Jesús Carmona, CEO of Schneider Mexico and Central America, recently told the newspaper El Economista that he is bullish on nearshoring, insisting that the impact in Mexico over the next 30 years will be enormous.

“I believe in nearshoring because I see [its impacts] every day,” he said. “The first place to feel its impact was Monterrey, but we see it in other northern cities and in the Bajío [region]. I have no doubt it will reach southern Mexico as well.”

Describing how Schneider’s presence in Mexico doubled between 2021 and 2023, Carmona said there are three reasons for his company’s accelerated growth here: “nearshoring, increasing demand for efficient solutions to electrical energy needs, and the great abilities of Mexican labor.”

Schneider employs 1,600 people across Mexico in 10 plants, with 1,000 of those workers hired in the past four years. Last year, Schneider invested US $72.5 million in its Mexican energy automation services.

At the June 13 inauguration of the new plant known as Monterrey 4, Schneider’s director of operations in North America, Agustín López, said that the new plant in Monterrey — its fourth facility in the northern Mexico city — would strengthen its local economic ecosystem by 17%–20% over the next two to three years. 

“We are always trying to optimize our technological capital via the development of a campus,” he said. “That’s why we build these production centers.”

Monterrey 4 will eventually create 460 jobs (257 people are on the payroll at present) and will be focused on the manufacture of specialized products, such as low-voltage electrical distribution boards — essential for hospitals, data centers; digital companies and organizations with high energy consumption. 

Schneider Electric, which has been operating in Mexico since 1945, specializes in digital automation and energy management by combining energy technologies, real-time automation, software, and services.

The 183,000-square-foot plant will boost the company’s production in North America as it will be an Engineer to Order (ETO) facility, which manufactures products to customer specifications and engineering designs.

López said that by next year, its four plants in Monterrey will reach net-zero status (a balance between the amount of greenhouse gas emissions produced and the amount removed from the atmosphere). The new plant is also the first in the world in which it will be possible to reutilize scrap metal.

In addition to the new Monterrey plant, Schneider is also building an 11th plant in the state of Tlaxcala.

With reports from El Financiero and El Economista

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Mexico’s bilateral relationship with the U.S. is “always difficult.”

“Mexico has immense potential. We just need to open the door.”

They are among the remarks Mexico’s next economy minister, Marcelo Ebrard, made during an interview with La Jornada.

The Mexico City-based newspaper published its interview with the former foreign affairs minister on Wednesday, six days after President-elect Claudia Sheinbaum announced the appointment of her erstwhile rival for the ruling Morena party’s presidential nomination as her economy minister.

Here is a selection of Ebrard’s remarks.

On his appointment as economy minister 

“This was the product of a conversation I had with Dr. Sheinbaum, thinking of the years ahead and the great task for the 4T* – [the construction of] its second story,” Ebrard said.

* The “fourth transformation,” or 4T, is the name of the political project initiated by President Andrés Manuel López Obrador. The term inherently equates the importance of the current “transformation” of Mexico to that of its independence from Spain, the enactment of 19th century liberal laws collectively known as La Reforma, and the Mexican Revolution.

On the United States and its trade relationships and policies 

“The United States is becoming a country on the defensive because it senses growing competition with China and suddenly realized they’re very dependent [on the East Asian country]. The United States will need Mexico to be able to compete [with China],” Ebrard said.

He also said there is “growing protectionism” in the United States and that Mexico is therefore faced with a “a different political position in the U.S. to that we saw some years ago.”

“That is the main risk. There is a kind of protectionist consensus [in the United States]. That’s why the review* of the trade agreement with the United States, and the trade relationship with them in general, could be more complex,” Ebrard said.

* A review of the United States-Mexico-Canada Agreement (USMCA), a free trade pact that superseded NAFTA in 2020, is scheduled for 2026.

On the USMCA review  

Ebrard said that the USMCA’s dispute settlement system* needs to be improved.

“We must strengthen the dispute resolution system, with the panels, where you can present your arguments to avoid unilateral measures,” he said.

Changes are also needed in other areas, Ebrard said. One issue he cited was labor mobility, an apparent reference to a need for workers to be able to move more freely across national borders in North America.

What is needed, Ebrard said, is to “bring a series of regulations into line to favor Mexican companies.”

