MIAMI, FLORIDA, UNITED STATES, January 18, 2022 /EINPresswire.com/ — In recent weeks, various media have pointed to the increase in investment in the manufacturing sector in the north of the country. Specifically, we are talking about Ciudad Juárez, Tijuana, Reynosa, Matamoros and Piedras Negras. The reason: A possible migration of investments from China to Mexico to meet its supply commitments to the United States.
Regarding this topic, we talked with Fernando Lelo de Larrea, Founder of one of the biggest Venture Capital companies in Latinamerica and entrepreneur.
Fernando Lelo de Larrea, do you consider these situations isolated, or is there a trend in this direction?
Indeed, in recent months we have repeatedly found that the word diversification is part of the analysis of solutions to stabilize economies and companies in these times of volatility. Specifically, the North American supplier has an operational risk depending on the magnitude of an operator: Asia. If the North American market understands these operational risks, Mexico has a chance. The saturation of the ports in California and the saturation of the Panama Canal can create an opportunity for Mexico. The unknown is whether this situation will continue in the long term or will only be a short-term issue. At the moment, we still need more information to answer the question.
Why have investors preferred China over Mexico to make their investments?
Mexico and China have competed and also complemented each other in production processes. Mexico has excellent opportunities at the level of delivery at the final destination point, and China has advantages due to its plant scale and access to the Asian market. I think that Mexico can attract more investment and that many foreign investors only think of China in the first instance, without analyzing Mexico in detail. Maybe this is the way to change this topic. China and Vietnam are ideal for serving the Asian market, and Mexico could serve the North American market.
Fernando Lelo de Larrea, any specific example that you can point us to?
As I have pointed out before, the case of Lego with its factory in Monterrey is very revealing. In 2021 they are investing 100 million dollars, and their production of "bricks," colored bricks made from their pieces, went from producing 10 million to 80 million in recent years, and their plant is larger than the one they have in China. For these reasons, their plant in Mexico strongly supported them in this crisis, and thus we have more cases. Another example in 2020, Ciudad Juárez was the third city with the most foreign investment in Mexico. So I can tell you that we have news that investment in these sectors continues to increase in our country. I would say that it is premature because there are no public figures that allow us to understand the order of magnitude of this issue. Still, the most crucial thing for a company in a supplier is delivery stability; there is no higher cost for a company that does not deliver a product. In this sense, today, Mexico has that advantage. Mexico already has a legal framework to capture these investments in Asia or another part of the world. We are also used to competing for these investments.
So what challenges does Mexico have?
The challenge is to channel these investments to the south of the country. Mexico's growth has depended on its link with the production processes of the United States or with the tourist capacity they have. Today we see that both sectors are growing in this sense. The effect of public policy could be oriented to finding conditions for these companies to find adequate logistics in the south of the country. The interoceanic corridor could be relevant to achieve this. The project contemplates industrial parks along the roads and other advantages such as tax incentives to standardize the border conditions with the United States, but in the south-central part of Mexico, and could start operating in 2023.
Finally, Fernando Lelo de Larrea pointed out that the Mexican labor force is trained to compete and that new technological developments allow increasing the quality of production and improving workers' quality of life.
Sharon Turner
Lideres Empresariales
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