The U.S. economy and investing in Mexico’s industrial spaces
It is fundamental to keep in mind how the U.S. economy can impact Mexico, causing significant changes in trade or transforming manufacturing and logistics activity. This includes everything that can affect the construction of industrial buildings.
Although the United States and Mexico have maintained a rise in the reference interest rate and stable inflation in the last year, it is worth noting the still-active availability in the industrial space sector, even if an economic recession hits the U.S.
How will a U.S. economic recession transform Mexico’s industrial real estate sector?
Several foreign companies adopted nearshoring strategies when relocating operations to Mexico, leading to outstanding growth in the industrial real estate sector. However, the U.S. economic slowdown is expected to hinder those projects. Even when the change is subtle, some signs call for action.
For instance, in Mexico City, the availability of the industrial real estate market, valued at 2.7% at the end of the third quarter of 20221, was deemed quite low.
Other awaited consequences for Mexico due to a U.S. economic recession include the following:
- Lower amounts of remittances sent.
- A fall in imports to the U.S.
- A decrease in external and domestic demand.
- Peso depreciation against the dollar as a result of tight monetary policy.
Advantages of investing in Mexico’s industrial parks
Investing in Mexico’s industrial park has many benefits due to its strategic location, international trade agreements, and economic conditions, such as low debt and budget deficit, exchange rate flexibility, high international reserves, and credit access to the International Monetary Fund.
Regarding economic policy, the Banco de México2 is expected to keep increasing the interest rate to control inflation.
Futhermore, more regions offer better infrastructure to situate an industrial zone, qualified enough to run operations from Mexican companies looking to grow as well as foreign companies that still use nearshoring as a policy.
Measures to ensure Mexico’s industrial production stability
Although the places with the best industrial space occupancy rates (Mexico City, Ciudad Juarez, Tijuana, and Monterrey) may not suffer much in this scenario, it is essential to address some key aspects to ensure all the country’s growth:
1. Strengthen the domestic market
Contribute to the growth of small and medium producers by integrating international chains to help exports reach larger markets.
2. Encourage foreign investment
Develop projects that promote competitive advantages to invest in an industrial zone of Mexico to attract foreign capital and create jobs for people to face any possible international economic crisis.
3. Review fiscal policies
Design incentives and create fiscal conditions to motivate private investment in the country even more. This way, the interest to invest in Mexican territory is boosted compared to other countries.
4. Guarantee electric power coverage
Ensure the availability of consistent and continuous energy for different production processes to continue endorsing the creation and use of new industrial spaces.
At Advance Real Estate, we know that fully equipped industrial buildings are key to addressing companies’ operational needs and attracting new
Information Sources:
- www.milenio.com/negocios/sombra-recesion-eu-frena-parques-industriales
- www.banxico.org.mx
- expansion.mx/economia/…/como-afecta-mexico-recision-estados-unidos-2022
- www.imf.org/es/Home
