Nearshoring in Context: Sixty Years of Mexican Production for the United States Market [Article]

Abstract

“Nearshoring,” as used here, is the relocation of production facilities currently located in China, owned by American, Chinese, and third-country firms, to North America and principally to Mexico, when low-cost labor and proximity to the U.S. market are important for many reasons. The objective of the phenomenon is to move the production of labor-intensive goods destined for the United States market to a location close to that market rather than thousands of miles away in China or elsewhere in Asia. But this phenomenon, which seems destined to continue for years or decades, is not a recent development. The need for American and foreign producers to access lower production costs for labor-intensive components and finished products is not new. It has occurred in one form or another (initially “offshoring” from the United States) for most of the past 60 years. Both the United States and third-country enterprises primarily serving the U.S. market have long chosen to use Mexico when needing a source of reliable, lower-cost, young labor. This historical review of Mexico’s use as a platform for the reception of foreign investment since 1965 to produce goods for the U.S. market, along with its ups and downs, may help potential investors, policymakers, and stakeholders to understand better the current mini-boom and perhaps the future of Mexican nearshoring as well.