After taking stock of the economic commitment of nearshoring to attract Foreign Direct Investment (FDI) to Mexico, Shanon O’Neil, Nelson and David Rockefeller Vice President for Latin American Studies at the Council on Foreign Relations, said that to achieve the above One of the country’s main challenges is investment in infrastructure.
“The federal entities that have managed to have the best attraction of companies are NL, Coahuila, Guanajuato, Chihuahua, San Luis Potosí and Jalisco,” he noted at the 2023 Prosperity Summit: Possible Purpose, of the Mar de Cortés Forum, leaving a reflection regarding the need to create better scenarios for FDI.
He added that, “Mexico must not only see that it will benefit from being close to the United States, but that correct infrastructure must be created so that these companies that want to invest can have good conditions to do so.”
He explained that better communication routes are needed such as roads, ports, railway systems and a better social security system.
“Mexico does not have railway systems for trade, which limits the interaction between both countries. It also has problems with basic services, such as lack of water, medical services and education,” he explained in the discussion “Nearshoring in Mexico” together with Rafael Fernández de Castro, Director of the Center for Mexico-United States Studies at the University of California in San Diego (UCSD).
Both pointed out that nearshoring is a market that Mexico can exploit, due to its excellent geographical position with the United States.
“But doing so will require greater development of infrastructure that facilitates the transfer of goods, essentially those components that are of interest to the United States and Canada,” they indicated.
Just in October of this year, tax incentives were announced by the Mexican Government from 56 to 89 percent, only on investments made in 2023 and 2024 in 10 areas: electronic components, semiconductors, batteries, motors, electrical or electronic equipment, fertilizers , pharmaceutical, agribusiness, medical instruments and cinematography.
“Together with the other entities, this is an important challenge and requires attention for the Sea of Cortes Region, since the geographical and orographic situation are attractive factors, but the lack of infrastructure in communication routes and working conditions has prevented the development of that type of industry,” the specialists pointed out.
Mexico needs considerable investments, estimated at around 40 billion pesos, to modernize and expand its electrical infrastructure and meet projected growth related to the relocation of manufacturing, Shannon said.
Fernández de Castro made an assessment of Mexico’s current commercial situation, in which he highlighted the participation of this country during the last five years in two markets, the United States and China.
However, he added, the situation between these two countries is not the most positive and Mexico must decide which commercial partnership is the most important.
“I think Mexico should bet on the North Americanization of its market,” he proposed and then recalled that this country has an advantage due to the trade agreement it has been a part of since 1994 with the United States and Canada, but also because the Mexican strategy revolves around manufacturing and This is an activity of interest for the northern region of the continent while China is betting more on the primary market, which leaves lower profits.