Mexico Nearshoring Boom Hits US$40.9 Billion FDI Record Before Energy and Tax Limits Bite

Economy · Latin America

Mexico’s nearshoring miracle is real but uneven. Foreign manufacturers are pouring record sums into plants and industrial parks, even as domestic investors retreat and infrastructure strains. US tariff threats are simultaneously reinforcing Mexico’s role and accelerating a wider Latin American diversification.

Mexico’s record FDI haul cements the nearshoring narrative

Between 2018 and 2025, cumulative foreign direct investment into Mexico increased by an estimated 69 percent.

Mexico attracted a record US$40.87 billion in FDI in 2025, up 10.8 percent.

The Rio Times linked this surge directly to the nearshoring boom and deepened integration under the United States-Mexico-Canada Agreement, known as USMCA.

In January and February 2026, Mexico announced and inaugurated US$5.8 billion in new investment across energy, industrial parks, automotive, pharmaceuticals, and advanced manufacturing.

A 2026 Rio Times analysis described Mexico as the structurally preferred nearshoring destination for North American supply chains, citing wage and logistics advantages.

PAM and MXE Fund frame nearshoring as a structural shift

A nearshoring-focused report from PAM and the MXE Fund, published in April 2026, concluded that nearshoring is a structural trend for Mexico and North America.

The report pointed to resilient FDI inflows and reconfigured global supply chains as supporting evidence.

Yet the same report noted that gross fixed investment in Mexico declined 3.6 percent year over year in February 2026.

The decline was driven primarily by weakness in machinery and equipment investment, with private investment continuing to contract.

Banco de México, the country’s central bank, revised its 2026 GDP growth forecast down from 1.6 percent to 1.1 percent in May 2026, then raised it back to 1.5 percent in August.

The central bank cited weaker domestic demand and softer investment activity despite the nearshoring opportunity.

The investment paradox undermines the boom’s foundation

Latinsight reported that total domestic investment in Mexico declined by roughly 10 percent in 2025.

The consultancy framed this as a paradox between policy narratives and institutional credibility.

A central driver of the weakness is retroactive audits by the Mexican tax authority, known as SAT or Servicio de Administración Tributaria.

These audits can extend up to a decade back and include threats to suspend import licenses unless disputed amounts are paid upfront.

For manufacturers dependent on uninterrupted cross-border component flows, this creates severe operational risk.

CSIS, the Center for Strategic and International Studies, described Mexico’s situation in February 2026 as Nearshoring Without Growth.

US tariff uncertainty hangs over the 2026 USMCA review

CSIS argued that uncertainty around fiscal governance and tax enforcement is increasingly shaping whether nearshoring translates into sustained growth.

The USMCA review of 1 July 2026, at which the United States declined to extend the agreement and triggered annual reviews through 2036, adds another layer of unpredictability for executives planning multi-year investments.

A SWP Berlin paper published on 27 May 2025 noted that Mexico’s earlier nearshoring investment boom has abated due to uncertainties.

The paper singled out Washington’s threats to raise tariffs as a major burden on nearshoring economic prospects.

The OECD revised its forecast for Mexico’s growth down to 0.8 percent in 2026, after actual growth of 0.8 percent in 2025.

A separate Rio Times macro article put Mexico’s GDP growth at 1.5 percent on Banxico’s forecast and 0.8 percent on the OECD’s for 2026, after actual growth of 0.8 percent in 2025.

Energy infrastructure emerges as the central constraint

AMPIP, Mexico’s industrial park association, identifies energy supply as one of three primary infrastructure constraints for nearshoring in 2026.

A Rio Times nearshoring guide noted that energy reliability is the most cited bottleneck among investors.

Mexico’s grid, dominated by the state utility CFE or Comisión Federal de Electricidad, has not expanded fast enough to serve new industrial loads in northern Mexico.

Companies face constraints on grid connectivity, power quality, and clean energy contracts, often needing private backup generation.

