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Nearshoring in Mexico
March 25, 2025
Ana Gabriela Vázquez
In recent years, Mexico has emerged as a key destination for foreign companies seeking to optimize their supply chains and reduce geopolitical risks due to its proximity to the United States, robust infrastructure, and tax benefits. This phenomenon, known as nearshoring, has accelerated due to global tensions, the need for diversification, and the desire to shorten delivery times. Foreign companies have found in Mexico not only a strategic solution to maintain competitiveness, but also a low-cost environment to operate close to their main market: the United States.
1. What is Nearshoring and How It Benefits Foreign Companies
He nearshoring Refers to the relocation of manufacturing operations and processes to nearby countries, such as Mexico, instead of maintaining them in more distant locations. For foreign companies, this strategy offers multiple benefits, such as reduced transportation costs, faster delivery times, and preferential access to North American markets through the United States-Mexico-Canada Agreement (USMCA). Furthermore, proximity to the United States allows companies to minimize the risks associated with disruptions in international supply chains.
2. Advantages of Nearshoring in Mexico
Geographic Proximity and Reduction of Logistics Costs: Mexico's location, just a few hours from major U.S. cities, allows for drastically reducing the time and costs associated with logistics and product distribution. Companies that implement nearshoring can benefit from rapid response times, giving them a significant competitive advantage.
Competitive Labor Costs: Although labor costs in Mexico have been rising in recent years, they remain considerably lower than in the United States. This allows foreign companies to maintain higher profit margins while taking advantage of the high-quality and highly trained Mexican workforce.
Preferential Access to International Markets: Thanks to the USMCA, foreign companies operating in Mexico can access key markets without the burden of additional tariffs, giving them a competitive advantage over competitors without that proximity.
Tax Incentives and Special Zones: Companies that decide to set up in Mexico have access to various special economic zones, which offer tax and customs incentives, further promoting the competitiveness of operations.
3. Challenges and Considerations for Foreign Companies in Nearshoring
While nearshoring in Mexico offers significant opportunities, foreign companies must be prepared to face certain challenges related to tax, regulatory, and labor compliance.
Tax Compliance and Transfer Pricing: Companies operating in Mexico must ensure compliance with local tax regulations, including proper reporting of income tax, VAT, and other taxes, as well as compliance with transfer pricing regulations. These regulations are key to ensuring that transactions between related parties are conducted at market prices, avoiding tax adjustments and penalties.
Labor Regulations and Benefits: Mexican labor laws require companies to offer certain benefits to their employees, including social security, benefits, and minimum wage. Ensuring compliance with these regulations is crucial to avoid workplace risks and additional costs.
Regulatory and Customs Challenges: Although the Mexican environment is favorable, foreign companies must be aware of the complexities of customs regulations, permits, and legal requirements specific to the sector in which they operate. Correct interpretation of these regulations is vital to avoid obstacles and unforeseen costs.
4. Tax Optimization and Planning for Nearshoring Companies
For foreign companies to take full advantage of nearshoring in Mexico, it is essential to have a solid tax and financial strategy. This involves properly structuring their operations, ensuring that all intercompany transactions are carried out in line with market prices, proper tax determination, and compliance with all local regulations.
Efficient tax planning not only helps mitigate risks, but also optimizes the use of tax incentives and special zones that could reduce the tax burden and improve long-term profitability.
5. Monitoring Tariffs and Trade Regulations
One of the key factors foreign companies must consider when implementing nearshoring in Mexico is constant monitoring of tariffs and international trade regulations. Although the USMCA offers significant advantages in terms of tariff-free access to key markets such as the United States and Canada, tariffs can vary depending on global trade policies and amendments to trade agreements.
It is crucial for companies to maintain continuous monitoring of tariff policies and regulatory changes both locally and internationally. Changes in tariffs can directly affect the competitiveness of operations and profit margins for companies involved in nearshoring. Furthermore, the implementation of new tariffs or trade restrictions by the governments of key countries can disrupt the economic viability of manufacturing or distribution operations in Mexico.
In this regard, having specialized advice and tools for monitoring tariffs and regulations can ensure that companies quickly adapt to any changes and take full advantage of available tariff exemptions. Furthermore, proper planning in this area can help reduce unforeseen costs and optimize the supply chain.
Nearshoring in Mexico offers a unique combination of benefits, from reduced logistics and labor costs to preferential access to key markets. However, it is essential for foreign companies to properly understand and manage local tax, regulatory, and labor issues to ensure the success of their operations in the country.
If your company is considering nearshoring in Mexico, it's important to have specialized advice that helps you navigate the tax and regulatory environment, optimize your operations, and minimize risks. At CB Strategy, we have the experience and knowledge to help you efficiently structure your presence in Mexico and ensure compliance with all local regulations, guaranteeing the long-term success of your expansion in the country.
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