“We have to support transport companies, for example, which have always had disadvantageous conditions,” Ebrard said, apparently referring to trucking and rail companies that move goods around the region.

“We have to limit unilateral decisions, like what happened in the avocado case, he added.

“… We should try to limit that as much as possible. That’s what we should seek in the review of the agreement, which, we must clarify, is not a renegotiation, but a review.”

Ebrard also said that, “unlike the [NAFTA] renegotiation in 2018,” which resulted in the creation of the USMCA, a “very important geopolitical factor” will be at play during the 2026 review — “competition between the United States and China.”

* Mexico is currently engaged in disputes with the United States over its energy policies and its stance on genetically modified corn.

On Mexico’s relationship with the United States 

“The bilateral relationship is always difficult” because the two countries have “different interests,” Ebrard said.

“But we have a good chance of succeeding because of the conditions I’ve just mentioned,” he said, referring to the growing economic interdependence of the two countries.

Ebrard said that Mexico and the United States have never previously been as close as they are today “in terms of trade, economic and financial exchange.”

Mexico, which is the United States’ top trade partner, “had never been so important for the United States,” he said.

* At bilateral security talks in late 2023, U.S. Secretary of State Antony Blinken said that “more than ever before” in his 30 years of experience in foreign policy, “the United States and Mexico are working together as partners in common purpose.”

On the nearshoring opportunity 

“What North American companies that … import technology from Asia want is to bring [production] to North America in order to not depend [on Asia],” Ebrard said.

As an example, he noted that North American electric vehicle companies (such as Tesla) rely on microprocessors that are made in Asian countries. Those microprocessors should be manufactured in Mexico, the United States and Canada, Ebrard said.

“There is a great opportunity” to attract advanced manufacturing companies to Mexico, he said.

Asked what the “pillars” of the Mexican economy will be in the coming years, Ebrard nominated “the relocation” of companies to Mexico, but stressed that foreign investment in Mexico must serve “the country’s interests.”

He also said that Mexico shouldn’t wait around “to see who comes,” but rather “go after the companies we’re interested in having [here].”

Ebrard also mentioned President-elect Sheinbaum’s plan to create “development hubs” and industrial corridors, in which different areas of Mexico, including parts of the historically disadvantaged south, would focus on attracting and supporting investment in certain sectors.

He stressed that “the development, growth and wealth of the country” shouldn’t be concentrated in “just some of its regions.”

“We have to seek to spread out [development and economic growth]. We have to support new companies [in Mexico]. … They’re going to be the pillars [of the economy] in the coming years,” Ebrard said.

“I’m very excited because [Sheinbaum* and I] agree on the ideas. I agree with what the doctor is proposing. Mexico has immense potential. We just need to open the door,” he said.

* Sheinbaum has described the nearshoring trend as a “great opportunity” for Mexico and asserted that it will help drive significant economic growth during the 2024-30 period of the federal government.

With reports from La Jornada 

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Optimism that Mexico — already the world’s 11th largest FDI recipient — is set to reap major economic rewards from the nearshoring trend, including a significant increase in FDI, can be found in government statements, in newspaper headlines, in remarks from leading business figures and in comments from President-elect Claudia Sheinbaum.

However, there are concerns that Mexico runs the risk of missing its nearshoring opportunity, or at least not taking full advantage of it, for a variety of reasons, including insecurity, government policy and lack of infrastructure.

To get another viewpoint on Mexico’s current FDI situation, and its future opportunities, Mexico News Daily CEO Travis Bembenek and I spoke to Jorge Guajardo, Mexico’s longest serving ambassador to China (2007-13) and a former consul general in Austin, Texas.

Jorge is now a partner at DGA Group in Washington, D.C., where he provides strategic guidance to companies on risk, cyber security, market disruptions, and barriers to market entry in China and Latin America.

MND put five FDI-related questions to the former ambassador, a Monterrey native who keeps a close eye on political, economic and social developments in Mexico.

Will the foreign companies that have recently made investment announcements for Mexico follow through with their plans? 

Guajardo essentially provided two answers to this question: one for Chinese companies and another for firms from other foreign countries.

Companies from the United States and Europe, for example, usually conduct “due diligence” before they commit to a project and therefore tend to make “more serious” investment announcements, he said.

On the other hand, China, and Chinese companies, have “a long history of making investment announcements they don’t follow up on,” Guajardo said.

