Mexico's Nearshoring Opportunity Hindered by Infrastructure Woes

Mexico stands at a potential inflection point, poised to capture significant economic benefits from the global nearshoring trend as companies seek to shorten supply chains and reduce reliance on distant manufacturing hubs. Drawn by its strategic geographic proximity to the vast US market, competitive labour costs, and extensive network of trade agreements spanning 50 nations, businesses are increasingly looking south of the border. However, mounting evidence suggests that critical deficiencies in the country's logistics infrastructure and operational environment pose substantial challenges, potentially capping the upside of this manufacturing realignment.

The concept of nearshoring – relocating production closer to end markets – inherently relies on efficient and reliable logistics. As highlighted by a study from the Mexican Institute of Public Accountants (IMCP), while the trend offers "unequalable opportunities," it simultaneously exposes significant logistical "challenges." The success of attracting and retaining investment hinges directly on the ability to move goods swiftly and cost-effectively. Mexico's Confederation of Industrial Chambers (CONCAMIN) underscores this point, noting that an efficient supply chain, capable of reducing costs and delivery times, is fundamental to capitalizing on the nearshoring wave.

Mexico's cargo transport sector is undeniably a pillar of its economy, contributing 3.6% to the national GDP and providing over one million direct jobs, according to data from the Secretariat of Communications and Transport (SCT). The country boasts a vehicle fleet exceeding 1.3 million units. Land transport dominates, with trucks and trains accounting for 81% of terrestrial cargo movement, handling a significant portion of the 57% of total domestic cargo moved via road, rail, ship, and air combined.

Despite the sector's scale, deep-seated problems loom large, creating significant friction. Three core logistical challenges stand out:

1. Strained Road Infrastructure:

The quality and capacity of Mexico's road network are uneven, directly impacting logistical efficiency. While highways in the north are generally in better condition, facilitating trade with the United States, the industrial heartland in the country's center suffers acutely. An estimated 52% of central region roads experience constant congestion and lack sufficient capacity to handle current, let alone future, demands spurred by nearshoring. Further south, infrastructure limitations represent a more profound bottleneck, significantly hindering connectivity and economic integration, with areas like Atasta in Yucatán cited as examples of critical choke points.

2. Pervasive Insecurity:

The persistent issue of cargo theft casts a long shadow over transport operations, inflating costs and risks. In 2024, reported incidents of cargo robbery surged by 9.15%, adding substantial burdens through higher insurance premiums and the necessity for costly armed escorts. The states of Mexico (25% of incidents), Puebla (21%), and San Luis Potosí (12%) have emerged as particular hotspots. Compounding the problem is a perceived lack of effective, sustained security programs across recent government administrations, leaving transport operators vulnerable and eroding confidence.

3. Customs Chokepoints and Concentration:

While Mexico operates 50 customs points nationwide, operational capacity is heavily skewed. Data from the National Customs Agency of Mexico (ANAM), SAT, and INEGI (through November 2024) reveals that a staggering 50% of all export and import operations are concentrated in just five locations: Nuevo Laredo (handling 23.25% of the total), Ciudad Juárez (9.61%), Tijuana (9.14%), Mexico City's International Airport (AICM) (6.29%), and Ciudad Reynosa (6.07%).

This concentration is stark across different modalities. Nuevo Laredo alone processes nearly half (49.8%) of all cross-border road freight. The capital's airports (AIFA and AICM combined) manage 50% of air cargo, while the Pacific ports of Manzanillo and Lázaro Cárdenas, alongside Veracruz on the Gulf coast, handle 71.5% of maritime trade. This intense funneling of trade through a handful of points inevitably leads to significant congestion, delays, and increased operating costs, particularly at these critical junctures. Notably, overall cash collection from foreign trade saw a slight year-on-year decrease of 0.5% to 1.11 trillion pesos in the January-November 2024 period, potentially reflecting efficiency strains alongside other economic factors.

Outlook:

The nearshoring phenomenon presents Mexico with a generational opportunity to bolster its manufacturing base and integrate more deeply into North American value chains. The country possesses clear advantages that make it an attractive destination for investment. However, the persistent and, in some cases worsening, logistical challenges related to infrastructure capacity, cargo security, and customs efficiency represent significant headwinds.

Failure to decisively address these bottlenecks risks not only frustrating existing operators but also deterring future investment. While the allure of proximity is strong, sustained logistical friction could ultimately limit the scope and scale of Mexico's nearshoring dividend. Urgent, targeted investment and effective policy implementation in transport infrastructure, security, and customs modernization are paramount if Mexico is to fully translate its geographic advantage into lasting economic prosperity.