Regional Realignment: Mexico\u27s Appeal in the Era of Nearshoring

Abstract

With growing geopolitical tensions and increased uncertainty over global trade, foreign companies are considering nearshoring (relocating their production to be closer to the end-market) and altering their supply chains to reduce risk and be more efficient. From growing demand for industrial parks to large public investments in Mexico’s manufacturing sector, evidence suggests that Mexico is one of the most attractive nearshoring locations. Therefore, using the process tracing method, in this thesis I explore why Mexico is such as compelling option for nearshoring. I find that Mexico’s strategic location, not only as a neighbor of the United States but its abundance in lithium and an isthmus, along with its multiple free trade agreements and investment incentives, make it an attractive option for companies looking to nearshore. The nearshoring discussion is relatively recent, having gained momentum since the COVID-19 Pandemic as multiple supply chain vulnerabilities were highlighted. Therefore, it is important to discuss nearshoring as its adoption and potential effects are and continue to unfold. This reconfiguration of supply chains entails new potential beneficiaries, like Mexico, and it is important to study nearshoring and its implications, not only in global trade dynamics but also domestically