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Nearshoring: Wall Street buzzword or structural tailwind?
Ana Reynal
Jeff Garcia
Arthur Caye
Brad Freer
May 31, 2023
Mexico looks an obvious beneficiary of nearshoring trends as countries move to bring production lines closer to home, with cheaper labour and existing trade partnerships with the US.
Evidence is growing of increasing investment in the country, with 2022’s foreign direct investment (FDI) the highest since 2015. Tesla has made nearshoring news in recent weeks, for example, with plans for a factory worth over US$5 billion in the northern border state of Nuevo Leon.
FDI in Mexico, highest since 2015 (US$, bn)
.png "FDI in Mexico, highest since 2015 (US$, bn)")
As at 31 December 2022. Source. Mexican Economy Ministry
Concerns around security, however, as well as the country’s electricity situation, are potential stumbling blocks for this latest Mexico moment.
Earlier this year, a number of Capital Group analysts, portfolio managers and economists visited Mexico to research a range of companies and policymakers. In this piece, they consider whether nearshoring is just an industry buzzword or a genuine structural tailwind.
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Past results are not a guarantee of future results. The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment. This information is not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. All information is as at the date indicated unless otherwise stated. Some information may have been obtained from third parties, and as such the reliability of that information is not guaranteed.
Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.