50 Mexican companies close factories in China to bring them back to the country

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China is no longer the manufacturing center for 50 Mexican companies, which are removing some of their factories from the Asian continent to bring them to the industrial poles of Mexico.

There are 50 companies that are returning production plants from China to Mexico,” revealed José Gerardo Tajonar Castro, president of the National Association of Importers and Exporters of the Mexican Republic (ANIERM).

The plants that are leaving China belong to the automotive, textile and manufacturing suppliers. “They are Mexican companies with brands that we have recognized for a lifetime,” said the business leader.

Among the businessmen involved there is a very important ANIERM associate in the construction industry in the country, who is living the clear example of nearshoring, he told Forbes Mexico.

“This associate has had around 22 industries, of which at this time it has 20% in Mexico and 80% in China, now it has given us the information that it is returning 12 plants to Mexico,” said the also president of Trade Point Mexico.

Tajonar Castro gave an example of a famous brand of brushes that are sold to Central and South America; before they were made in Mexico, but at one point, their manufacture left China when the maquila there improved its quality.

“They told us that the difference between the Mexican and Chinese brush is that (the first) you can’t mess it up. Importers and exporters ripped off the Chinese brush a few years ago, and today China has efficient, high-quality production.”

The Mexican brush company then removed its factories from Mexico and took them to China, from where it produces and distributes to the whole world; however, today they seeks to return to the country.

“Today other companies are bringing industries to Mexico, because from here there is efficiency in deliveries and costs, as well as competitiveness in logistics,” he mentioned.

Mexican companies are returning their plants to North America because their customers in the United States already require the products in a timely manner, highlights the president of ANIERM.

Now there is a great opportunity to attract US companies, which require someone to help them with softlanding, to set up their companies and certify records of official standards, said Tajonar Castro.

“Today Mexico is the logistics center and developer of manufacturing, which is returning from Asia due to nearshoring,” said the leader of the international trade sector.

A ‘tsunami’ is coming with nearshoring

The accelerated growth of nearshoring implies the implementation of commercial, legal and tax strategies, in order to obtain both economic and logistical advantages, since now companies can have their production close to customers, save on costs and labor expenses, as well as having better products.

Nearshoring —the tendency of transnational industries to install their production lines in countries close to their main markets to reduce costs— is also a great opportunity for the growth of the Mexican economy, at least for the next decade, said Sergio Ríos Martínez, executive specialized in foreign trade and former general director of Investment Attraction of the Secretariat of Economic Development (SEDECO) of the Government of Jalisco.

Mexico, he detailed, has the optimal conditions to take advantage of this industrial relocation.

“We have greater commercial openness, a much more diversified economic structure and much more prepared people,” said the former official. “A tsunami is coming, and this is the decade of Mexico.”

The economic potential of Mexico is the main factor considered by companies to settle here. “The investor minimizes the political part, which possibly has a cost, but it is the economic part that he sees with great enthusiasm,” said Ríos Martínez.

“Nearshoring, driven to a large extent by the Treaty between Mexico, the United States and Canada (TMEC), benefits the country, increasing the arrival of foreign investments, as well as the competitiveness of players in the market, improving response times and reducing important risks when consolidating the distribution chains”, declared Diego Gómez-Haro, partner of the Sánchez Devanny law firm.

He added that as with all types of investments, including those related to nearshoring, these cover a wide range of legal areas, including corporate aspects, tax, labor, foreign trade, real estate, energy and regulatory, among others.

Knowing which are the most relevant areas will depend on various factors, including the identity and nationality of the investor, the type of business and the requirements it will have, investment and financing structure, and if applicable, the exit plan, to determine the appropriate tax legal strategy for each specific case.

In addition to identifying the type of operation and market to be served, looking for alternatives and landing the optimal business model for the specific situation.

Source: Forbes