5 Opportunities for Companies Nearshoring to Mexico

Outsourcing is a well-established strategy for companies looking to reduce costs and improve efficiency. Traditionally, customer support and manufacturing roles were the focal point of offshoring efforts, with Asia being a popular destination due to low labor costs.

But recent global shifts have prompted businesses to bring operations closer to home and consider nearshoring as a way to maintain quality control while still saving money. One of the most attractive nearshoring destinations for US companies is Mexico, which offers a strategic blend of proximity, skilled labor, and economic incentives.

This article will explore the reasons why companies are nearshoring to Mexico and examine five opportunities you can take advantage of.

What is Nearshoring?

Nearshoring is the practice of outsourcing business processes or roles to a nearby country. Unlike traditional offshoring—which often involves hiring talent in countries with different time zones and cultural environments—nearshoring benefits from reduced travel time, improved communication, and greater working hour alignment.

For US companies, nearshoring means hiring professionals or moving business operations to Latin American (LatAm) countries like Mexico. These closer operations can react quicker to market changes and integrate seamlessly with their existing supply chains.

Nearshoring offers a balanced outsourcing approach that combines the cost benefits of offshoring with the operational efficiencies of geographic proximity.

Why Are Companies Nearshoring to Mexico?

As the global business environment changes, companies continue to re-evaluate their outsourcing strategies for efficiency and resilience. Here are a few of the reasons why Mexico has emerged as a top contender:

COVID-19 pandemic

COVID-19 exposed vulnerabilities in global supply chains, especially those stretching across continents. Shipping disruptions, increased lead times, and fluctuating international restrictions highlighted the need for more resilient and flexible operations.

Mexico’s geographic proximity ensures quicker response times, easier facility access, and the ability to adapt operations swiftly in the face of unforeseen disruptions.

At the same time, it sped up the adoption of remote work and made distributed teams a reality for most US companies. Though numbers are notoriously hard to pin down, many studies suggest nearly 50% of the workforce now works remotely at least part of the time.

Transition from NAFTA to USMCA

The replacement of the North American Free Trade Agreement (NAFTA) with the United States-Mexico-Canada Agreement (USMCA) has further incentivized nearshoring to Mexico.

The USMCA is designed to create more balanced international trade, support high-paying jobs, and grow the North American economy as a whole. It provides more favorable conditions for companies looking to conduct remote business, including improved labor conditions and updated intellectual property protections.

For corporations seeking stability and growth, the certainty offered by USMCA makes Mexico a more attractive nearshoring destination than ever before.

US tariffs on China

The ongoing trade tensions between the US and China—marked by tariffs on a wide range of Chinese goods—have made sourcing and manufacturing operations in China more costly and complex.

These tariffs have spurred companies to look for alternative locations that provide cost savings without the political and economic uncertainties. Mexico is a viable solution because of the USMCA and its competitive labor costs and developed infrastructure.

Companies nearshoring to Mexico can avoid punitive tariffs and reduce their reliance on China, ensuring more predictable and cost-efficient operations.

The Impact of Nearshoring

Nearshoring to Mexico is not just a strategic pivot for companies. It has had some profound effects on the US and Mexican economies and business environments.

The rise of cross-border logistics in US-MX

The growth in nearshoring has led to a significant rise in cross-border logistics, with companies investing heavily in infrastructure, transport networks, warehousing, and supply chain management.

Enhanced rail and road connectivity, coupled with advanced logistics technology, is enabling more efficient movement of goods. This rise has led to the development of logistics hubs on both sides of the border, creating more jobs and services.

Increased trade between the US and Mexico

Nearshoring is also fueling a significant increase in trade between the two countries as companies shift operations closer to home. The surge is most evident in sectors such as automotive, electronics, and pharmaceuticals.

Mexico has passed China as the leading source of goods imported by the US, and increased trade naturally fosters stronger economic ties. 

Benefits to the US and Mexican economies

The two nations continue to work together for improved economic growth and stability through the US-Mexico High-Level Economic Dialogue (HLED), relaunched in 2021.

For the US, nearshoring means a boost in service and manufacturing sectors that support cross-border operations. In Mexico, the influx of foreign investment and the establishment of new operations fosters industrial growth and development.

The country has experienced higher employment rates, improved local infrastructure, and a skilled workforce that continues to attract more business. Improved economic prospects may lift the standard of living and reduce poverty levels in various regions of Mexico.

5 Opportunities for Companies Nearshoring to Mexico

Companies nearshoring to Mexico are presented with a compelling array of opportunities for cost reduction and growth. Here’s a closer look at five of them:

1. Access a large pool of skilled talent

Mexico boasts a robust and steadily growing workforce, enriched by the continuous influx of graduates from university and technical institutes. These young professionals are well versed in various disciplines, including:

• Sales
• Information technology
• Software development
• Virtual assistance
• Finance

By nearshoring to Mexico, you can tap into this reservoir of skilled professionals who are ready to contribute high-quality work and innovative solutions.

2. Expand into new markets

Not only can nearshoring to Mexico help optimize an existing operation, but it also provides a strategic gateway to the Latin American market. Mexico’s position in the region—along with numerous trade agreements—makes it an ideal hub for expansion.

By establishing a presence in Mexico, companies can more easily access and serve consumers in neighboring countries, capitalizing on emerging market opportunities and driving international growth.

3. Use the country’s close proximity to the US

One of the most significant advantages is Mexico’s geographic proximity to the US. It minimizes travel time and costs, helping to facilitate in-person visits, audits, and face-to-face collaboration.

This ease of access allows for better quality control and faster resolutions of any operational issues.

4. Collaborate more easily thanks to time zone alignment    

With overlapping working hours, companies can enjoy real-time collaboration and more effective communication with outsourced teams. This minimizes delays, enhances project management, and fosters a more cohesive, responsive working relationship.

Streamlined communication translates to improved productivity and better decision-making, which are crucial in today’s business environment.

5. Save on cost of labor rates and availability

Labor costs in Mexico are considerably lower than in the US, given the much lower cost of living that most residents experience. Despite the lower salary expectations, the country has a large, young, and reliable workforce that is just as skilled and experienced as their US-based counterparts.

The Future of Nearshoring to Mexico

These recent trends don’t appear to be slowing down. The strategic advantages of nearshoring to Mexico, combined with the economic uncertainty across the rest of the world, will likely result in even more US companies investing in LatAm.

The 2024 HLED laid out four pillars for the future of US-Mexico economic policy:

• Pillar I: Collaborate on initiatives to strengthen the supply chain and reduce the risk of disruption.
• Pillar II: Promote sustainable economic and social development in southern Mexico and Central America.
• Pillar III: Secure the tools for future prosperity through commercial cybersecurity.
•  Pillar IV: Develop and prepare the workforce to meet the needs of modern industry.

If these goals are accomplished, the future of nearshoring in Mexico is secure and exciting. It will keep US businesses competitive and continue to expand perspectives through diverse hiring practices.

Final Thoughts

The future of nearshoring to Mexico looks promising, but the present is already filled with opportunity. Companies that embrace the nearshoring trend position themselves to capitalize on a range of operational efficiencies and market advantages.

To dig deeper into the pros and cons of outsourcing in Mexico, check out our comprehensive guide. It breaks down the most common roles companies are outsourcing and provides insight into the Mexican talent market.