The reshoring to Mexico trend is an opportunity for Nuevo León
In addition to being among the states with the greatest attraction for FDI, reshoring to Mexico through Nuevo León can capture projects for producing items such as assemblies, subassemblies, and finished products.
For many manufacturing companies established in Mexican territory, the reshoring to Mexico initiative is welcomed by the United States. Companies are engaged in this activity to narrow the distances of the supply chains once again. This resurgent dynamic can translate into excellent opportunities to attract new projects in the near term. This is the case because production in Mexico is expected to recover from the hard blow dealt by the coronavirus pandemic and the slowdown in the automotive industry. Recently, imports of vehicles into the United States from its southern neighbor fell from 14.7 to 14% from 2019 to 2020. These figures are according to data generated by the consulting firm Kearney. This has created a challenging set of circumstances, albeit temporary ones.
INEGI data has revealed that at the end of 2021, the projected growth of exports through the end of that year compared to 2020 (4.91 billion compared to 4.16 billion dollars ). The development manifested itself in new projects in the automotive industry that manufacturers initiated to prepare production lines for models 2023 and 2024 models. In addition, tier 1 and 2 supplying the industry opted for reshoring to Mexico to insulate their supply chains from trade delays and disruptions.
With inflows of 18.5 billion US dollars, Nuevo León is the state of the Republic, which includes the border city of Ciudad Juarez, with the greatest attraction of net foreign direct investment (FDI). Given this significant figure, it is clear that the entity is attractive for companies seeking to engage in reshoring to Mexico. It is also essential to recognize that it is a place of considerable interest for US manufacturing companies and those located in Europe and Asia.
Teresa Galindo, director of the Nuevo León headquarters of the National Council of the Maquiladora and Export Manufacturing Industry (INDEX), has confirmed that there is already much evidence of companies seeking to initiate and maintain operations in Mexico. This includes OEMs as well as their suppliers. The motivation is a clear one, “they seek to be in proximity to the United States, whether for industries such as electronics, automotive or medical, to name those industries of greatest importance.” The survey indicated that approximately half of the entrepreneurs questioned agreed with company business relocation policies. The movement of companies in the direction of Mexico started in earnest after the interruptions that affected supply chains resulting from the spread of COVID. This adverse event helped them realize the benefits that accrue to companies that produce close to home and those derived from the diversification of global supply chains.
American companies and policymakers, in particular, viewed reshoring to Mexico as a means to reduce dependence on China and as a way to insulate the United States’ economy from pandemic-caused economic disruptions.
Diverse Capacities are available by reshoring to Mexico
Galindo, who before leading INDEX held various positions in maquiladora industry companies in Nuevo León, explained that many components could be manufactured on the border and the interior of Nuevo León. In addition to metal products and plastic in general, companies can find a manufacturing base that produces components such as electronic subassemblies, auto parts, medical devices, among others. “We mainly have the automotive industry, household appliances and refrigeration, metalworking, but Ciudad Juarez and the entire state of Nuevo León also has growth occurring in the electronics, medical device, and plastics industries.”
Monterrey, the state capital, has developed and excelled in high-tech production. This fact is why Galindo warns that it is not by chance that large-scale companies have investment plans in the city. A case in point is Corning, which in 2022 has a project in process for a new plant to manufacture fiber optics.
A trigger for high-tech manufacturing has been the Technological Research and Innovation Park (PIIT). The facility was founded in 2006 and is located in the municipality of Apodaca. It is very close to the international airport. Bringing the park into existence was the product of the vision of Jaime Parada, former director of Conacyt, Mexico’s National Council of Science and Technology.
Another facility that stands out in Nuevo León is the Hofusan Industrial Park. Its construction began in 2017 on an area of 8.47 km2. The project is based on a cooperation agreement between the governments of Nuevo León and the Chinese province of Zhejiang. It is expected that at least 10 Chinese companies will settle in the park to supply the industries that operate in that area of northeastern Mexico.
Reshoring to Mexico is a win-win
Galindo explains that Index’s work to maintain the attention of investors and manufacturers in Nuevo León and its various cities includes working with international organizations and foreign consulates that support them to bring trade missions. These efforts have two purposes, “to explore investment in the state and to place products in the local market. This win-win relationship generates greater confidence between all parties involved. It also functions as a soft landing model that allows companies new to the country to understand how things work in Mexico. This point is true, especially in the labor market.”
In this way, permanent links are made between INDEX members and companies interested in bringing investments by reshoring to Mexico. These relationships translate into industrial development promotion based on real cases and projects.
By detecting the specific needs of foreign companies participating in these missions or relationship activities, they immediately build links to the capabilities of companies in the region. From there, the projects for the production of assemblies and subassemblies are generated. In addition to the above, Index also has a series of forums, courses, workshops, and seminars. These programs are related to various vital fields for exporting companies. They include the rules and regulations of foreign trade, logistics, compliance with existing commercial regulations, and updates on current business issues, such as the labor law, taxation, tariffs, and issues related to the United States-Mexico-Canada Free Trade Agreement (USMCA).
“For example, within the framework of the USMCA, the need recently arose to legitimize collective contracts before the Secretary of Labor. In late 2021, we had an outreach with US embassy and consulate staff, as well as with labor attaches, that helped us to comply with updates to rules and regulations that policymakers had made.”
The critical thing, adds Galindo, is to be prepared to take advantage of opportunities as they appear since it is a fact that manufacturing networks are being reconfigured. An example of this set of new conditions is the automobile manufacturer KIA. The Korean firm initiated operations in the municipality of Pesquería, Nuevo León, in 2015. At the facility, they are assembling vehicles. In addition, Kia continues to build its local supply chain by encouraging companies to engage in reshoring to Mexico.
Intellectual and workforce development is a strategic foundation for bringing manufacturing to the border and the rest of Nuevo León. Teresa Galindo affirmed that this is why linkage programs between companies and universities exist. These organizations developed the relationships to ensure that graduates acquire knowledge of the real-world needs that characterize the market, often in accordance with ongoing projects.
“It is a given fact that industry is constantly evolving. As a result, many companies have well-structured internship programs that make it easy for them to source students from universities and technical schools and ensure that they hire well-trained staff.”
Reshoring to Mexico is undoubtedly a window of opportunity. Nuevo León is one of the entities with the most significant chance to win projects to produce assemblies, subassemblies, and finished products. INDEX will play a fundamental role in attracting foreign direct investment to the state and its many manufacturing communities.