Tech global leader Siemens inaugurated “ITESA 4,” a new manufacturing plant in Ciudad Juarez, Chihuahua. The new plant involved a US$17.4 million investment and aims to address the growing demand seen in the North American market, especially in the housing sector.

The new manufacturing plant will manufacture products to measure and distribute energy. “In Siemens, we are committed to continuous innovation… we will keep collaborating as a strategic partner in Mexico and continue boosting its position as a leader in digital, safety, and sustainability electrification,” says Alejandro Preinfalk, President and CEO, Siemens Mexico, Central America, and the Caribbean.

The plant will be built during four stages and construction is expected to be finished by the end of 2025. Siemens will install four assembly lines and transfer another six. The plant will have capabilities for CNC stamping, metal bending, welding, and painting, among others, for metallic components and aluminum bars.

The expansion is expected to boost the company’s exports by 16%, allowing it to meet the demand in its main market, says Rolando Calderón, Head of Manufacturing, Electrical Products, Siemens Mexico, Central America, and the Caribbean.

Maria Granados, Ministry of Innovation and Economic Development of Chihuahua, highlighted that Siemens’ expansion will generate employment, as it has already created over 260 direct jobs.

The project focuses on productivity and operational efficiency, reinforcing the company’s position as a strategic hub for manufacturing and distribution in the electrification market. “We are committed to reimagining our scope while reinventing our processes to lead the electrification of homes, industries, and societies,” says Marco Cosío, Vice President of Smart Infrastructure, Siemens Mexico, Central America and the Caribbean.

Source: Mexico Business 

Juan Carlos Valladares Eichelmann, Secretary of Economic Development (SEDECO) of San Luis Potosí, and executives of Unison Shanghai laid the first stone of the new plant that will operate in San Luis Potosí.

The Chinese company will invest US$400 million and plans to generate 3,000 new jobs with the new manufacturing complex.

According to the agency, the new plant will strengthen the company’s presence in the region and promote economic growth.

The event was attended by Winsong Weng, Vice President of Overseas Operations of Unison Shanghai; Daniel Lagunas López, Municipal President of Villa de Reyes; and Michelle Porrino, Director of the WTC Industrial Park.

The executives highlighted the importance of this investment for economic development and job creation in the region.

Specializing in the manufacture and assembly of auto parts, Unison Shanghai excels in the production of body parts and components for electric vehicles.

Source: Mexico Now 

The nearshoring boom has benefited Mexican industry, but it has also made more evident the challenges the country faces in receiving investors, mainly in terms of logistics infrastructure.

Josefina Moisés, general director of the Mexican Association of Real Estate Fibers (AMEFIBRA), assured that 500 companies attracted by nearshoring took their factories, production lines and distribution centers out of Asia to move them and install them in Mexico.

“Around 500 companies have established themselves in the country, boosting the demand for industrial space as a result of nearshoring,” said the representative.

According to the leader, the nearshoring boom has benefited Mexican industry, but it has also made more evident the challenges that the country has to receive investors, mainly in terms of logistics infrastructure.

Some of the main opportunities for a solid growth of the real estate industry in Mexico are in nearshoring, tourism and infrastructure.

“We have a good labor force, but also the macroeconomic stability, interest rates and stable exchange rate allow investors to evaluate the relocation of their production areas to Mexico,” she said.

The general director of AMEFIBRA said that the arrival of new companies has triggered a demand for industrial parks, so work must be done to improve the road and telecommunications network:

“All this in order to provide great benefits to foreign companies so that they decide to locate in our country,” she mentioned.

He recalled that the real estate market continues to be a solid and reliable option, capable of resisting global economic crises, despite the risks inherent to any investment, he said.

Mexico’s strategic location and good property costs, diverse types of industries, growing market, beneficial business conditions, low labor costs and cost savings are attractive, said Josefina Moises.

The Ministry of Economy informed that foreign direct investment (FDI) at the end of the third quarter of 2023 stood at 32.926 billion dollars, registering an increase of 30 percent compared to the 25.272 billion dollars reached in the same period of 2022.

