The scenario for Mexican SMEs in nearshoring

by Advance Real Estate 8 de August, 2023 423 Views

Read Time:3 Minute

Many industries in Mexico have been transformed since nearshoring emerged, offering several business opportunities that both small and medium-sized companies can leverage.

Nearshoring in Mexico

Nearshoring (as opposed to offshoring) is a strategy employed by large global firms to outsource operations in nearby countries with which can have direct and fluent communications. Due to its strategic approach and production potential, Mexico has become an excellent option for nearshoring to interconnect North America with Latin America.

As this business strategy spreads, it promotes more production centers opening in the country because it leverages trade route location and establishes close commercial relations with neighboring countries.

Additionally, companies resorting to nearshoring increase local demand. They require skilled labor, qualified vendors, and new business partners to help them meet the new plant’s requirements, boosting the labor market.

Therefore, there are multiple attractive business opportunities for SMEs in Mexico with significant growth potential.

The SME context in Mexico

Due to the pandemic, industrial space leasing and sale were encouraged since several foreign companies that unable to import or export as per usual chose to relocate within Mexican territory.

This is a circumstance that SMEs should make the most of because:

They continue to grow post-pandemic. As stated by the Business Demographics Study², there were 4.9 million active businesses in 2020, and in May of 2022, 5.5 million businesses registered in the National Statistical Directory of Economic Units (DENUE). This demonstrates that citizens are still entrepreneurial regardless of the economic turmoil.
They increase their competitiveness with e-commerce. The health crisis caused 48% of SMEs to adopt e-commerce, resulting in 7 out of 10² successfully adding the internet to their sales model and remaining competitive.
They have great export capacity. According to the Profile of Export Manufacturing Companies (PEME)³, by 2021, there were 7,102 companies involved in foreign trade and manufacturing, of which SMEs constituted 59%.

The Inter-American Development Bank (IDBD) indicated that all these factors might influence the rise of total exportation in Mexico, reaching US$35,300 annually⁴, mainly driven by nearshoring.

3 opportunities nearshore bring to SMEs

SMEs from Mexico should capitalize on the following:

1. Early supply chain configuration

With the growing popularity of nearshoring, structured supply chains can help SMEs foresee foreign companies’ needs, meet suppliers’ demands, and provide essential technological and logistical services or adapt their current services.

2. The need for business alliances

Foreign companies prefer proximity to borders to save on transportation costs and utilize highways or ports near industrial parks. Therefore, companies located in a strategic zone will have more business opportunities.

Furthermore, offices don’t have to be relocated. A small operation center can be opened in an industrial building inside an industrial corridor.

3. Motivation to settle near the U.S.

Foreign companies prefer proximity to borders to save transportation costs and enjoy highways or ports near industrial parks. Therefore, you will have more business opportunities if your company is located in a strategic zone .

Furthermore, the offices don’t have to be relocated, but a small operation center can be opened in an industrial building inside an industrial corridor.

Empowering SMEs through nearshoring

Promote commercial agreements between your SMEs and hundreds of companies arriving in Mexico by locating your business in the key industrial facilities of the country. Take this opportunity to lease an Advance Real Estate industrial building.

Now is the time to access world-class infrastructure. The Business Council of Mexico (CMN) stated that more than 15,000 SMEs⁵ would improve from nearshoring.

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Advance Real Estate

Advance is a leading company in the acquisition, leasing and operation of industrial and logistics assets, with presence in 12 cities within Mexico and a portfolio of 11.5 million sf of industrial space.

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Tags : nearshoring