is open to trade.

Bloomberg in their recent post regarding Mexico’s export growth identifies the key elements driving Mexico’s export growth. Its openness to trade, geography and sophisticated manufacturing base

US demand for industrial goods from Mexico has been strong as trade between Mexico and its biggest trading partner (80% of exports) has continued to grow. Hitting a record in September $52b

 

 

Increased Government focus on Near Shoring Support

Mexico’s government is actively looking to build policy interventions to attract investment. Strengthening the country’s ability to become a more attractive option for American companies looking to develop Near Shoring or Friendly Shoring elements in their Supply chains. A business response to recent supply chain shocks such as the Russia-Ukraine conflict and China’s dynamic COVID containment policy.

The immediate attraction of the geographical position of Mexico to its Northerly neighbour allows rapid and quick movement of goods North South. Removing all the risk associated with long seaborne transport from Asia.

In addition, wages in Mexico whilst growing quickly are highly competitive with China.

Source: Supply Chain Quarterly

Mexico’s attractiveness as a jurisdiction for Near-Shoring or Friendly-Shoring elements of your Supply chain is further enhanced by the availability of a large labour force. Mexico has about 59 million people in the labour force, and about 7 million people who are available and not yet actively participating.

Summary

Nearshoring has huge potential for growth with an estimated 40% of all goods traded in the world pass through China at some stage. As companies look to build additional Markets into their sourcing strategies. The China + sourcing strategy.

Mexico is well placed to continue its growth trajectory as a highly attractive jurisdiction for Sourcing strategies to focus on.

1. Proximity and Trade agreements with USA and Canada
2. Sophisticated manufacturing network already in place
3. Large labour force and young average population age
4. Average wages highly competitive V China
5. Shipping risks removed with simple road freight links

Critical factors in Unlocking the Value potential of Mexico

The same with opening any new jurisdiction as part of a wider sourcing strategy several steps are crucial to ensure the positive results you require.

1. Clarity of brief on product requirements
2. Build a factory shortlist to make final partnership selection
3. Audit factory selections with independent auditors
4. Align environmental commitments with potential partners
5. Build in digitised QC for full transparency

Work with a Sourcing Partner who has a team on the ground to be your eyes and ears. Identifying the right factory partner short list for your sourcing needs

ET2C Global Sourcing Company

ET2C Is a global sourcing company with over twenty years’ experience working with our clients on their sourcing strategies. Our offices in seven countries including Mexico ensure you always have a team on the ground.

If you would like to explore opportunities within Mexico for your sourcing strategy or to discuss your future challenges.

Please contact us at contact@et2cint.com