For Carlos Zegarra, lead partner of management consulting At PwC Mexico, transportation is one of the areas where companies seek to reduce costs by nearshoringwhereby investing in this field is key.
“We look at the average cost of production for the manufacturing industry in general in China and Mexico, and if you move your manufacturing capacity to supply the United States, you have a average decrease of 23% in production costsfor a lower cost of labor and tariffs”, he explains.
While China offers an average monthly salary in manufacturing of $840, in Mexico it is $480 a month, according to data from the firm Dezan Shira & Associates. But China’s logistics and transportation infrastructure, including the world’s largest network of high-speed rail and highways in terms of mileage, allows goods to be efficiently transported within the country.
The nearshoring concept took off after the 2018 Sino-US trade war, when tariffs on Chinese goods led some companies to reconsider the viability of the Asian country as a global manufacturing platform.
More recently, the strict Covid-19 control measures imposed in China, at a time when most other countries are reopening, have reignited the discussion about relocating production.
Modernization and expansion of logistics capacity
The diversity of means of transport It has been an element that has played in favor of Mexico. According to an analysis by the Economic Commission for Latin America and the Caribbean (Cepal), while a 72% of land vehicles and its parts are transported in railwaymore than fifty% of the machines and electrical equipment they move by highway. More than half of the fuels Y minerals they move Seawaywhile precious stones and metals are transported by air cargo.
But these systems need to be modernized, on the one hand, and expanded to deal with a potential increase in merchandise flows, especially in key ports in Mexicosuch as Manzanillo –which has remained saturated as it is the largest recipient of containers in the country– and Lázaro Cárdenas, who has barely been able to keep up with the arrival of each time more vehicles from Asia.
Some of the next federal government investment projects would solve part of this. In the 2023 Expenditure Budget, for example, contemplates more investments to expand 11 ports resources that would be allocated mainly to enclosures such as Veracruz, Altamira and Lázaro Cárdenas.
However, in other regions, such as the southeast of the country, more infrastructure is required to take advantage of the potential in sectors such as commoditiessays Alejandro Chavelas, an analyst at Credit Suisse.
“There are opportunities that the country has that are a little more complex, which probably would require having a better infrastructure.”
In addition, using data from CBRE, the firm estimates that the nearshoring concentrated around 40% of the demand for industrial buildings north of the country in the first quarter of the year, when in previous years it had barely represented 15%.
For this reason, specialists agree on the need to work together to attract more companies, and even on the importance of creating a commission dedicated to the field.
The ECLAC report indicates that, in order to enhance the country’s ability to attract foreign direct investment due to factors such as the nearshoring and others, it is important that they develop public programs to improve the infrastructure of logistics chains.
“Particularly with regard to transport systems and energy services, which are essential to maintain international competitiveness”, he concludes.