We have insisted that Mexico is currently experiencing a golden opportunity to grow and develop, driven by the dynamism of international business, derived from the realignment of supply chains on a global scale; what specialists call nearshoring, but those who attend to the financial needs of exporting and importing companies and their suppliers know that it is a structural and long-term phenomenon since the ratification of the TMEC.
There are those who maintain a legitimate skepticism towards the thesis that international business can be the engine of national development. His arguments are varied and well-founded: the meager growth of the Mexican economy -the most recent data was an annual rise of 0.9% for the GDP- and the low level of gross fixed investment; the adverse economic impacts of the Russian invasion of Ukraine, mainly on energy and grain prices; the massive lockdowns in China’s large logistics centers due to the prevalence of Covid, which aggravate disruptions in supply chains, such as those that have affected the supply of many inputs, mainly chips for the automotive and electronics industries; among the most prominent risks, where low growth and high inflation in the world economy – stagflation – is not a minor fact.
Faced with this, others consider that crisis is an opportunity. For them, although all the risks mentioned are real, the common fundamental characteristic is that they are circumstantial phenomena, while the realignment of supply chains or the opportunities opened up by the T-MEC are structural phenomena. This is something that has been identified by countless international companies that have decided to bet on establishing their operations in Mexico.
A significant figure is derived from the amount of Foreign Direct Investment (FDI) captured by the country in recent years. In 2021 it reached an amount of 31.6 billion dollars. According to official figures, this amount came from reinvestment of profits, 38.6%; for new investments, 43.7%; and for accounts between companies, 17.7%. By sector: manufacturing represented 39.7%; mining, 15.2%; financial and insurance services, 15.0%; transportation, 8.8%; trade, 8.5% and temporary accommodation services, 5.2%. The remaining sectors captured 7.6%. By country of origin: United States, 47.5%; Spain, 13.7%; Canada 6.5%; UK, 5.7%; Germany, 5.2%; and Japan 5.0%, other countries contributed the remaining 16.4%. In other words, although there is much to be done to improve confidence in the Mexican economy, the truth is that large international companies continue to consider Mexico an attractive destination.
A key piece of information to explain the above is the Logistics Cost. The CIF* logistics expense in dollars of imports made by the United States by country increased by a world average of 49.3% between February 2020 and the same month of this year. However, in Mexico this same indicator for this same period had a contraction of 3.3%. It is the strategic location of Mexico, added to its skilled workforce, which favors the attraction of FDI. Recently, the Ministry of Economy put it in simpler terms: An entry truck from Mexico to Memphis costs $3,100 with a maximum time of four days, while from China it costs $6,453 and takes 31 days.
Of course, the competitiveness of companies cannot be based on a single factor, be it cheap labor or low logistics costs, but rather on a combination of factors that guarantee efficiency, including access to advice and agile financing solutions. specialist are essential.
The truth is that every day news appears in the media about companies that have decided to establish their operations in Mexico, both in border cities with the United States and in the West, Bajío, Center and even in the Yucatan Peninsula. They are companies that require from industrial buildings to supplies and services. Those who satisfy this long-term demand, derived from being located in one of the largest markets in the world and with a strategic global location, will undoubtedly be able to transform risks into opportunities.
*CIF: The value of the merchandise in the first port of the United States, including freight charges, THC (terminal charges), GRI (general increase), VGM (verification of gross weight), BAF (adjustment factor for fuel) and CAF (exchange adjustment factor), insurance policies, stamps, issuance of BL, excluding taxes and duties to be paid in the destination country.
*The author is executive director of Grupo Financiero Base.