8 BuildersOutlook 2025Issue3
How Nearshoring is Reshaping Supply Chains in 2025
By Fernando Mares | Journalist & Industry Analyst, Mexico Business News
The rapid evolution of global logistics, driven by consumer demand, has placed an unprecedented focus on transportation, customs brokerage, and warehousing services. The automotive, technology, and steel industries have experienced significant growth, requiring the adoption of advanced technologies to enhance logistics and transportation efficiency. As Mexico aims to solidify its position as a nearshoring hub, strategic investments in logistics and technology will be critical to ensure supply chain resilience and long-term sustainability.
To strengthen its supply chains against potential disruptions, the Baker Institute suggests Mexico prioritize investments in: transportation networks, by expanding road and rail infrastructure to facilitate efficient cargo movement; digital connectivity, by upgrading logistics technology, AI-driven optimization models, and machine learning applications; supply chain security, implementing realtime tracking, cybersecurity measures, and risk management strategies; and sustainability, by promoting ESG-compliant supply chain practices and adopting green logistics solutions.
By focusing on these areas, Mexico can attract and retain investment while ensuring that its logistics ecosystem remains competitive and resilient in the face of evolving global trade dynamics, says the Baker Institute. " Compared to export powerhouses like South Korea and China, which invest heavily in infrastructure as a percentage of their GDP, our resource allocation is significantly lower," states Sandra Aragonez, President, CONALOG.
Challenges, Considerations for Mexico’ s Nearshoring Strategy
According to the Boston Consulting Group, Mexico remains a key manufacturing hub for North America, but increasing labor costs, infrastructure limitations, and US trade policies pose challenges to the country’ s long-term competitiveness. While it continues to be the top nearshoring choice for many companies, those planning new factories must carefully assess evolving conditions. Constraints in labor, infrastructure, and market access may shift the ideal locations within Mexico or even prompt consideration of alternative destinations in the region. " In terms of FDI, a ' Triple A ' government is essential. This means a government that effectively serves its citizens, strategically attracts companies that align with our national interests, and fosters the growth of local enterprises,” says Astrid Abugaber, Founder and Managing Director, Abu Logistics.
Among other challenges the country must address is security and ensuring the rule of law to create more certainty, as Mexico should not only rely on geography. " The current tension with the United States over security underscores the critical need for legal certainty. While Mexico offers significant investment benefits and proximity to the US market, unresolved security concerns and pervasive corruption will ultimately deter investors, regardless of cost advantages,” says Milton Magos, Vice President Mexico, Traffix.
The complexity of supply chains and proximity to key suppliers are critical factors for manufacturers. Industries requiring scale, integrated supply networks, and strong logistics, such as automotive manufacturing, still find Mexico irreplaceable. However, the country must also help SMEs to develop to better serve incoming investments, as strong supply chains are essential for companies interested in Mexico.
For Aragonez, the strength of Mexico ' s SMEs is crucial, but significant challenges hinder their efficiency and competitiveness. " Our data reveals that SMEs face double the logistics costs compared to large companies. This disparity stems from two key gaps: a severe lack of planning and a profound digital divide, with many businesses still operating without ERP systems. To attract more investment, we need a robust ecosystem. If Mexico does not have that ecosystem of potential suppliers, then how can it serve incoming companies?” she adds.
Shifting From Reinvestment to Transformational FDI
Mexico has historically relied on foreign reinvestment. According to the Ministry of Economy, in 3Q24, Mexico reached a historic high in FDI, totaling US $ 35.737 billion, a 9 % increase compared to the same period in 2023. Of this total, 86 % came from profit reinvestment, 6 % from new investments and capital increases in established companies, and 8 % from intercompany transactions within the same corporate group.
Authorities aim to further enhance investment in the country through Plan México, which includes several strategies to:
• Enhance investment incentives by providing tax benefits, regulatory simplifications, and financial support for high-valueadded sectors such as semiconductors, pharmaceuticals, and clean energy
• Foster R & D by increasing investment in innovation from the 2022 Mexico’ s 0.27 % of GDP to levels competitive with leading economies
• Develop specialized workforce programs by expanding technical education and dual training programs aligned with emerging industries
• Streamline investment processes by reducing the time to finalize an investment from 2.6 years to one year through digital platforms and reduced bureaucracy By implementing these measures, Mexico can position itself as a hub for transformative investments that drive sustainable industrial growth. However, experts believe that authorities must work on making the project a long-term one.“ Plan México holds promise, but its effectiveness hinges on deeper, long-term planning. This ensures that infrastructure investments, which require extended maturation periods, are implemented strategically and that the most beneficial projects are prioritized,” says Carlos Santillán, Director of Business Liaison, AML.
Héctor Díaz Santana, Tax and Legal Partner, KPMG Mexico, indicates that, according to a KPMG survey, companies are increasingly drawn to Mexico not solely for cost advantages. Factors such as the agility and resilience of its supply chains, access to skilled talent, and its strategic proximity to destination markets also play a significant role.
For these reasons, business leaders call for professionalization for the workforce and managing positions, the latter with a focus on having a more open mind in terms of technology adoption. " When discussing attracting investment, we often fail to incorporate considerations like vertical warehouses. We still operate with a ' cheap labor ' mentality, and that needs to change,” Aragonez notes.