The agency highlighted that the increase is the result of the confidence of foreign investors due to the good business environment and the country’s economic stability.

“Although there are a large number of properties, warehouses and industrial parks in Mexico, the choice of the most suitable one will always depend on the needs and objectives of each company, like a tailor-made suit,” said the executive.

During 2022, supply increased and closed the year at 3.98 million m2 , increasing by more than 290 thousand m2 since the beginning of the year. Even so, supply remains compressed due to the strong demand for industrial space and several conditions that have created obstacles to the development of new speculative projects.

Among these conditions are energy shortages, rising land prices, and the general rise in the cost of construction inputs and interest rates.

FIBRAs currently have more than 2,000 properties with more than 35 million meters of GLA, and more than 500,000 jobs have been created, 50,000 directly and 450,000 indirectly.

“Another point to highlight is that developers in Mexico are implementing the construction of sustainable buildings,” said Josefina Moises.

Strategies will have to be implemented to enable the implementation of new technologies, achieving long-term savings of at least 40 percent in energy, 20 percent in water and 20 percent in energy embedded in materials by 2050.

Source: Forbes

In 2023, the year was marked by the relocation of companies (nearshoring) at a global level. In Mexico, this phenomenon was a trigger for the industrial real estate sector, which was reflected in construction indicators.

According to Solili, a real estate data platform, throughout 2023, the development of more than 350 industrial projects began in the various Mexican markets under pressure from the demand of companies wishing to relocate their production centers to the country, in order to take advantage of the proximity to the United States.

Thus, by the end of December, a total of 5.6 million square meters of industrial buildings were reported under construction nationwide.

Despite the fact that construction did not stop throughout the year to satisfy the reconfiguration of supply chains, an analysis conducted by Banco Base stresses that nearshoring is “a golden opportunity that is not being fully exploited”. It is estimated that Mexico receives only between 10% and 20% of foreign investment flows due to company relocation.

“These investment flows are highly focused on certain states and manufacturing subsectors. In fact, there are entities where nearshoring continues to be a myth, as they have not received new investments,” reads the bank’s report.

It is worth mentioning that in 2023, Monterrey stood out for the announcement of an investment of more than US$5 billion by Tesla; however, the city was already emerging as one of the winners of nearshoring prior to this event, due to its geographic location, its infrastructure and its manufacturing vocation developed over the years.

With more than a hundred projects, the city of Monterrey exceeded 1.5 million square meters of new industrial buildings in construction last year, according to Solili. The second quarter was the most dynamic in the region, since the execution of 31 industrial buildings began.

Source: Mexico Now

Electric automaker Tesla has received land-use permits from Mexico’s federal environment ministry to build a planned “gigafactory” in the northern border state of Nuevo Leon, the state government announced on Tuesday.

The state government on Tuesday said the land designated for the plant spans around 261 hectares (645 acres).

The automaker in March announced plans for a new factory in Mexico without providing a timeline for construction.

The Nuevo Leon government has estimated it would cost more than $5 billion but Tesla is yet to share a capital cost forecast.

CEO Elon Musk said in October that he was hesitant to go “full tilt” on plans for a factory in Mexico given the uncertain economy.

After his comments, Nuevo Leon said the government would spend more than $130 million on infrastructure to support construction.

Nuevo Leon has agreed to build an electric power substation, a natural gas pipeline, railroad spurs, roads, and services for water and sewage, Reuters previously reported. The so-called “Gigafactory” is set to bring in an estimated $15 billion over the next two years through Tesla and its suppliers, Nuevo Leon Governor Samuel Garcia said in October.

Mexico has touted the Tesla project as proof the “nearshoring” trend is taking off as companies seek to move production away from Asia and set up operations closer to the United States.

In October, a state official told Reuters that approvals from the environment ministry would allow Tesla to begin construction on the site.

Tesla and a spokesperson for Nuevo Leon did not immediately respond to a request for comment late on Tuesday.

Source: Reuter

Mexico projects to receive an estimated foreign direct investment (FDI) of 106.418 billion dollars (mdd) during the next two to three years, according to the Ministry of Economy (SE).

