Mexico will soon become the largest manufacturer of electric vehicles in Latin America thanks to Tesla’s decision to construct a Gigafactory near Monterrey, Nuevo León. However, if Mexico wants to continue to attract foreign investment, infrastructure development needs to become a priority, experts warn. Francisco Solare, president of the Mexican Chamber of the Construction Industry, says Mexico allocates under 1% of its GDP to infrastructure development – when it should invest at least 5%. “Industrial construction is a great opportunity for the country, […] but the public sectors are not considering this branch as a strategic economic activity,” he says.
The rise of nearshoring
Mexico enjoyed $35.3 billion USD in foreign direct investment in 2022 – a 12% increase since 2021, and the highest amount in seven years. And, over 400 businesses were reportedly interested in relocating to Mexico in November 2022. Indeed, nearshoring – the business practice of moving operations or manufacturing to a lower-cost country – is becoming increasingly popular in Mexico – despite rising inflation and interest rates and poor infrastructure. Efforts to expand infrastructure should therefore be performed as efficiently as possible, and with reliable equipment. Skid steers with hard wearing caterpillar rubber tracks, for example, have a wide range of industrial uses. Durable rubber tracks are key to ensuring equipment is fully-optimized and avoiding downtime.
Mexico as an alternative to China
“The biggest impediment to Mexico’s reaching its potential as an alternative to China may be Mexico itself” as President López Obrador “has neglected the nation’s infrastructure, including its ports”, the New York Times reports. Whereas Chinese ports are able to house 30 million TEUs (twenty-foot equivalent units) of cargo annually, Mexico’s biggest port in Manzanillo, Colima can only fit three million TEUs. Other estimates say Mexico can accommodate around eight million TEUs in total.
Demand for industrial parks
Mexico can only accommodate the growing demand for nearshoring if at least 25 industrial parks are constructed, according to Foreign Affairs Minister Marcelo Ebrard. The nation’s industrial parks have now reached a record occupancy rate of 97% due to nearshoring, while Fibra Upsite, an industrial real estate company, put this rate at 100% in Q4 2022. That said, Mexico’s currently experiencing power outages, and manufacturing electric vehicles, in particular, demands a large quantity of electricity. The government is considering renewable energy as a solution.
“There are many opportunities in Mexico, but we have to go fast, we must increase the infrastructure in ports, land transport, help cargo carriers to modernize their fleets, and update programs so that young men and women become interested in being operators,” says Ignacio Szymanski, president of the SoyLogístico Association. Ultimately, Szymanski emphasizes the need for Mexico to increase port capacity significantly within the next decade.
