USMCA Summary: Focus on Nearshoring and the Industrial Real Estate Market in Mexico.

GG PARTNERS
Aug 29, 2024
3 min read

The USMCA has catalyzed nearshoring and created significant opportunities for the industrial real estate market in Mexico. With a more favorable trade environment and growing demand for industrial spaces, Mexico is positioning itself as a key destination for investment in the industrial sector. Companies looking to capitalize on these opportunities should carefully consider the advantages and challenges of the Mexican market to maximize their success.

El T-MEC ha catalizado el nearshoring y ha creado oportunidades significativas para el mercado de propiedades industriales en México. Con un entorno comercial más favorable y una demanda creciente de espacios industriales, México se está posicionando como un destino clave para la inversión en el sector industrial. Las empresas que buscan aprovechar estas oportunidades deben considerar cuidadosamente las ventajas y desafíos del mercado mexicano para maximizar su éxito. — USMCA Summary

1. Introduction to the USMCA:

The United States-Mexico-Canada Agreement (USMCA), in effect since July 1, 2020, is a trade agreement that updates and replaces the North American Free Trade Agreement (NAFTA). Its primary goal is to promote trade and investment among the three countries, creating a fairer and more balanced business environment while strengthening regional supply chains.

2. Nearshoring and Opportunities for Mexico:

Nearshoring refers to the strategy of relocating production or services to nearby countries to reduce costs and risks associated with the global supply chain. The USMCA has driven nearshoring to Mexico due to several key factors:

Reduction of Trade Barriers: The USMCA has lowered tariff and non-tariff barriers, facilitating Mexico’s access to U.S. and Canadian markets. This has made Mexico an attractive destination for companies seeking to relocate closer to their main markets.
Regional Supply Chain: The agreement promotes the integration of supply chains in North America, encouraging investment in infrastructure and industrial properties in Mexico to meet the growing demand for near-market production.
Investment Incentives: The USMCA includes provisions that encourage investment in Mexico, such as investor protections and dispute resolution mechanisms, creating a safer and more predictable environment for foreign companies looking to establish operations in the country.

3. Impact on the Industrial Real Estate Market in Mexico:

The surge in nearshoring has significantly impacted Mexico’s industrial real estate market:

Increasing Demand: The need to relocate production centers closer to the U.S. and Canada has increased the demand for industrial properties in Mexico. Companies are seeking high-quality spaces for manufacturing, storage, and distribution.
Expansion of Industrial Parks: Growth in investment and demand has led to the expansion of industrial parks and logistics centers in Mexico, especially in strategic regions near the U.S. border, such as Nuevo León, Chihuahua, and Baja California.
Development Opportunities: The industrial real estate market in Mexico is seeing increased investment in the development of new properties and the modernization of existing ones to meet the needs of companies moving to the country.
Infrastructure Improvement: With rising demand, there is a push to improve transportation and logistics infrastructure, such as roads and ports, to support the growth of the industrial sector and facilitate regional trade.

4. Challenges and Considerations:

Despite the opportunities, companies must consider several challenges when entering the Mexican market:

Local Regulation: Companies need to adapt to local regulations and compliance requirements in Mexico, which can vary depending on the region and the type of property.
Operational Costs: While Mexico offers advantages in production costs, operational and setup costs can vary depending on the location and type of industrial property.
Security and Stability: Companies should assess the security conditions and political stability in the regions where they plan to invest to ensure a safe and efficient operating environment.