In that context, he told MND he sees slated Chinese investment in Mexico as “a big nothing story,” citing promised Road and Belt Initiative projects that haven’t come to fruition to support his view.

Take China’s investment announcements in Mexico with “a huge grain of salt, a Rock of Gibraltar-sized grain of salt,” Guajardo said.

“China announces things without giving it much thought, they seldom actually go ahead. In China there is a saying that once you sign a contract that’s where the negotiation begins. … I’m not saying it as a criticism, it’s just they have a different way of doing business,” he said.

Given that firms from other foreign countries typically conduct ample research before they commit to a project, and considering that they are often public companies with a responsibility to report to their shareholders, Guajardo is confident that they will go ahead with the projects they announced during Andrés Manuel López Obrador’s presidency.

If they were confident enough to commit themselves to projects during AMLO’s administration, they won’t change their mind during the presidency of Claudia Sheinbaum, he said.

Regarding the proposed reforms López Obrador sent to Congress earlier this year — which have generated considerable concern in markets in the wake of Mexico’s recent elections — Guajardo noted that Morena and its allies didn’t win a supermajority in the Senate and therefore there is no ironclad guarantee they will be able to approve the proposals.

Even though there is a better than even chance that they will be able to bring over the missing votes from other parties, he said, this will be done on a case by case basis, without a blank check for Morena to proceed without having to build coalitions.

Guajardo added one caveat to his confidence about most foreign companies following through on their investment plans, noting that he expects more caution from auto sector companies, including Tesla, because of Chinese overcapacity in that sector and the possibility that those vehicles will be dumped all over the world.

Is it concerning that ‘new investment’ currently constitutes only a small percentage of overall FDI?

New investment accounted for just 3% of FDI in the first quarter of 2024, while the figure last year was 13%. The lion’s share of FDI in Mexico in those periods was “reinvestment of profits” by foreign companies that already have a presence here.

Some analysts have claimed that the low levels of new FDI are a cause for concern and evidence that Mexico hasn’t yet really benefited from nearshoring.

For his part, Guajardo said he was unconcerned about the low current levels of FDI.

Whether foreign companies’ outlay in Mexico is new investment or reinvestment of profits “makes no difference to me,” he said.

The expansion plans of companies such as automotive manufacturer Polaris and toy maker Lego in Nuevo León don’t represent “new investment” as classified by the Economy Ministry, but “the way they’re growing” is new, Guajardo said, noting that they are “building more capacity” and “hiring more people.”

If most companies that have recently made new investment announcements for Mexico do go ahead with their plans, as Guajardo believes they will, the “new investment” proportion of FDI will inevitably rise in the coming years.

What are the most attractive sectors for foreign investment in Mexico?

Mexico’s under-resourced energy sector is “the biggest immediate area of opportunity for foreign direct investment,” Guajardo said.

“… If I’m talking to foreign investors I would say the big area to keep an eye on is the energy sector. There’s a huge opportunity for generation and transmission,” he said.

Guajardo said that the makeup of Sheinbaum’s team — she is due to name her cabinet this week — will be indicative of whether she wants to maintain AMLO’s “energy sovereignty” posture, or whether she is more pragmatic and seeks to address deficits in energy generation, especially clean energy generation, by allowing, and courting, greater private sector investment.

Beyond the energy sector, he said that the logistics industry represents another area of investment opportunity given that the desire to shorten supply chains is a major motivation for relocation to Mexico by foreign companies.

“That would be an area I’d be keeping an eye on,” Guajardo said, noting that there is already significant foreign investment in transport and warehousing projects in Mexico.

Will the depreciation of the peso spur foreign investment?

“My guess is most every exporting company in Mexico wanted a depreciation of the peso,” Guajardo said, referring to the recent drop in the value of the currency against the US dollar.

He said that a weaker peso — the currency has depreciated 8% against the greenback since the elections — puts winds in the sails of industry in Mexico because their exports are “more attractive.”

Guajardo said he was “quite bullish” on the opportunities that a weaker peso creates for Mexico, although he expressed consternation at the cause of the currency’s recent fall — i.e. Morena’s comprehensive election win and concerns about the party’s proposed constitutional changes.

Mexico needs a weaker peso “to prop up industry,” he added.

“Countries don’t become big by consuming more, they become big by producing more,” Guajardo said.

