News, Insights and Best Practices for Manufacturing in Mexico

Nearshoring to Mexico, Latin America seen as strong trend

28 Mar 2014

Category: Logistics Management

According to a recent study of the global logistics market by Pennsylvania State University, Capgemini Consulting, Korn/Ferry International, Penske Logistics and eyefortransport (EFT), nearshoring was seen as the biggest trend that will expand in the future. Nearshoring means offshoring to a country near the U.S., such as Mexico or Puerto Rico.

"For example, Mexico is now the No. 2 car exporter in the world, and that's because labor rates are equalizing between Asia, Mexico and South America now," Shanton Wilcox, logistics and fulfillment leader at Capgemini, said in a statement, according to Go by Truck News. "We're seeing a lot of manufacturing shifting back to North and South American for that reason and because that shortened their supply chain, lessening the impact of disruptions."

Economies like China are growing, and that results in more expensive labor. The number of workers is also declining. In China, the population of able workers declined by 3.45 million in 2012 and 2.45 million in 2013, according to The Wall Street Journal.

According to the San Francisco Chronicle, China's economy will surpass the U.S. economy within one or two decades. Mexico is also expanding, but not as quickly, and labor in Mexico is cheaper than in China. In response to this, the newspaper suggested that California form ties with Mexico through trade and nearshoring opportunities.

"Mexico is less a problem and more an answer for the economic, security, and international diplomatic challenges the United States faces today," wrote Shannon K. O'Neil of the Council on Foreign Relations in her book, "Two Nations Indivisible."

Europe is also offshoring to Mexico
Countries as far away as Europe are also eyeing Mexico as a place to expand. Nestal, a packaging company based in Germany, has begun manufacturing in Mexico, according to Packaging Europe, and it is reporting good results. In fact, it gave a presentation on this subject at the ExpoPlasticos in Guadalajara between March 25 and March 28.

"We envisage extremely good opportunities for the growth of Netstal's high-quality product and service portfolio in the Mexican packaging and beverage packaging market," Nestal said in a press release.

Nearshoring to Latin America
And Mexico is not the only ideal location for nearshoring. Many companies are also beginning to expand to Puerto Rico as well. One such company is Appelrouth Farah & Co. P.A., which works in accounting and international business. The company has expanded to Puerto Rico in order to service clients that are outsourcing to Latin America and need tax advice for multiple countries.

"The opening of our Puerto Rico location allows us to better serve our clients in South and Central America and the Caribbean," says Stewart Appelrouth, co-founder of Appelrouth Farah & Co.

 

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