While some believe there are infrastructure obstacles that need to be resolved before nearshoring can grow dramatically south of the U.S. border, Jorge Gonzalez Henrichsen, co-CEO of The Nearshore Co., an outsourcing firm that helps firms transfer their manufacturing operations into Mexico, discusses where he sees the future of nearshoring headed.
Sourcing Journal: An S&P Global Ratings report from its chief economist for emerging markets, Elijah Oliveros-Rosen, said that nearshoring is progressing slowly in Mexico due to infrastructure obstacles that include a supply of clean energy, water and specialized labor. That said, it appears that the primary area for production capacity is in the north and center/Bajo regions of the country. What is your experience with clients on the ground there and where do you see investment growth?
More from Sourcing Journal
Jorge Gonzalez Henrichsen: The North and Bajo areas are the most demanded and, therefore, experiencing more growth. Infrastructure is in place, a three generation manufacturing culture exists, deep “clusters” around specific industries have been created, and distance to the U.S.—if the company’s products are to be delivered in the U.S.—are the main reasons for these regions to become more sought after.
There used to be a very strong textile manufacturing industry in the North and center of Mexico (Puebla), but as the country has focused on more value-added activities and industries, such as aerospace, automotive, electronics and medical devices, textiles has left for other countries with a more affordable labor cost, in regions like the Caribbean and Central America.
SJ: Tell me about Mexico’s strategic position for nearshoring for U.S. firms? What about the current infrastructure and supply chain network? Aren’t crime and complicated labor laws some of the key obstacles to nearshoring?
JGH: All of these are obstacles need to be overcome if we want nearshoring to transform the country and reach its highest potential…. Mexico was not expecting this trend to pick up so fast and [therefore prepare for] when these are things that take years to build: think airports, highways, ports, etc. The Federal Government’s “non-pro-business” ideology has led to lower investment by local and foreign investors. That said, Mexico was transformed into a manufacturing country from an oil-dependent one in the 80’s, which has been paying off for years and will continue to do so for many decades.