There’s been a lot of talk after Mexico’s recent election. Many think we’re on the verge of an economic downturn, due to the election results which could place us in a risky situation towards our future. I do not agree.
These are objective questions that describe why I am positive about Mexico:
Has Mexico changed its geographical location vs de USA?
The obvious answer is no. Mexico’s prime location next to the world’s biggest market has always been, and will continue to be, one of its strongest advantages. Being so close to the U.S. comes with some risks, especially if the U.S. faces economic problems. However, this closeness also offers significant benefits, especially as the global economy shifts.
With many companies looking to move their manufacturing closer to home instead of relying on Asia, Mexico’s location makes it a top choice. Our well-developed infrastructure, skilled workforce, and trade agreements like the USMCA make us an attractive option for businesses. Additionally, Mexico’s strong and stable relationship with the U.S. adds to our appeal as a dependable partner, especially when it comes to important industries like automotive, electronics, and aerospace.
Our strategic location will not only continue to be an asset but will also enhance our role as a key player in North America’s economy. By taking advantage of this, Mexico can attract more foreign investment, boost economic growth, and cement its position as a critical hub for global trade.
Has the USA come to terms with China and is the commercial war over?
The short answer is no. While there have been attempts to ease tensions, the trade war between the U.S. and China is far from over. The economic rivalry between these two global powers continues to shape international trade and investment strategies. Tariffs, restrictions, and ongoing disputes over technology and intellectual property remain key issues.
This ongoing tension benefits countries like Mexico. As U.S. companies look to reduce their reliance on China, many are turning to Mexico as a safer, more stable alternative for manufacturing and supply chains. Our proximity to the U.S., combined with strong trade agreements, makes Mexico an ideal partner in this shifting global landscape.
The trade war is driving the U.S. to deepen its economic ties with neighboring countries, particularly within North America. This is creating new opportunities for Mexico to expand its role as a manufacturing hub and strengthen its position in the global economy. As the U.S.-China conflict continues, Mexico stands to gain by attracting more foreign investment and increasing its participation in international trade.
Has the need for supply chain based in China changed its need to come to this side of the world?
Again, no. The fundamental need for supply chains based in China has not changed, but the way companies are managing them has. While China remains a crucial hub for global manufacturing, issues like trade tensions, rising costs, and disruptions have led many businesses to look for alternatives.
Companies are increasingly exploring options closer to their main markets, particularly in North America. Mexico is emerging as a key player in this shift. Its proximity to the U.S., combined with favorable trade agreements and a growing industrial base, makes it a strong alternative for companies looking to diversify their supply chains while maintaining efficiency.
So, while the importance of China in global supply chains remains significant, the trend is moving towards including more options like Mexico to balance risks and enhance stability. This shift offers new opportunities for Mexico to attract more business and investment, strengthening its role in the global economy.
Have freight costs improved so that transportation from Asia to America be part of a good movement of goods?
Guess what? No.
Freight costs have seen some improvements, but they are still higher compared to pre-pandemic levels. While there have been reductions from the peaks experienced during the height of global disruptions, transporting goods from Asia to America remains relatively expensive and unpredictable. There’s an additional fact in this matter. Freight costs are running higher costs again due to geopolitical situations occurring in some latitudes involving some of the most important routes.
These ongoing costs, along with concerns about supply chain reliability, have led many businesses to rethink their logistics strategies. As a result, companies are increasingly considering alternatives, such as moving production closer to their main markets, including to places like Mexico. Mexico’s lower transportation costs and strategic location make it a more attractive option for reducing overall supply chain expenses and improving efficiency.
So, while freight costs from Asia to America have improved somewhat, they still present challenges. This situation is driving businesses to explore more cost-effective and stable options, boosting Mexico’s role as a key player in global trade.
Is Mexico still the first option for much of the sunk cost invested in China to move?
Yes, Mexico remains a top choice for many companies looking to shift their operations from China. Despite the significant investments already made in China, businesses are increasingly seeing Mexico as a favorable alternative. The country’s proximity to the U.S., strong trade agreements like the USMCA, and growing industrial capabilities make it a prime location for companies looking to reduce their dependence on China.
Moving operations involves considerable sunk costs, but Mexico’s advantages often outweigh these costs. Companies find value in Mexico’s lower transportation expenses, stable business environment, and the opportunity to access North American markets more effectively. As businesses adapt to the changing global landscape, Mexico continues to be a leading option for those re-evaluating their supply chains and investment strategies.
From a political perspective:
Mexico is not Venezuela. Mexico lacks of the natural resources that Venezuela has to “maintain” itself. Venezuela has the largest oil reserves in the world. Although Venezuela’s current government has been a disaster for the country, they have been managing to “live” out of their natural resources like oil and their “partnerships” with other authoritarian countries.
On the contrary, Mexico’s oil reserves and production are the lowest in our history, and it keeps going down.
Mexico NEEDS investment. If the current and upcoming government want to keep all of their promises, they need money. That can only come from investment.
Of course there’s a lot to do in education, infrastructure, rule of law and security. But, we’re still in a predominant position for investment to come in and make business with us.
Now, how about the US elections?
Trump is a bully and his only way to maintain his push is by talking. Now, the whole world knows him and we know what he will do and what he won’t. He might threaten us and other countries, but at the end of the day, he knows Mexico and the US are in a symbiotic relationship. “Cutting” Mexico out would hurt both nations, and I am afraid it would hurt the US more than it would Mexico.
In the past 2 to 3 weeks, I have hosted 3 visits to Guadalajara for 2 Chinese companies and 1 US company that are looking for land and space to operate. Additionally, several important investments have been announced for different states in the country.
Although there will be some uncertainty, I tend to be optimistic as we move forward to the end of the year.
We’ll see in due time.
