Capital IdeasTM
Investment insights from Capital Group
Emerging Markets
Ana Reynal
Jeff Garcia
Arthur Caye
Brad Freer
Mexico looks an obvious beneficiary of nearshoring trends as countries move to bring production lines closer to home, with cheaper labour and existing trade partnerships with the US.
Evidence is growing of increasing investment in the country, with 2022’s foreign direct investment (FDI) the highest since 2015. Tesla has made nearshoring news in recent weeks, for example, with plans for a factory worth over US$5 billion in the northern border state of Nuevo Leon.
FDI in Mexico, highest since 2015 (US$, bn)
.png "FDI in Mexico, highest since 2015 (US$, bn)")
As at 31 December 2022. Source. Mexican Economy Ministry
Concerns around security, however, as well as the country’s electricity situation, are potential stumbling blocks for this latest Mexico moment.
Earlier this year, a number of Capital Group analysts, portfolio managers and economists visited Mexico to research a range of companies and policymakers. In this piece, they consider whether nearshoring is just an industry buzzword or a genuine structural tailwind.
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