Expert Contribution - Nearshoring in Mexico: Technical Approach From the Civil Engineering and Construction Specialty

Decades ago the trend was "offshoring" (taking factories to countries like China to produce more cheaply). With the US-China trade dispute, the global supply chain disruption during the coronavirus pandemic; and the Russia-Ukraine war crisis, companies have shifted to "Nearshoring" (manufacturing their products close to the world's largest market: the United States). As a result, Mexico has emerged as an attractive destination for this activity.

Mexico benefits from its geographic location close to the United States and a similar time zone, which expedites the flow of goods and services, reducing transportation costs and delivery times. It also has a state-of-the-art logistics infrastructure, a skilled workforce in technology, engineering, and finance, and the backing of the Mexican government, which offers tax incentives and support programs to attract foreign investment and encourage the establishment of companies in the country. The Treaty between Mexico, the United States, and Canada (T-MEC) also boosted trade and investment between these countries.

Likewise, according to data from the Mexican Ministry of Economy, the Foreign Direct Investment (FDI) registered in the first half of 2022 was distributed as follows: 2,376 companies with foreign capital participation, 2,649 trust contracts, and 16 foreign legal entities. In addition, the following are key points to understand:

• New investments accounted for 43.0%, reinvestment of profits 42.4%, and intercompany accounts 14.6%.
• Manufacturing received 34.3%, followed by the transportation sector with 16.3%, mass media information with 14.2%, financial and insurance services with 13.0%, trade with 6.1% and mining with 4.7%. The remaining 11.4% was accounted for by other sectors.
• The United States contributed 39.9%, Canada 10.3%, Spain 6.8%, Argentina 5.9%, United Kingdom 3.3%, Germany 2.6%, and other countries contributed the remaining 31.2%.

Strategic decision: Location 

The Nearshoring effect has detonated the occupation of industrial parks in Mexico, by necessity new spaces are being built, increasing the supply in Mexico. The decision to purchase the physical space for the installation of the new location depends on several factors:

Area and dimensions that cover the needs of the space for the installation of the production building, storage areas, offices, etc.

1. Available services that are vital inputs for the production process:

• Electric power supply
• Gas supply
• Water supply

2. Infrastructure and communication routes:

• Highways
• Railroads
• Ports

3.Strategic locations:

• Potential customers or end users of the product to be manufactured.
• Potential suppliers of services, inputs, and spare parts
• Financial centers
• Health centers
• Education centers
• Housing supply
• Commercial

Development of a Megaproject

A major challenge for companies seeking to produce in Mexico is the implementation of processes, technologies, and engineering to comply with quality standards in the production lines, improving the profitability of the business. Achieving these objectives requires the involvement of experts in the diverse branches of engineering that participate in the development of projects.

Nowadays, technological alliances and collaborations place the experts of each of the areas in different parts of the world, hence the importance of implementing collaborative methodologies for creating and managing projects, whose objective is to centralize the information of all the engineering companies involved in real-time, facilitating the team communication, regardless of the geographic location where they are working.

In the case of Civil Engineering, it is advisable to have a local expert involved in all stages and dimensions of the project:

• Management: such an expert must be familiar with local legislation and construction regulations. This coordinates the necessary feasibility studies, such as environmental and civil protection studies. 

• Preliminary studies: In the pre-design stage, it is essential to work closely with equipment, machinery, and process designers, in conjunction with the Civil Engineering discipline. These work teams should obtain technical data from studies carried out at the construction site, such as topographic surveys, soil mechanics analysis, seismic spectra evaluation, as well as studies such as Land Development Feasibility Studies that facilitate decision-making.

• Structural and Foundation Design: It is necessary to have professionals who are familiar with seismic design features and other relevant variables. These experts must understand the particularities of the terrain and have a solid knowledge of how to design structures and foundations that are resistant and safe.

• Construction: A thorough understanding of the construction processes specific to the area in which the project will be carried out is required. This involves knowledge of local construction methods, access to skilled labor, establishing relationships with reliable suppliers, and establishing union contracts, if applicable, to ensure successful and efficient project execution.

• Real Estate: It is important to have experience in this sector. This involves identifying and evaluating housing opportunities in the area for foreign executives, and managing the acquisition or leasing of properties, among others.

In short, nearshoring has boosted foreign investment in Mexico, and having engineering experts and making the right strategic decisions are key to ensuring the successful implementation of production projects close to the U.S. market. Mexico has become an important player in this trend and continues to attract investment and generate economic opportunities.

Author

José Antonio Ramírez Wiella

CEO | Valpa Engineering

+52 1 55 1291 2708