What do you see as the biggest barriers to even greater FDI in Mexico? 

Guajardo said that government policy or posture, water scarcity, insecurity and inadequate infrastructure are among the potential barriers to increasing foreign investment in Mexico.

He said he believes that the government’s posture — at least with regard to the energy sector — will improve during the presidency of Sheinbaum, who will take office Oct. 1.

Respect for the rule of law, “particularly in the energy sector,” is needed to create investor confidence, Guajardo said. There need to be “clear signs” that contracts will be respected “in the long term,” he added.

Meanwhile, water supply pressures as more and more companies relocate to Mexico is going to be a “huge issue,” Guajardo predicted.

“Communities will stand up to investment or to big business” over water, he said, adding that water availability, electric capacity, and a tight labor market will be new areas of due diligence for companies seeking to set up manufacturing operations in Mexico

Insecurity, “particular as it pertains to transportation,” is another potential barrier to FDI, Guajardo said, referring to things such as highway and train robberies.

Finally, the Isthmus of Tehuantepec is one example of a region of Mexico where a lack of infrastructure could hold foreign investment back, he said.

The federal government has modernized the rail line between the Pacific and Gulf coasts across the isthmus, and hopes to lure companies to new industrial parks in the region with a range of tax incentives.

However, Guajardo said that more infrastructure is needed to convince companies to move to Mexico’s disadvantaged south.

“If you’re going to build a new plant, you want hospitals, you want airports, you want schools, you want roads,” he said.

“I think it’s still in its infancy,” he added, referring to the Interoceanic Corridor of the Isthmus of Tehuantepec project.

“It’s a great idea. Who’s not in favor of giving more jobs to people in need? But it’s more complicated than that,” Guajardo said.

By Mexico News Daily chief staff writer Peter Davies (peter.davies@mexiconewsdaily.com)

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The energy-efficient manufacturing plant is being built in collaboration with the Daikin subsidiary Alliance Air Products, based across the border in San Diego, and is expected to be operational by June 2025, according to the news website Forbes México.

Alliance Air Products, which currently operates a construction plant in Tijuana, is considered an expert in custom HVAC manufacturing, encompassing all aspects of implementation and operation while also manufacturing the equipment to fit specific client needs.

The new 46,000-square-meter plant will manufacture energy-efficient HVAC cooling solutions tailored specifically for data centers across North America. It also aims to achieve maximum efficiency and meet sustainability goals for both Daikin Applied and its customers, according to the newspaper Mexico Business News.

Yu Nishiwaka, director of operations at Daikin Applied, hailed the initiative, saying this is an important time for the HVAC industry which is growing exponentially due to economic trends and forces such as artificial intelligence and insourcing manufacturing.

“It is critical not just to meet the demand for cooling in data centers, but also to help data centers improve efficiency and sustainability with regard to energy consumption,” Nishiwaka said. “This expansion underlines our commitment to help our clients identify sustainability opportunities and achieve, if not surpass, decarbonization design objectives.”

The project also reflects Daikin’s and Alliance Air’s belief that there will be significant growth in the data center market throughout Mexico and North America. 

Baja California Governor Marina del Pilar Ávila praised Daikin for the investment, saying it aligns with her government’s economic policies. “Baja California emphasizes attracting foreign investment that will foster innovation and create well-paying jobs,” she said, according to Mexico Business News.

Luis Plascencia, president and general manager of Alliance Air, spoke glowingly of the new plant. “We’ve been operating successfully in Tijuana for 20 years and have 986 exceptionally talented employees here. We are eager to continue this success and strengthen our relationship with the Baja California government as well as local leaders in Tijuana to make this new installation a reality.”

The Tijuana plant investment is part of the more than US $39 billion that foreign and multinational companies plan to invest in Mexico over the next two to three years, according to data compiled by the Economy Ministry (SE) from Jan. 1 through May 31.

With reports from Mexico Industry, Forbes México and Mexico Business News

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With a planned investment of US $300 million, the new plant in Salinas Victoria, near the city of Monterrey, Nuevo León, will manufacture the Bobcat ‘M-Series’ compact loaders to meet the increasing demand in the North American market.

The 65,000-square-meter factory is expected to commence operations in 2026 and create between 600 and 800 new jobs. According to the company, the plant will seek a LEED Silver energy efficiency certification and will feature state-of-the-art technology.