This forecast arises from the plans of international companies, highlighting the trend towards the relocation of supply chains, known as nearshoring, which Mexico Industry has dealt with extensively.

Up to the third quarter of 2023, Mexico has already registered an FDI of $32,926 million dollars, showing an increase of 2.4% with respect to the same period in 2022. Of this investment, 76% comes from reinvestment of profits, according to SE data.

Foreign investors

The investment plans announced, with an average of $35.472 million dollars per year, come mainly from companies in the manufacturing sector (40%) and represent expansions of companies already established in Mexico by foreign investors (67%).

The SE highlights that these announcements reflect the confidence of foreign investors in maintaining and expanding their investments, as well as the interest of new companies to establish themselves in the country.

These plans include projects in the automotive sector, such as those of Tesla, as well as initiatives related to the transportation of liquefied natural gas and the construction of industrial parks, among others.

Investment diversification

The projected figure is expected to exceed the average recorded in 2022, when Mexico reached an FDI of $35.291 billion dollars, the highest in seven years.

In addition, it is highlighted that a quarter of the expected investment comes from companies with no previous presence in Mexico, originating in countries such as China, Taiwan, Denmark and Germany, which according to the SE represents a diversification in the origin of resources.

Reducing excessive dependence on China

The disclosure of this figure coincides with the visit of U.S. Treasury Secretary Janet Yellen to Mexico, who has expressed the need to reduce her country’s excessive dependence on China in terms of manufacturing.

The United States continues to be the main source of FDI in Mexico, leading investment announcements with commitments for $42,095 million dollars in the coming years, followed by China, with a pledge of $12,610 million dollars, despite currently being in the 80th position as origin of FDI in the country.

Source: Mexico Industry

Nearshoring in Mexico, for example, could make the economy grow 3.7% per year, after only growing 2.6% per year in the last two decades.

Nearshoring in Mexico represents an economic opportunity for the country only comparable to what was seen after the implementation of the North American Free Trade Agreement (NAFTA) in 1994 and, if well exploited, could generate the greatest economic growth since the “Mexican miracle” (1941-1982). This was the opinion of the general director of Economy, Business & Indicators (ECOBI), John Soldevilla.

According to the economist, “there is no country in the world with a better opportunity than Mexico to take advantage of this new phenomenon” known as nearshoring, which is nothing more than a business strategy to relocate part of the production and supply chains of companies to areas closer to their main target market. Tesla’s arrival in Nuevo León is a clear example of this.

While there are conditions that triggered nearshoring in Mexico and are now mitigated, such as the crisis in global supply chains and the surge in transportation rates caused by the Covid-19 pandemic, there are others that will persist in the medium term and give Mexico a unique competitive advantage in the world: the trade war between the United States and China; Russia’s war against Ukraine; and the increase in the cost of labor in Asia.

According to the economist, Mexico’s competitive advantages to position itself as a natural candidate to benefit more from nearshoring are the solid production and logistics chains developed with the United States as a result of NAFTA; shorter production and shipping processes than in other regions of the world; similar time zones with the United States, which facilitates communication between production and suppliers.

Also, the availability of skilled labor; Mexico is the country with the most trade agreements and treaties in the world; it is the largest exporter of manufactured goods in Latin America and the main commercial supplier to the United States, surpassing China.

But, just as there are advantages, there are also challenges to overcome in the country for nearshoring in Mexico to become a reality. Some of them are legal certainty for foreign investment; social problems, security, organized crime, corruption and impunity; development and modernization of more transportation logistics infrastructure, ports, airports, customs capacity, clean energy, as well as more skilled labor.

But, just as there are advantages, there are also challenges to overcome in the country for nearshoring in Mexico to become a reality. Some of them are legal certainty for foreign investment; social problems, security, organized crime, corruption and impunity; development and modernization of more transportation logistics infrastructure, ports, airports, customs capacity, clean energy, as well as more skilled labor.

