‘Nearshoring’ already benefits 3 out of 10 Mexican companies, according to Banxico

The relocation of strings o’nearshoring‘ “it’s happening” and it already benefits three out of 10 mexican companies with an increase in its production in the first quarter of 2023, the Bank of Mexico (Banxico) estimated this Thursday.

“Regarding impacts that have already materialized, 30.7% of the companies mention having signed new contracts with foreign companies or having increased their production due to relocation”, the Mexican central bank said in a report.

According to their Report on Regional Economiesthis phenomenon identified as ‘nearshoring’ has also led 29.1% to hire more staff, and has “increased its use of installed capacity, or increased the area of ​​rented real estate”.

Likewise, Banxico identified, after interviews with 467 businessmen in the country, that 27% reported that they will see increases or are in the process of increasing their productive capacity by expanding existing plants or building new ones.

Another result is that at least 4 out of 10 companies consulted have held conversations about ways to benefit from this phenomenon.

In addition, a smaller percentage (32.9%) stated that they have plans to expand their production or increase investment.

“Business executives confirm that relocation is happening. Specifically, they point out that companies have gradually established themselves in Mexico and that they have observed greater demand from foreign companies, which is why they have increased their production or are planning to do so.”, said the Banxico study.

The businessmen consulted have also observed greater occupation and construction of warehouses and industrial parks, as well as greater demand for office space.

Nearshoring impacts over time

The companies interviewed qualified that the relocation of global production in Mexico “It is likely to be gradual, as planning and establishing businesses in a new location are costly processes that take time.”.

The report shows that only 1.3% estimated that the greatest impacts were observed before the pandemic, while the same percentage estimated that this occurred between 2020 and 2021.

10.1% reported that the benefits were observed in 2022, while 21.5% of the companies consulted anticipated that the greatest benefits would occur this year.

Meanwhile, 40.6% expected the effects of ‘nearshoring’ to be reflected later, between 2024 and 2025.

To take advantage of these benefits, the business community said that it will be important to monitor possible imbalances between supply and demand in the transition period and promote a flexible economy.

Finally, the report points out that it is necessary to promote a favorable environment for business and that encourages investment.

“In the opinion of the companies contacted, improving security conditions in the country and strengthening the infrastructure, especially in the southern region, could contribute to this.”, the report concluded.

Source: EFE