Lala Elizondo, Managing Partner of Tule Capital, Starup advisor and Business Consultant. She sits on the board of Endeavor Mexico.
Nearshoring is the practice of outsourcing business processes to neighboring or nearby countries. It can offer cost savings, access to skilled talent and better control over operations when compared to offshoring.
In the past few years, due to a shift in economic relations between U.S. and Canada, as well as other political and economic circumstances, more and more companies are establishing their operations on the Mexican border states with the U.S. This is a phenomenon started about two years ago, but it is now what everyone seems to be talking about on my business trips to Mexico.
Work To Be Done
However, I believe that Mexico has a lot of work to do to position itself as an optimal place for U.S. companies wanting to tap into the country’s skilled workforce and benefit from its geographical proximity.
I recently returned from an event organized by Forbes in Monterrey, Mexico, that focused heavily on nearshoring topics. I’m pleased to see that this concept, which has been on some people’s minds for years, is more universally relevant and on people’s lips (at least on the Mexican side). Undoubtedly, the government of Nuevo León, along with other stakeholders, has done a great job, and the confirmed investment in the new Tesla plant in Mexico helped spread the word. But what comes next?
As a Mexican living “across the border” and being well connected in the tech community in Austin and the commercial real estate community in Dallas and Houston, I realize that there is still a lot of work to be done to create awareness of the growing collaborative opportunities between both countries—particularly on the American side.
What Comes Next?
How can Mexican production position itself as top of mind on the American side? It still happens to me that when I’m in Austin attending venture capital, tech or real estate events, I tell someone that I moved from Monterrey, and in 80% of the cases people respond with “from Monterey, California?” No one can believe that it’s just a seven-hour drive from Austin to Monterrey.
Current Projects
With projects like Scale Up Nation, led by Rogelio de los Santos, which includes specific initiatives such as the Expedition Building in Distrito Tec or the Venture Café, the city of Monterrey is slowly laying the groundwork and adding the ingredients to ride this wave.
Independent efforts have been made as well to position Nuevo León in Texas. In 2021, INCmty organized an event aimed at promoting collaboration between the border state and the northern region of Mexico.
And during the past South by Southwest conference and festival, a similar event was organized with much more attendance than the first one. But I don’t think one event per year is enough, and the attendees were mostly Mexican. There is still a long way to go to be on the minds of the average American business stakeholder.
Collaboration Between States
I would love to see an office of the Mexican federal government and/or the border states established in Texas, specifically in Austin or Dallas, whose main function is to promote different collaboration initiatives between both regions and attract investments to the golden triangle in northern Mexico.
The office could collaborate with different chambers or relevant sectors in nearshoring, promoting opportunities through informative sessions and industry networking events. This office could not only focus on manufacturing issues but also on tech talent.
Currently, I find that very few Americans consider Mexico as an option to recruit quality talent in areas such as data science and machine learning, considering instead Middle Eastern countries or Canada as their first choice in these fields.
Although the state government of Nuevo León has shown great progress and has become the state that attracted 50% of the investment in production centers in 2022 due to nearshoring, it is regrettable that Tamaulipas, another border state with enormous potential and a major port like Altamira, has not managed to attract any new investment through nearshoring.
Promoting Nearshoring
To promote its nearshoring efforts in the U.S., businesses and organizations in Mexico can take several steps. First, the country can improve its business climate by simplifying processes and offering tax incentives. I also believe Mexican business leaders can help by emphasizing the country’s advantages such as geographical proximity, skilled workforce and cost-effectiveness.
As a part of this, collaboration with trade organizations can connect Mexican and U.S. businesses while investment in educational programs can enhance workforce skills. Moreover, things like establishing special economic zones with incentives, improving infrastructure and sharing success stories are all effective marketing strategies.
Leaders should look to foster collaboration and partnerships while providing support through incentives and customized services. These measures can further position Mexico as an attractive nearshoring destination for U.S. companies.
Overall, the winds look to be favorable for Mexico, but it is up to businesses and the government to take advantage of them. If the Mexican government or affiliated organizations fail to establish a constant and active presence in the United States, I don’t see them turning the nearshoring trend into a real and sustainable opportunity.
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