As the nearshoring trend boosts Mexico’s economy, so will a new wave of innovative solutions disrupt its supply chain industry.
· Nearshoring to Mexico is becoming the go-to choice for manufacturers targeting the US market, due to geographic proximity, favourable policies, and lower wages, among other factors.
· With the surge of manufacturers relocating to Mexico, the supply chain industry is ripe for disruption and innovative solutions in areas such as construction, logistics, and HR management.
· Mexico’s supply chain industry must accelerate its development to meet the increasing demand of nearshoring, creating opportunities for venture capitalists to invest in new and innovative solutions.
Historically, labour-intensive industries have moved to developing countries, attracted by competitive wages, even though this comes with operational issues. This has been particularly true for the U.S., that has relied on global imports for manufactured goods because of production costs at home. The pressure to do so has actually grown, with 2.4 million manufacturing jobs expected to remain unfulfilled in the country from 2018 to 2028.
Recent macro events, such as the covid-19 pandemic, or geopolitical realignments, are pushing manufacturers targeting the U.S. market to reconsider their global supply chain. Mexico is becoming the destination of choice, due to its geographic proximity, favourable policies, lower comparative wages, large pool of affordable (and qualified) workers, lower energy costs, and more. Mexico is already a manufacturing country heavily tied to the U.S. (in 2022, 78% of its exports were directed to its North American neighbour).
This nearshoring or friendshoring phenomenon is already taking place, notably with Tesla’s latest announcement of its mega factory in Nuevo Leon. It estimated that >400 North American companies intend to relocate from Asia to Mexico. As a consequence, Mexico is catching up with China, with exports expected to rise by $155bn in a five-year period.
Such a trend, comes with underlying challenges, as the country will need to accelerate its development of its supply chain ecosystem and the quality of physical infrastructure. This creates an exciting opportunity for the venture capital industry to support new and innovative solutions ranging from construction / real estate, manufacturing processes, logistics, to HR management and payments. At Angel Ventures we are at the forefront of identifying these innovative trends, and solutions, to support an industry ripe for disruption.