Outsourced manufacturing offers Mexico a major business opportunity (Deloitte)

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Mexico City, Mexico – The CEO of the United States Business Association of E-Commerce (USBAEC), Tayde Aburto, has a message for the Mexican government: Encourage more US firms to move businesses they have offshored to China and Southeast Asia closer to home.

“Some of our members have been successfully nearshoring to Mexico for several years,” Aburto told Al Jazeera. “About 5 percent of our members had taken up nearshoring prior to the pandemic.”

The entrepreneur and founder of the Hispanic Chamber of E-Commerce say Mexico said the supply-chain snarls and disruptions spawned by the COVID-19 pandemic have fuelled an uptick in nearshoring to Mexico, keeping USBAEC busy.

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

The case for US companies to nearshore to Mexico has been building for years. The US-China trade war that grew under former US President Donald Trump raised the costs of a slew of China-based inputs for US business. Washington has also slapped restrictions on some goods from China over concerns that they contribute to human rights abuses. Rising costs for fuel and shipping stemming from the pandemic have also made Chinese goods less attractive to US companies.

And as China’s outsourced manufacturing star fades, Mexico’s shines brighter. The country is part of a free trade agreement with the US and Canada that allows for 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.

The latest Deloitte Mexico Economic Outlook says that nearshoring currently offers Mexico a critical opportunity, “which, if grabbed in time, has the potential to help the country reverse years of slow growth in investment and in fact propel it to higher growth in the coming years”.

Deloitte cites jeans manufacturers who, following for example a 23.8 percent fall in shipments from Indonesia to the US in 2021, “are looking for suppliers that are close by in order to avoid bottlenecks in supply chains and higher transportation costs”.

Source: El Financiero