Mexico City — Nearshoring in Mexico does not seem to have a favorite presidential candidate so far. The companies that are arriving in the country as part of the relocation of their supply chains do evaluate the political environment, but it is not the variable that determines their final decision to settle in the country.
The nearshoring phenomenon goes beyond ideologies, the color of political parties and the anticipated campaign of the possible presidential candidates for the 2024 election, agree two experts consulted by Bloomberg Línea.
The four most popular presidential hopefuls are, for the ruling Morena party, Claudia Sheinbaum and Marcelo Ebrard; Samuel García for Movimiento Ciudadano, and Xóchitl Gálvez for the Frente Amplio por México coalition, made up of the PAN, PRI and PRD parties.
Once the candidates of Morena, the party of President Andrés Manuel López Obrador, the Frente Amplio por México and Movimiento Ciudadano are known, companies will look at the presidential candidates and their proposals related to investments in infrastructure, public safety, the energy model and the rule of law.
Forty-percent of businesspeople consulted in the spring by Banco de México (Banxico) for the Report on Regional Economies January-March 2023 expect the nearshoring phenomenon to be reflected between 2024 and 2025, a period in which there will be a presidential election, government transition and the first year of the next president’s six-year term.
This means that, during the period in which nearshoring is likely to materialize in Mexico, the electoral scene will be active, and executives from the center of the country consulted by Banxico pointed out that the economic uncertainty that could result from the 2024 electoral process is among the risks for regional economic activity.
Nearshoring, between ideologies and a state vision
Sofía Ramírez, director general of the think tank México, Cómo Vamos? said that ideologies can indeed trace routes and visions of trade openness, and that the ideology of presidential candidates can damage or enhance the terms of trade, and considered that the role of the state, from a technocratic-ideological point of view, is to allow economic activity to be predominantly private.
“For example, there is an ideological component that says that we have to be vigorously sovereign, whatever the president means by that concept, but the truth is that not much oil is coming out of the ground and Pemex is not investing in preventing platform fires, so what do you mean by ‘I want to be vigorously sovereign?”Sofía Ramírez, director general of the think tank México, ¿Cómo Vamos?
Carlos Ramirez, a consultant at Integralia, said that companies looking to relocate to Mexico consider the political environment as a variable, but it is not the most important criterion, since what companies see of the country is its proximity to the United States, the accessible labor force and the free trade agreement between Mexico, the United States and Canada (USMCA), among other factors.
“Politics is a variable that may not count as much, but at the end of the day politics can help or hinder, and if we want nearshoring to change the face of the country we have to take action to take advantage of it, otherwise it will just be a fad and there will be a little bit more investment and exports, but it won’t change the overall framework of the country at all.”Carlos Ramírez, consultant at Integralia
Which candidate would most favor nearshoring?
Experts at the México, ¿Cómo Vamos? think tank and Integralia point out that it is too early to say which of the four most popular presidential hopefuls would be the most favorable for nearshoring, since the specific proposals related to the issue are not yet known, however, they offered an overview of the profile of the possible candidates.
Claudia Sheinbaum, Morena
Sofía Ramírez: She has more experience in domestic politics, but she kept the opening in Mexico City, and what she can be criticized for is an exacerbated urban growth where there are clear examples of gentrification. Perhaps with her we are not talking about nearshoring, but we are talking about the importance of the integration of people coming from abroad.
Carlos Ramírez: I see Claudia very focused on the López Obrador model, with some nuances, although changing AMLO’s model would imply a significant political cost. Sheinbaum so far seems to say that she is not going to change much in the energy sector, that is unsustainable in the face of the energy demand of the companies coming to the country.
Enrique de la Madrid, Frente Amplio por México
Carlos Ramírez: De la Madrid, like the other aspiring candidates, seems to understand that there is an opportunity in nearshoring; it is no longer a foreign topic, it is a topic that everyone has on their radar and in that sense it is good news that it is being talked about.
Marcelo Ebrard, Morena
Sofía Ramírez: In terms of management with the private sector, with multinationals and with the entire financial and logistics system that international trade implies, Marcelo has the necessary experience. His relationship with large companies and capital has been very clearly traced over the years; he understands the importance of Mexico’s relationship with other countries.
Carlos Ramírez: I see Ebrard open to explore new paths in energy matters, there seems to be more openness to explore a more hybrid and more viable model in energy matters and the investments that will be required for nearshoring.
Samuel García, Movimiento Ciudadano
Sofía Ramírez: Samuel Garcia is someone who, even with his relative youth and less experience, has experienced a very important moment, pulling investment and landing investments such as Tesla’s in Mexico. I do not think this is minor in the face of a fickle character like Elon Musk. Samuel is surrounding himself with people who know how these types of investments are negotiated.
Xóchitl Gálvez, Frente Amplio por México
Sofía Ramírez: With Xóchitl we are talking to someone with business experience, which is always appreciated, and above all with transparency and proven experience selling both to the government and to companies. It seems to me that Xóchitl’s experience is successful and I would highlight the importance of that sensitivity that implies having been someone who put or risked her own resources and not only public resources.