The economist pointed out that the weakness of nearshoring in Mexico is that, unlike NAFTA, it is not a State policy on the part of Mexico, nor is it an agreement signed with the United States, but a product of unintended circumstances: the economic effects of the Covid-19 pandemic, the trade war between the United States and China, and Russia’s war against Ukraine.

Possible effects of nearshoring in Mexico

For the general manager of ECOBI, nearshoring in Mexico is a unique opportunity that is unlikely to be repeated in the future. And it also has an expiration date. That is, it will not be there forever, so capitalizing on all its benefits is crucial for the country. But what could those benefits be for Mexico?

John Soldevilla assured that the benefits of nearshoring could be visualized in a seven-year horizon, which was more or less the time in which NAFTA showed its main effects. In this way, the economist stated that from 2023 to 2030, if all the benefits of nearshoring are captured in Mexico, these results could be expected:

• The Mexican economy could grow 3.7% per year, after only growing 2.6% per year in the last two decades.
  Manufacturing would account for 96% of total exports.
• Investment would grow 7.4% per year and would be equivalent to 28.6% of GDP, its historical maximum.
• The big winner of this phenomenon would be the manufacturing sector, representing 22.4% of GDP in 2030, its historical maximum.
• Around one million new formal jobs would be generated per year.
• Exports would increase from 578 billion dollars in 2022 to 1.1 trillion dollars in 2030, going from 39% to 49% of GDP.
• Foreign investment would increase from US$36 billion in 2022 to US$87 billion in 2030, rising from 2.5% to 3.8% of GDP.

John Soldevilla considered that, unless some extraordinary internal or external phenomenon occurs, known as a black swan in economic jargon, the end of the six-year term should be orderly, without an economic or financial crisis. The probability of a crisis is low, with a moderate bias, given the presence of few risk factors in amber traffic light.

ECOBI analyzes 16 macroeconomic risk factors in our model, of which two are a source of concern this year (red traffic light): the Fed and Mexico’s rates. The rest are either green (low risk) or amber (moderate risk).

“Before 1995, most of the factors were in red and a crisis was imminent. Today, things are very different, our economy is stronger or more resilient. Our economy has better indicators than other emerging economies in the region. Therefore, Mexico’s potential is very great,” said ECOBI in a presentation to journalists.

ECOBI pointed out that, of the state economies, five states in the north of the country could benefit the most from nearshoring in Mexico, with Nuevo León leading the way. “Nuevo León is the first manufacturing entity in the country in GDP, FDI, employment and about to be the first in IMSS wages. Except for the CDMX, it is far behind the rest of the entities in terms of financing.”

“The top five places in exports correspond to entities in the north of the country, accumulating together almost 48% of the national total. Its export rate is high and its exports are mainly concentrated in transportation equipment (automotive) and electronic accessories and computer and communication equipment. The industry that could benefit most from this Nearshoring era is that of vehicles, electronics, auto parts, among others. Even construction itself.

Source: Forbes

Mexican car production grew by 13.54% year-on-year in the first three quarters of 2023, showing the recovery of the country’s main industry, informed the National Institute of Statistics and Geography (Inegi).

Mexican plants assembled more than 2.85 million light vehicles from January to September, about 340,000 more than in the same period of 2022, Inegi detailed in its report.

“Light trucks accounted for 76.3% of the total produced, while the rest corresponded to the manufacture of vehicles,” the autonomous agency specified.

Meanwhile, vehicle exports increased by 14.22% year-on-year in the first nine months of the year, totaling 2.42 million.

On the other hand, domestic sales of light vehicles in the first three quarters of 2023 rebounded by 24.94%, with 975,841 units sold nationwide.

Inegi’s report detailed that, last September alone, car manufacturing in Mexico grew by 23.99% year-over-year, to a total of 338,899.

Meanwhile, vehicle exports in the ninth month of the year soared 15.99%, to 301,341 units.

Likewise, car sales in the domestic market rose by 35.6% to 118,038 light vehicles.

According to the Mexican Automotive Industry Association (AMIA), the automotive industry is important for Mexico because it represents almost 4% of the national gross domestic product (GDP) and 20.5% of the manufacturing GDP, more than any other sector.

Source: Mexico Now