Nearshoring in Mexico: Is the country industrializing or just building?
- Antonio Carlos Faustino
- Nov 14
- 8 min read
In recent decades, the term nearshoring has gained traction in discussions about international economics and productive reorganization. But what exactly does this concept mean, and why does it have such a significant impact on the economies of the Americas?
In our Good Morning, America! article, we want to present a new perspective on the impacts of nearshoring in Mexico and Latin America. We bring unpublished data, critical analysis, and invite you, the discerning reader, to reflect with us: are we truly witnessing a new industrialization or merely a sophisticated "assembly line" relocated closer to consumer markets?
Understanding the concept of nearshoring in Mexico
The term nearshoring refers to the process by which companies transfer part of their operations, mainly production operations, to countries near their main consumer market. The main objective is to reduce logistics costs, overcome tariff barriers, and gain agility in supply chains.
Following the Covid-19 pandemic, this movement accelerated. The global disruption of supply chains, shortages of inputs, and high transportation costs led giants in the electronics, automotive, pharmaceutical, and textile sectors to rethink their strategies. And the United States, the world's largest consumer, began to seek geographically close production partners.
In the new global landscape, being "close" has once again become a real competitive advantage.
From a socioeconomic standpoint, nearshoring reignites debates about industrial development, job creation, and technology transfer. But does it necessarily mean progress for Mexico and Latin America, or are there less visible nuances?
Why did nearshoring grow after the pandemic?
To understand the recent surge in nearshoring, we need to consider three key events from the post-2020 period:
Risks and delays in global supply chains, often concentrated in Asia;
Seeking business resilience by diversifying suppliers and geographic reach;
Geopolitical clashes, such as trade disputes and sanctions from major powers.
These pressures led the United States and Europe to reassess their dependence on China and other distant centers. A strategic part of the industry was transferred to closer countries, especially in Latin America, the Caribbean, and Eastern Europe.
In this context, Mexico has emerged as a favorite destination for American companies. Its geographical location is advantageous. Trade laws such as the USMCA (Treaty between Mexico, the United States, and Canada) also offer a solid foundation for the flow of goods, merchandise, and capital .
Mexico: industrial hub or maquiladora country?
In the Mexican economic landscape, the term maquiladora carries a history and controversy. Since the late 20th century, "maquiladoras" have been factories that import components, assemble products, and re-export them, benefiting from tax and customs incentives. The growth of this model has always sparked debate: is it genuine industrialization or mere assembly?
Historic growth of maquiladoras
Over the past 30 years, Mexico's border areas have attracted thousands of factories, mainly from the electronics, automotive, and textile sectors. Data from the Mexican government shows that in 1990, the number of workers in maquiladoras was around 500,000. In 2022, that number exceeded 3.1 million (INEGI, 2023).
We asked: was this growth accompanied by greater national technological complexity?
While there has been a surge in exports, the infrastructure still relies on foreign inputs and technologies. Several analysts argue that Mexico lacks a robust innovation ecosystem and strong domestic suppliers (OECD, 2021).
Authentic industrialization: are there any signs?
One characteristic that distinguishes genuine industrialization from simple assembly is the creation of local value. This involves research, the development of innovative solutions, and the growth of the local production chain.
Mexico has made some progress in the automotive and software sectors.
The aerospace sector, for example, sees partnerships for the development of more complex parts.
Global companies are investing in technical training and qualification of local suppliers.
Even so, dependence on imported components is still high. In 2023, 70% of the value exported by the Mexican automotive industry was of assembled products, with low national content according to the country's own Ministry of Economy (2023).
We assemble a lot, but manufacture little? That's the dilemma.
We then question whether nearshoring is simply updating the logic of maquila or whether it is advancing towards something more complex.
Foreign direct investment: where is the money going?
To understand the scale of nearshoring, we analyzed Foreign Direct Investment (FDI) flows in Mexico and Latin America in recent years. Data from UNCTAD (2023) reveal striking trends:
Mexico concentrated approximately US$36 billion in FDI in 2022, a 12% increase compared to the previous year.
Of the total, 48% went to the manufacturing sector, mainly automotive, electronics and food.
The United States, Germany, and Japan were the biggest investors.
Brazil received US$86 billion, but with a smaller share directed to the manufacturing industry.
Mexico is emerging as a leader in attracting new industrial projects driven by nearshoring . A significant portion of foreign investment is aimed at building manufacturing plants near the US and Canada.
The following graphic (we suggest a visual for web story posting) can illustrate the differences:
Mexico: Robust growth in FDI and expansion of the number of factories, especially in the northern regions.
Brazil: Highest total FDI, but focused on sectors such as energy, agribusiness, and services.
Attracting investment is not enough. The challenge lies in transforming resources into innovation and national value .
Is Mexico, in fact, the largest trading partner of the USA?
The rise of nearshoring has allowed Mexico to surpass China and solidify its position as the United States' main trading partner in 2023 (US Census Bureau, 2024).
From an export perspective, the country reached US$475 billion in sales to the US in 2023, representing 15% of total American imports. This trade is not limited to low value-added products; it ranges from sophisticated vehicles to electronics and medical equipment.
However, despite this leading role, assessments from organizations such as the OECD, the World Bank, and the Mexican Institute for Competitiveness paint a challenging picture:
Much of the growth is concentrated in industrial zones near the border, perpetuating regional inequalities;
Productive integration often occurs through dependence on contracts and technologies from foreign parent companies;
Little national innovation in export supply chains;
Limitations in infrastructure and proprietary technological development.
In our research on the blog Good Morning, America!, we noticed that there is legitimate enthusiasm about the economic gains, but also concern about the limited progress for innovative industrial sectors.
We are selling more, but are we creating more value for Mexico?
