Despite TESLA’s investment, there still skepticism about Mexico’s nearshoring forecasts

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Despite Tesla’s recent announcement that it was going to set up a large new factory in northern Mexico, there are still questions about the country’s nearshoring forecasts.

“(I’m) skeptical of the idea that the reorganization of supply chains will result in a large surge of capital inflows in the near term,” said Deutsche Bank’s chief Latin American economist, Sebastian Brown.

“There are areas…that (Mexico is) lacking,” he said, pointing to constraints for example in the power sector, where there are concerns an influx of new factories could overload the electricity grid.

Morgan Stanley economists also said in a report last year that they believed Mexico was “unprepared” for a fresh nearshoring wave, and had “underinvested.”

Gonzalez says any nearshoring boom “is going to be little by little.”

But Peyrelongue said investors should get in front of what is a clear trend, amid early “strong appetite” from companies to relocate closer to the United States.

These are companies that want to diversify risk and reduce risk to China, so they’re coming to Mexico.

Mexico’s financial markets have been battered lately over concerns over President Lopez Obrador’s policies.

Source: El Financiero

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