Mexico, the new logistics hub in North America?

Mexico has a big opportunity to become a logistics hub in North America, not only because of the implementation of the new trade agreement with the United States and Canada (USMCA), but also thanks to the regionalization of supply chains following the impacts of the coronavirus (COVID-19).

According to Raul Meyer, Advanced Manufacturing and Mobility Partner at Ernst & Young Mexico, there is a big opportunity for manufacturing companies, auto parts, and the aerospace sector in countries like Mexico, as long as they present the right conditions for the multinational industry to decide to invest in the country.

Mexico already has a very big advantage, and international companies are showing interest in considering Mexico as a logistics hub, as it’s a neighboring country of the United States.

New opportunities for Mexico

The economic impact of China’s closure as a result of the COVID-19 pandemic will create regional blocs. In addition, the implementation of the USMCA opens the door for companies operating in China to move to Mexico, so they can have their base of operations and comply with the new trade agreement.

Evodio Kaltenecker, professor at the Tec de Monterrey Business School, stressed that Mexico needs to work even more on opening trade, lowering the barriers for international business and developing infrastructure.

This is because Mexico is already part of multilateral agreements, but could seek a more aggressive platform in bilateral treaties, which would open the door to the U.S. market for products made in Mexico.

Also, by lowering barriers to foreign business, Mexico could become more attractive for international trade. Similarly, there are ways to attract investment in infrastructure, logistics, and customs through public-private partnerships.

Attracting investments

The implementation of the USMCA is expected to contribute to a 3-5% increase in industrial activity in Mexico in the wake of 3.4% downswing in March, the largest monthly decline for the last 11 years according to data from INEGI.

To attract FDI (Foreign Direct Investment), the country needs to offer more security, clear regulations and certainty to the international market.

Foreign investment via subsidies is expected in electromobility in the next three to five years, and where the main value added in Mexico’s industrial sector will be as a logistics hub.

Oradel, and its contribution to Mexico

For 20 years, Oradel Industrial Center has been searching for international companies to establish their manufacturing operations in Mexico to provide them with competitive advantages. The industrial park is on the “NAFTA Highway”, only 10 minutes away from the international crossings with the United States, presenting huge benefits to international trade.