“The new plant in Mexico will support Doosan Bobcat’s continuous growth by responding to the increasing demand for Doosan Bobcat products, including its largest market, North America,” Geewon Park, Vice Chairman of Doosan Group said during the groundbreaking ceremony. (Doosan Group bought Bobcat Company in 2007.)

Doosan Bobcat executives and local government officials, including Nuevo León Governor Samuel García, attended the ceremony.

The new manufacturing plant is the company’s first production facility in Mexico, joining Doosan Bobcat’s existing global production sites in Korea, the U.S., the Czech Republic, France, Germany, India and China. Once the Mexico plant is operational, Doosan Bobcat expects it to increase the production of North American loaders by about 20%.

The company explained that it chose Mexico as the location of its new plant because it “offers the benefits of the US-Mexico-Canada Agreement (USMCA), a strong manufacturing infrastructure, and a skilled workforce, making it an ideal global production hub.” It added that they specifically chose Nuevo León due to its accessibility as the “industrial capital of Mexico.”

Other Asian companies that have recently announced major investments in Nuevo León include Japanese motorcycle maker Kawasaki and Chinese solar panels manufacturer Trina Solar. Tesla also plans to build its new gigafactory in the northern state.

Nuevo León has been one of Mexico’s leading destinations for foreign investment. According to recent figures from the Economy Ministry (SE), Nuevo León received US $1.35 billion in FDI during the first quarter of the year, second only  after Mexico City, which reported  US $12 billion in FDI in the same period.

With reports from El Economista 

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The second of four quarterly forums aimed at promoting the development of semiconductor supply chains in North America was co-hosted by Baja California Governor Marina del Pilar Ávila and Mexico’s National Chamber of Electronics, Telecommunications and Information Technology (Canieti). U.S. Embassy Deputy Chief of Mission Mark Johnson led the U.S. delegation.

The forums aim to catalyze dialogue among the U.S. and Mexican federal governments, Mexican local governments and the private sector in order to make Mexico’s part of the global semiconductor supply chain.

“Studies presented to the forum indicate that Mexico has the potential to develop design, assembly, packaging and integration to complement the U.S. chip manufacturing industry,” said Canieti president Enrique Yamuni.

“The importance of semiconductors is massive,” said Pedro Casas Alatriste, the CEO of the American Chamber of Commerce in Mexico and a participant in the forum. “Just as we’ve talked about oil in recent decades, this is how we should talk about and act on this technology as a key differentiator for North America.”

In late March, the U.S. State Department announced a partnership with the Mexican government to “explore opportunities to grow and diversify the global semiconductor ecosystem.” 

The partnership is developed under the umbrella of the multi-billion dollar CHIPS Act of 2022, a U.S. federal statute that aims to develop semiconductor research and manufacturing in the U.S., and also to strengthen supply chain resilience in North America.

Mexico’s government further solidified its commitments to the industry with the June 5 decree, which establishes the formal commitment by several federal agencies to collaborate on promoting the semiconductor industry in Mexico.

Armando Cortés, the director of the National Autoparts Industry association (INA), applauded the publication of the decree.

“The development of the semiconductor industry is essential to guarantee inventory for key sectors, particularly the automotive industry,” Cortés said, according to the magazine Fortuna y Poder. “Furthermore, global market conditions indicate that sufficient demand exists such that Mexico can position itself as a competitive supplier.”

The decree authorizes the Finance Ministry (SHCP), the Economy Ministry (SE) and the Environment Ministry (Semarnat) to coordinate the promotion of the semiconductor industry in the country via identifying the best areas for development, ensuring adequate energy supply and also providing tax incentives to attract investors.

The new program is designed to help Mexico keep pace with the fast-evolving global industry, one of the most critical elements of the global economy and especially attractive to investors, especially as Canada and the United States have taken significant steps to develop their position in the front end (chip design and manufacture) of production. 

Cortés and forum participants point to Mexico’s potential to play a critical role in the back end of the value chain. This would have Mexico specializing in validating processors in semiconductor assembly and focusing on semiconductor packaging. 

With reports from Fortuna y Poder, Expansión and El Economista

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United States government data shows that the value of exports of Mexican-made auto parts to the U.S. increased 9.4% annually in the first four months of 2024 to reach a record high of US $28.37 billion.

