Relocation to Mexico boosts manufacturing and real estate sectors, Fitch reports

According to Fitch Ratings, the shift of global value chains towards Mexico benefits non-financial corporations, local manufacturers, and the industrial real estate sector.

Key sectors experiencing benefits include automobiles, machinery, medical equipment, electronics, appliances, logistics, and industrial real estate.

Fitch mentioned that realizing the full advantages of this “nearshoring” could take three years or more until the invested capital starts yielding the expected returns.

While Mexico is observing benefits, it still grapples with infrastructure challenges, especially in energy and water-intensive sectors.

Concerns also include skilled labor availability and security.

However, the pace of foreign and private investment in Mexico is expected to remain positive, driving economic activity, consumer demand for goods and services, reducing unemployment, and raising wages.

Fitch emphasized Mexico’s open economic stance, backed by various trade agreements and a favorable position to cater to the North American region, which accounts for over 25% of global GDP.

Companies moving their manufacturing operations to Mexico stand to gain from improved supply chain diversity and reduced logistics costs, offset by potentially higher labor costs depending on their previous operational locations.

Mexico’s second-largest economy in Latin America after Brazil, grew by 3.0% in 2022.

Private analysts forecast Mexico’s economic growth at 2.50% this year and 1.50% in 2024, influenced by expected slowdowns in the U.S.

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