International companies are coming to Mexico as part of nearshoring expansion

Companies that have already announced nearshoring-related expansions in Mexico include Taiwanese tech giant Foxconn, Danish toy giant Lego, and US Barbie doll maker Mattel.

A vast sprawl of industrial parks already surrounds Monterrey, the capital of Nuevo Leon which is home to glass-fronted office blocks and luxury hotels catering to well-heeled business executives.

A plot of land near the city has been earmarked for a giant new factory announced last year by electric car maker Tesla, though construction has been delayed.Nearshoring is likely to be a gradual process “that’s going to take many years,” said Elijah Oliveros-Rosen, chief emerging markets economist at S&P Global Ratings.

 

Most of the activity seen so far has been in the expansion of industrial parks rather than lots of major manufacturing firms relocating to Mexico, he said.“That hasn’t boomed,” he told AFP.Companies looking to move to Mexico face challenges including insecurity, water scarcity, labor requirements, and the need for a consistent supply of energy, particularly from renewable sources, Oliveros-Rosen said.

In 2022, residents of Monterrey faced weeks of water rationing.Contemplating the future at his factory, Ochoa also saw many challenges, including a need for infrastructure development and worker training.“If a logger comes to a forest where there are many trees and begins to consume the resources without thinking about sustainability and long-term development, in the end, it won’t be possible to replant what’s needed for the coming decades,” Elijah Oliveros-Rosen, the chief emerging markets economist at S&P Global Ratings concluded.

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