Although moving production to Asia helped companies reduce cost at first, it also proved to be a fragile system with the arrival of the pandemic. Therefore, foreign investment in Mexico has been showing great signs of expansion as companies seek to reinforce their supply chains.
Mexico is becoming the strongest candidate for companies to create new supply chains
The Asian market has been the leading production supplier for over a decade. Its low production cost and vast labor force set the stage for China, Bangladesh, Taiwán, and India to become top suppliers. This made the continent the main provider of electronic components, clothing, auto parts, medical devices, and more for the North American market.
Although this strategy allowed companies to reduce costs, it also weakened their supply chains. The first sign of this was the disruption occurred by the 2012 tsunami that affected Japan. The natural disaster had effects on industrial sectors such as the automotive, as companies like Nissan and Honda weren’t able to supply auto parts to North America.
Although that was considered a minor disruption, the real challenge would come in 2020 with the arrival of the COVID-19 pandemic.
The risks of global supply chain disruptions and the bet on regional supply chains
Asian supply chains were completely disrupted with the arrival of the pandemic. This meant that depending on the Asian market for the production of medical equipment, ventilators, and facemasks was no longer viable. To reinforce supply chains was no longer an economic matter, but a subject of survival.
“With the arrival of the pandemic there was an important disruption in American supply chains due to the scarcity of components coming from China,” stated José López Portillo, Founder member and Director of Pedralbes Partners. “Mexico has the opportunity to attract investments in different sectors thanks to the country’s proximity to the USA and the ratification of the USMCA deal,” he added.
There is now more interest in foreign companies to invest in Mexico. Industrial sectors such as manufacturing, chemical, food & beverage are amongst the most popular for investors to reinforce their supply chains to North America.
Foreign investment in cities like Silao, Guanajuato, is expanding thanks to this. Volkswagen recently announced that they would be investing $233 million USD to double production in their Silao plant and take advantage of the USMCA deal, which rules of origin state that 75% of the final product must be made in the region.
Getting ahead of the curve and reinforcing supply chains is essential for companies looking to become more resilient. This would future-proof production and help the company stay afloat whenever there are difficult times. Thus, here at VYNMSA we would like to assist you in settling in Mexico.
We are one of the leading industrial real estate developers in Mexico. Plus, we have over 25 years of experience and have delivered over 400 projects to fully satisfied international clients. We are also fully equipped to assist you in developing your BTS projects. All while offering lease and sale solutions that always have a win-win approach.
Contact us and set shop in Mexico with VYNMSA.