Mexico’s share of the U.S. $66.26 billion market for auto parts imports between January and April increased to a record high of 42.8%, up from 42.5% in the same period of last year.

Compared to the first four months of 2014, Mexico’s auto part exports to the U.S. increased an impressive 80% in monetary terms and its share of the U.S. market rose by 8.7 points.

A range of Mexican auto parts companies, such as Katcon and Metalsa, as well as foreign ones that operate here, ship their products to the United States. Among the latter group are a growing number of Chinese auto parts manufacturers.

According to the United States International Trade Commission, the rules of origin for the automotive sector as set out in the United States-Mexico-Canada Agreement and tariff-free trade between the three signatories of the pact have contributed to greater integration of automotive production in North America.

Exports and imports of vehicles and auto parts account for more than 20% of the total value of trade between Mexico, the United States and Canada.

Vehicle production and exports also up 

Data from Mexico’s national statistics agency INEGI shows that the production of light vehicles in Mexico increased 5.5% annually in the first five months of 2024, while exports rose 12.3% in the same period.

Automakers including General Motors, Ford, Nissan and Volkswagen made just over 1.65 million light vehicles in Mexico between January and May, up from 1.56 million in the same period a year earlier.

A total of 1.42 million light vehicles were exported from Mexico in the first five months of the year, up from 1.26 million a year earlier.

In May, light vehicle production in Mexico increased just under 5% to 365,574 units, while exports rose 13% to 310,655 units. Both figures were records for the month of May.

INEGI’s data also shows that the top five light vehicle manufacturers in Mexico in the first five months of the year were:

• General Motors: 361,203 units.
• Nissan: 279,887 units.
• Stellantis (Fiat Chrysler/Peugeot): 185,120 units.
• Ford: 169,369 units.
• Volkswagen: 169,262 units.

Those automakers were also the top five exporters of light vehicles from Mexico in the first five months of 2023, but Stellantis and Ford swapped positions.

With reports from El Economista 

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Between Jan. 1 and May 31, private firms announced their intention to invest $39.2 billion in Mexico, according to the Economy Ministry (SE).

The SE expects the funds to flow into the country in the next two to three years, it said Sunday.

The ministry said that there were a total of 127 investment announcements in the first five months of the year. The projects announced are expected to create more than 54,000 new jobs.

Just over half of the total investment — 51% — will come from the United States, Mexico’s largest trade partner and source of FDI. Mexico’s next biggest investors based on announcements made so far this year are Germany (14% of the total) and Argentina (11%).

The lion’s share of the money — 56% — will go to the manufacturing sector, while the mass media, commercial and transport sectors will receive 13% each, the SE said.

The ministry highlighted that 16% of the expected new investment will go to Querétaro, 12% to México state, 9% to Nuevo León and 5% to Coahuila. The other 58% will be divided between Mexico’s 27 other states and Mexico City.

The largest investment announcements in the first five months of 2024 were those made by Coca-Cola bottler and convenience store owner FEMSA ($9.96 billion); Amazon Web Services ($4.96 billion); and DHL Supply Chain ($4 billion).

Femsa, the owner of the Oxxo chain of convenience stores and 17 Coca-Cola bottling plants in Mexico, among other assets, said in February that its outlay would go to “organic growth initiatives in our key businesses.”

Amazon Web Services announced in February that it would open a cluster of data centers in Querétaro.

The SE on Sunday highlighted the three largest investment announcements in the second half of last month.

It noted that Evergo, a Dominican Republic-based company that operates charging stations for electric vehicles, intends to invest $200 million in Mexico, while United States contract manufacturer L&T Precision announced a $143 million investment.

The third foreign direct investment announcement mentioned by the SE was the plan by Japanese air conditioner manufacturing company Daikin, which plans to invest $122 million in Mexico.

The FDI announced in the first 5 months of the year is over $3 billion more than the total foreign investment recorded in 2023.

FDI in Mexico was $36.06 billion last year, according to SE data, while investment announcements totaled well over $100 billion.

The SE reported last month that foreign investment in Mexico hit a new record high in the first quarter of 2024, with Mexico FDI increasing 9% annually to exceed US $20.3 billion.

But only 3% of the FDI Mexico received in the first three months of the year — around $600 million — was new foreign investment, while 97% was reinvestment of profits by foreign companies and investors that already had a presence in the country.

