Are we doing the homework for nearshoring?

One of the words of the year is nearshoring. It serves to describe the relocation of companies that are now in China. They leave that country for geopolitical reasons, in a context of growing distrust of the United States towards China. It is part of a process of decoupling between Uncle Sam and the Dragon, as well as a sign that deglobalization is serious. The great global factory of the beginning of the century seems doomed to become a puzzle of 1,000 pieces, where shorter production chains predominate, located in regional blocs and agreed with strategic allies.

In this new scenario, Mexico appears as a potential winner. The geographical proximity to the United States, the relatively low labor costs and the USMCA seem sufficient arguments to fuel optimism.

It is a cake that could mean between 60,000 and 150,000 million dollars of investments for Mexico in the next decade. What can go wrong? We are a natural candidate, but we are not the only country that is in the competition for those tens of billions of dollars. The first two years of tension or decoupling between the United States and China were better used by Vietnam than by Mexico. Of the four percentage points that China lost in total US imports, Vietnam was left with 1.8 and Mexico with 0.8.

“That the cúnico does not panda”, would say El Chapulin Colorado. It is a medium and long term competition. Mexico has many more arguments than Vietnam. We are closer, so the logistics costs and the time zone are in our favor. We are less distant culturally and more integrated. The automotive, electronics and even food industries are evidence of this.

As if this were not enough, we have three decades of development in the economic relationship. There are hundreds, thousands of success stories: investments, trade, tourism, and even marriages that have been fostered by this binational bond that grows in size and complexity over time.

If Vietnam doesn’t scare us, what do you think of the United States? The logic of nearshoring is to bring factories and processes as close to the United States as possible. No one says that relocation has to be generous. Nowhere is it written that the United States is left out of this competition to attract investment that is now in China. Moreover, in its DNA, nearshoring has a strong protectionist component. If one pricks up one’s ear, one can hear that in the competition with China and the uncoupling of Uncle Sam against the Dragon, the echoes of Make America Great Again resonate.

In this context, it should be noted that the first mega investment announced with nearshoring fell in Arizona. It is about 40,000 million dollars that Taiwan Semiconductor Manufacture will put in that state, which borders Mexico, to develop a large semiconductor production platform. The investment is a response to the chip supply crisis that broke out in 2021, but also part of a strategy to remove the production of one of the key inputs for almost all industries, peaceful or warlike, from Taiwanese territory.

Why did TSMC choose Arizona and not Mexico? Answering this question can help us do our homework for future investments. Arizona offers energy supply, human capital, airport and highways. In addition, it has resources to subsidize a part of the investment, which will come from the Semiconductor and Science Law, where it has a bag of half a billion dollars.

How are we doing, how is Mexico in energy, human capital, logistics infrastructure, industrial parks… That is the question. One thing is clear: We don’t have 20 years to catch up and be ahead of the curve.

lmgonzalez@eleconomista.com.mx