Brazil: Is it ready to compete?
While Mexico stands out on the nearshoring radar, the question always lingers: why doesn't Brazil receive the same productive boost?
The country possesses significant natural advantages, a continental size, and a domestic market with potential, but it has faced structural challenges for decades:
Complex tax bureaucracy, which hinders business planning;
Poor logistics infrastructure, increasing production and export costs;
Difficulty in negotiating trade agreements that facilitate integration with key markets;
Low integration into global value chains in high-tech sectors.
Even with modernization efforts – such as discussions on tax reform and infrastructure investments – Brazil still lacks the logistical, fiscal, and business conditions that make Mexico such an attractive hub.
According to a recent report by ECLAC (2023), despite Brazilian efforts, foreign companies continue to prioritize destinations with easy access to the American market and an already established logistics infrastructure.
For those interested in understanding the strategic role of ECLAC and other multilateral organizations, we recommend reading the article "The Role of ECLAC in the Economic and Social Development of the American Continent," here on our blog.
Benefits and limitations of nearshoring for Mexico and Brazil
In the debate about nearshoring, polarized analyses are common. Therefore, we propose here a transparent, critical, and balanced perspective:
What does Mexico gain?
Significant increase in the volume of industrial exports;
Creation of thousands of jobs – mainly in border regions;
Massive influx of capital and modernization of production processes.
However, challenges arise:
The risk of remaining trapped in assembly-line logic, without advancing in the global value chain;
High exposure to geopolitical changes and variations in American demand;
Concentration of development and income in already industrialized areas.
And what about Brazil?
It maintains a strong flow of FDI in sectors such as agribusiness and energy;
Potential to be an export platform for South American and African markets;
Seeking greater integration into global value chains.
But it still faces:
High bureaucracy and tax burden;
Infrastructure incompatible with integrated global production;
Lower level of bilateral and regional trade agreements.
Ultimately, the choice between assembly line production and deep industrialization depends on the country's vision.
Perspectives for the future: new opportunities or risks?
For us at Good Morning, America!, global productive reorganization is inevitable, but the destiny – and the fruits of this process – depend on the political and strategic choices of each country.
If Mexico can expand its domestic supplier base, invest in research and development, and promote training, it can transform nearshoring into a real leap in productivity, not just an increase in maquiladoras.
For Brazil, the path forward involves improving the regulatory environment, investing in infrastructure, and pursuing intelligent integration with global supply chains . Without this, we will be mere spectators of the billions circulating in the region, without capturing their true value.
In the world of global supply chains and major agreements, national leadership requires long-term planning. We suggest following the Bom dia, América! series on the economy of the Americas for in-depth analysis.
Exclusive interviews and data
We spoke with experts in international trade and representatives from industrial sectors, who reported:
Mexican business leaders see advantages in their proximity to the American market, but emphasize the need for medium- and long-term industrial policies.
Innovation consultants warn of the risk of the "productive trap": building, building, building, without innovating.
Discussions cover tax incentives, genuine technology transfer, and the training of a highly skilled workforce.
"Ultimately, a factory that only assembles doesn't create a future. Innovation is about building autonomy."
For those seeking to understand the nuances of the relationship between the US, China, and Latin America, we also recommend reading the post "US vs. China: Dispute, Infrastructure, and Economic Impact ," which is essential for broadening understanding of productive relocations.
How does nearshoring affect people's daily lives?
It's easy to forget that major macroeconomic decisions have direct effects on daily life. In the case of Mexico, nearshoring boosted the creation of technical and administrative jobs, raising wage standards in industrial regions.
However, social challenges arise. Rapid growth puts pressure on urban services, increases housing costs, and generates new inequalities.
It is clear how important it is to combine industrial policies with social, urban, and innovation policies. Sustainable development only occurs if there is integration between sectors.
Recommendations for those who want to learn more and stay up-to-date.
For readers of Good Morning, America! interested in delving deeper into topics of trade, innovation, and global supply chains, we suggest:
Book “The New Map: Energy, Climate, and the Clash of Nations” – analysis of global networks of economic and energy power.
The book "Development as Freedom" (Amartya Sen) is a reference for anyone seeking to understand the role of freedom in economic development.
Online course “International Business for 21st Century Professionals” (Hotmart) – focusing on value chains, agreements, and nearshoring opportunities.
For those interested in digital transformation and the growth of startups in Latin America, we recommend our in-house content, "The Growth of Startups in Latin America."
The role of knowledge and critical analysis
Nearshoring is not an automatic path to success. We at Good Morning, America! believe that only knowledge, public debate, and critical analysis can ensure that Mexico, Brazil, and all of Latin America benefit from these new global flows.
Scholars, journalists, and public and private managers must work together to ensure that nearshoring means genuine industrial development and not just the growth of free trade zones disconnected from the real country .
For those who want to broaden their horizons, we suggest the text "The Soft Power of the USA: The Invisible Force That Shapes the World," which is relevant when considering economic and political influence on the continent.
Conclusion
Nearshoring represents a historic opportunity for Mexico and all of Latin America. However, as we have observed in our research and analysis on Good Morning, America!, the ability to transform opportunities into real development depends, first and foremost, on how each country structures its industrial, social, and educational policies .
Ultimately, the difference between genuine industrialization and sophisticated assembly will lie in the degree of autonomy, innovation, and added value that nations are able to build locally.
Only informed debate, critical reflection, and qualified monitoring of events can help our countries build solid paths. Follow Good Morning, America!, subscribe to our newsletter, and contribute so that we can continue producing valuable analyses on issues crucial to the present and future of our continent.
Join us on this mission to understand, discuss, and transform the Americas. Support Good Morning, America! and stay ahead in your knowledge of continental economics and politics!
Comments