A Columbia Emerging Markets Review piece reported that electricity costs in Mexico’s northern industrial hubs have doubled compared to costs in the US and China.

Water scarcity complicates site selection in the industrial belt

AMPIP lists water availability alongside energy and customs efficiency as the top infrastructure constraints for nearshoring.

The Rio Times identified Baja California, Sonora, Chihuahua, Coahuila, Nuevo León, and Tamaulipas as the core of Mexico’s industrial nearshoring belt.

These six states are among the country’s driest, creating a structural mismatch between industrial demand and natural supply.

Existing municipal infrastructure was not designed for industrial-scale water demand.

Investors are now being forced to price water risk directly into site selection decisions.

This environmental constraint increasingly determines which states can capture the next wave of nearshoring projects.

Customs and logistics inefficiencies slow cross-border flows

AMPIP identifies customs efficiency as the third primary infrastructure constraint for nearshoring in Mexico.

Delays at border crossings and inland customs checkpoints raise the cost of just-in-time manufacturing.

The Columbia Emerging Markets Review piece listed electricity, water, and logistics as the three main constraints on the nearshoring opportunity.

The same analysis cited Brookings Institution research showing that growing nearshoring production will require addressing energy bottlenecks.

Utility diligence has now become part of core feasibility analysis for new industrial projects in Mexico.

Central America and the Dominican Republic expand maquila capacity

The maquila model, in which imported components are assembled and re-exported duty-free, is accelerating across Central America and the Dominican Republic.

These countries offer lower labour costs and preferential access to the US market through the Dominican Republic-Central America Free Trade Agreement, known as CAFTA-DR.

The shift is partly a response to Mexico’s rising energy costs and customs delays.

US tariff uncertainty is prompting multinationals to hedge their North American exposure by adding production lines in multiple locations.

The maquila sector remains labour-intensive, focusing on textiles, electronics assembly, and medical devices.

This regional growth is absorbing investment that might otherwise have flowed exclusively to Mexico.

Colombia and Costa Rica push into services exports

Colombia and Costa Rica are positioning themselves as nearshore hubs for business process outsourcing and software development services.

Costa Rica has long used its educated workforce and political stability to attract shared services centres and technology firms.

Colombia offers a large Spanish-speaking talent pool and competitive labour costs for call centres, finance, and IT support functions.

Services exports from these two countries are growing as US companies seek time-zone-aligned alternatives to Asia.

The services nearshoring wave is less dependent on heavy infrastructure than manufacturing, giving these economies a faster path to new jobs.

Both countries continue to address gaps in English proficiency and connectivity to widen their service export base.

US tariff policy is reshaping the entire regional investment map

Washington’s tariff threats are simultaneously reinforcing Mexico’s structural role and accelerating diversification across Latin America.

The SWP Berlin paper noted that tariff uncertainty burdens nearshoring economic prospects for Mexico.

Companies are now evaluating tariff exposure as a core factor in site selection across the hemisphere.

The July 2026 USMCA review and the annual reviews it triggered create a decision point for firms deciding between Mexico, Central America, and South America.

Mexico’s energy and tax enforcement weaknesses are pushing some investors to test smaller neighbours as complementary production sites.

The result is a more distributed Latin American nearshoring footprint rather than a single-country concentration.

What investors should watch through 2026 and beyond

Mexico’s record FDI numbers mask a domestic investment contraction that could cap long-term growth.

Investors need to separate headline foreign inflows from local capital formation when assessing economic health.

Energy, water, and customs constraints will determine which states and sectors can absorb the next expansion wave.

Retroactive SAT audits remain a legal and operational risk that requires pre-transaction due diligence.

Central America, the Dominican Republic, Colombia, and Costa Rica offer complementary options but with smaller scale and different risks.

The near-term direction of US tariff policy will likely shape capital allocation decisions more than any single domestic reform in the region.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error

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