However, based on the recent announcements made by foreign companies, the “new investment” percentage of Mexico’s FDI should increase significantly in coming years.

Scores of companies — including automakers Tesla and Kia, steelmaker Ternium and energy firms Mexico Pacific Limited and Woodside — made large investment announcements last year.

Just last week, the CEO of Mexico Pacific, Sarah Bairstow, told the El Financiero newspaper that the company she leads would invest an additional $15 billion in liquefied natural gas projects in northern Mexico in the next two to three years, doubling its outlay in the country to $30 billion.

Mexico News Daily 

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In an interview with the El Economista newspaper, the head of the global publishing, research and consultancy firm even said that “the combination of favorable factors” in Mexico right now may surpass the advantageous conditions that prevailed in other countries at certain times in the past.

He was especially bullish about the potential of the Isthmus of Tehuantepec trade corridor.

However, Jeffreys also acknowledged that Mexico has its fair share of problems, and warned that not everything will be easy as the country seeks to capitalize on the nearshoring opportunity.

In conversation with El Economista journalist Luis Miguel Gónzalez, the CEO noted that Mexico has become a large manufacturer across a range of sectors and a major exporter.

Still, Mexicans are very hard on themselves, failing to fully appreciate what has been achieved over the past 30 years, Jeffreys said, referring to the time that has passed since the North American Free Trade Agreement, or NAFTA, took effect.

“Being demanding and self-critical is healthy,” the CEO said, but Mexicans “shouldn’t lose sight” of the progress that has been made. In his view, the future is very bright as well.

Mexico “in more than one way, is a country on the rise,” Jeffreys said.

“Nearshoring is spoken about, but this isn’t a coincidence. [Mexico] has a privileged geographic position, has been developing capabilities in industries such as automotive and electronics for several years [and] has a lot of advantages in demographics, including a large number of qualified people,” he said.

Jeffreys, who has worked as a consultant in numerous developing countries during his 30-year career with Oxford Business Group, said that some of the problems Mexico faces, such as a lack of high-quality infrastructure, are “very common in developing countries.”

But while Mexico shares some of its problems with other developing countries, it has advantages that other nations don’t have, he said.

“There are other countries with large populations, but they’re not as well-educated as Mexico’s population. No other country is so close to the world’s largest market,” Jeffreys said.

“… I’ve spent a lot of time in Saudi Arabia, Indonesia and Eastern Europe. What I see in Mexico is, perhaps, a greater combination of favorable factors than in other places or at other times. Arab countries had the oil boom, Eastern Europe had the the fall of the [Berlin] Wall and its entry to the European Union. Now [the economic opportunity for Mexico] can be more powerful,” he said.

Mexico’s opportunity, Jeffreys noted, comes at a time when the world is in the “post-COVID” period, the relationship between the United States and China is being redefined and the U.S. is making changes to its commodity chains in “very important” sectors.

“I’m not saying that everything is going to be easy [for Mexico], but a lot of countries have achieved it,” he said, referring to rapid economic development, including the improvement of infrastructure.

“In the ’80s Spain and Greece had very poor infrastructure. Now [their infrastructure] is first class. Mexico has a lot to do with highways, ports, customs, but it has the capacity,” Jeffreys said.

Sharing his optimism about Mexico’s economic potential are other high-profile business people such as JPMorgan Chase CEO Jamie Dimmon and Thor Equities founder and Chairman Joseph Sitt. For her part, President-elect Claudia Sheinbaum said last year that the nearshoring phenomenon will help drive significant economic growth in Mexico during the six-year period of the next federal government.

Asked what will bring major economic benefits for Mexico in the years ahead beyond nearshoring, Jeffreys was definitive.

“The Interoceanic Corridor [of the Isthmus of Tehuantepec], without a doubt,” said the Oxford Business Group CEO.

The corridor includes (or will include) a modernized railroad between the Pacific and Gulf coasts, a chain of industrial parks, improved highway infrastructure and expanded ports in Salina Cruz, Oaxaca, and Coatzacoalcos, Veracruz. Companies that set up there will benefit from a range of tax incentives.

Touted as a rival to the Panama Canal, the trade corridor “makes sense” for Mexico and even more sense “from a global point of view,” Jeffreys said.

