Over the past few years, companies in the United States have been turning to nearshoring, as opposed to more traditional offshoring, as a beneficial way to move production closer to the final consumer to reduce costs and avoid logistical setbacks.

This new trend in international trade began in 2018 as U.S.-imposed tariffs to China forced some businesses to look for alternative markets. Close behind was the renegotiation of the North American Free Trade Agreement (NAFTA) into the United States-Mexico-Canada Agreement (USMCA) in 2020, followed by the COVID-19 pandemic closing many global borders and most recently supply chain impacts from the Russia-Ukraine War.

All of these developments set forth the opportunity for Mexico that has accelerated the country's economic growth across various sectors and has strengthened the U.S. and Mexico commercial partnership. That partnership may continue to grow, in part, due to the two countries’ close geographical proximity, as thriving manufacturing operations in Mexico may present attractive opportunities for investment for businesses in a number of sectors, including electronics, transportation equipment, machinery, and basic metals. 

Key Considerations for Nearshoring to Mexico 

While nearshoring may offer a number of benefits when compared to offshoring, including reducing costs, simplifying supply chain logistics, and even potential tax benefits for certain sectors, there are several factors to consider when evaluating nearshoring opportunities.

  • Cross-border Operations. When setting up operations in another country, it is important to have the right advice from cross-border legal and tax professionals. This includes an evaluation of day-to-day operations, regulatory compliance, employee relationships, tax consideration, and supplier negotiations for governance as a corporation.
  • International Tax. Understand how to deploy an efficient tax structure for cross-border operations, which may include various financing structures, investment vehicles, or reorganizations. 
  • Regulatory Compliance. Ensuring compliance with appropriate regulations such as environmental safety or consumer products is of paramount importance. 
  • Labor and Employment. Labor considerations may include drafting employee handbooks, preparing and negotiating employment and confidentiality agreements, and implementing human capital structures.   
  • International Trade. This encompasses all technical aspects of U.S. customs and border protection, including export control requirements, regulatory compliance, and any changes in tariffs of the goods being manufactured cross-border and imported into the U.S.
  • Anti-corruption. The Foreign Corrupt Practices Act can be challenging to navigate, and having the right advice and solid counsel to provide step-by-step guidance can help avoid missteps and mistakes.

Webinar Replay: Learn More About Nearshoring in Mexico

PNC teamed up with BBVA Mexico to host a webinar discussing the economic outlook in the U.S. and Mexico, and how companies can benefit from nearshoring to Mexico..

Click here to log in and view: Nearshoring: Exploring Supply Chain Opportunities in Mexico

Ready to Help

PNC can work with you to develop strategies to help you manage issues related to supply chain disruption and market volatility. For more information, reach out to your PNC Relationship Manager, or contact us.