Relatively cheap labor and its proximity to the U.S. has made Mexico the ideal “Nearshoring” destination

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Relatively cheap labor and its proximity to the U.S. has made Mexico an ideal destination for industries to manufacture their products, including electric carstoys, and medical supplies.

Mexico’s manufacturing industry has been “booming” as a result of recent nearshoring initiatives, BofA’s Capistrán wrote. The sector has grown 5% so far in 2022 alone, and has already exceeded its pre-pandemic size, he added.

Capistrán noted that average labor costs in Mexico are now cheaper than in China, incentivizing more companies to move manufacturing operations to its shores.

These factors—combined with a preexisting free trade framework between Mexico, Canada, and the U.S.—could help Mexico increase its exports by 30% over the next several years, BofA analysts wrote.

Banks are already jumping on the region’s promise as a new manufacturing hub to replace China. In July, the Inter-American Development Bank, the largest developmental finance institution servicing Latin America and the Caribbean, announced it would inject between $1.75 and $2.25 billion to support nearshoring and relocation projects in Mexico over the next three years.

In a separate study in June, the IDB found that nearshoring could add $78 billion in export value in Latin America over the next few years, with Mexico seeing the biggest gains, adding $35.3 billion in annual export value.

Relatively cheap labor and its proximity to the U.S. has made Mexico an ideal destination for industries to manufacture their products, including electric carstoys, and medical supplies.

Mexico’s manufacturing industry has been “booming” as a result of recent nearshoring initiatives, BofA’s Capistrán wrote. The sector has grown 5% so far in 2022 alone, and has already exceeded its pre-pandemic size, he added.

Capistrán noted that average labor costs in Mexico are now cheaper than in China, incentivizing more companies to move manufacturing operations to its shores.

These factors—combined with a preexisting free trade framework between Mexico, Canada, and the U.S.—could help Mexico increase its exports by 30% over the next several years, BofA analysts wrote.

Banks are already jumping on the region’s promise as a new manufacturing hub to replace China. In July, the Inter-American Development Bank, the largest developmental finance institution servicing Latin America and the Caribbean, announced it would inject between $1.75 and $2.25 billion to support nearshoring and relocation projects in Mexico over the next three years.

Source: El Financiero

Mexico Daily Post