Global trade will at least double by 2050 and the world’s main trade routes are currently “saturated,” on the verge of being “in crisis,” he said.

“I’m thinking about the Shanghai-New York route. There are problems in the Suez Canal and the Panama Canal. The distance between California and New York is almost 5,000 kilometers. The world needs to resolve transit from the Pacific to the Atlantic. It’s the most important trade route in the world. Thus, the Interoceanic Corridor is a very important solution for Mexico, but even more so for the world,” Jeffreys said.

He described the corridor as a “long term project” and declared he had no doubt that it will take off in the next five to 10 years. It has “too many things going for it” to fail, Jeffreys said.

“It’s not just a logistics corridor” — across which goods can be transported by train before being reloaded onto another ship for onward sea transportation — “but is also intended to be a production hub,” he noted.

“There are some very successful cases in Asia, on the Strait of Malacca, for example,” Jeffreys said.

As the Isthmus corridor will be a production hub as well as a Pacific-Atlantic trade route it can in fact be considered part of Mexico’s efforts to take advantage of the nearshoring opportunity. Some observers believe that the establishment of the corridor, and the comparative abundance of water in southern Mexico, will attract a significant number of foreign companies to that part of the country.

To spur such investment, a Mexican delegation headed up by Foreign Affairs Minister Alicia Bárcena will travel to the United States this week to speak to U.S. officials and business executives about the trade corridor, where projects worth at least several billions of dollars are expected to be built in coming years.

Jeffreys told El Economista that industries that are already well-established in Mexico, such as the automotive sector, as well as emerging ones, such as semiconductors, could open production facilities in the corridor.

“The corridor can take development to an area that hasn’t had development and reduce transport costs from west to east [and vice versa],” he said.

With reports from El Economista 

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Data published by the U.S. Census Bureau and the U.S. Bureau of Economic Analysis on Thursday also shows that Mexico earned more revenue from its exports to the U.S. in April than in any previous month.

Mexico’s exports to the U.S. in April were worth $43.06 billion, a 13.2% increase compared to the same month of 2023.

Export revenue in the first four months of the year was $162.91 billion, a 6.2% increase compared to the same period of last year.

Most of Mexico’s export income comes from manufactured goods including cars, computers and machinery, but it is also a significant exporter of oil and agricultural products to the U.S.

Mexico’s total share of the U.S. market for imports in the first four months of 2024 was 15.9%, up from 15.4% last year and 14% in 2022.

Canada and China ranked second and third, respectively, for exports to the U.S.

Canada’s revenue from exports to the U.S. fell 0.8% annually in the first four months of the year, while China’s income declined 2.5%.

In 2023, Mexico surpassed China to become the top exporter of goods to the United States.

Mexico has benefited from a “decoupling” of the world’s two largest economies amid the ongoing China-United States trade war, as well as the relocation of foreign companies here as part of the nearshoring trend.

Imports from the U.S. also increased between Jan. and April 

The U.S. data also shows that Mexico spent $29.39 billion on imports from the United States in April and $109.56 billion in the first four months of the year.

Imports to Mexico from the U.S. increased 18.2% in annual terms in April and 3.4% in the January-April period.

The strength of the Mexican peso is a factor that contributed to the increase in spending on imports in the first four months of the year, the El Economista newspaper reported.

Mexico remains the United States’ top trade partner

Two-way trade between Mexico and the United States was worth $272.47 billion between January and April, a 5% increase compared to the same period of last year.

Trade with Mexico accounted for 16% of the United States’ total trade in the first four months of the year. Canada was the United States’ second largest trade partner with a 14.8% share of total trade, while China ranked third with a 10.4% share.

Mexico recorded a trade surplus of $53.5 billion with the U.S. between January and April.

Other ‘need-to-know’ economic data

• The USD:MXN exchange rate was 18:00 at 3 p.m. Mexico City time on Thursday, according to Bloomberg.
• The national statistics agency INEGI reported in late May that Mexico’s economy grew 1.9% in annual terms in the first quarter of 2024.
• The annual headline inflation rate was 4.78% in the first half of May.
• Mexico’s unemployment rate was 2.6% in April.
• The Bank of Mexico’s benchmark interest rate is set at 11%. The central bank’s board will hold its next monetary policy meeting on June 27.

With reports from El Economista and El Financiero

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