Mexico nearshoring gains may fall short of potential

Significance

Mexico, with its long US border and relatively low wages, is well-placed to take advantage of this trend, and is doing so to some extent, but several factors are weighing on its ability to maximise benefits.

Impacts

• The establishment of an arbitration panel to handle the tri-national energy dispute could spook investors.
• The special status of Mexico’s northern ‘free zone’ will probably be renewed by the country’s next government.
• Nearshoring will continue to drive Chinese investment in Mexico, but Mexico’s US ties will remain dominant.