Nearshoring has become an increasingly strategy for US companies looking to outsource IT, business processes, and manufacturing to countries that are closer geographically.
Mexico in particular has emerged as a top nearshoring destination for US companies due to its proximity, cultural similarities, free trade agreements, and talented workforce.
We'll explore some of the main benefits of nearshoring to Mexico for US companies.
One of the biggest advantages of nearshoring to Mexico is its proximity and minimal time zone differences with the US. Mexico shares a nearly 2,000-mile border with the southern US, making travel between the two countries relatively quick and easy. Flights between major US and Mexican cities take just a few hours. This proximity allows for more convenient collaboration and oversight when compared to offshoring to distant regions like India or China.
Mexico and the US share strong cultural ties in terms of language, values, religion, and business practices. Many Mexicans have family connections to the US and are exposed to US media and entertainment. This makes communication and understanding between Mexican and American team members smoother. Additionally, Mexico produces around 200,000 English-speaking IT graduates each year, minimizing language barriers.
The US-Mexico-Canada Agreement (USMCA), which replaced NAFTA in 2020, provides duty-free access to goods and services between the countries. US companies can manufacture products and outsource services in Mexico without tariffs or trade barriers. This gives Mexico a competitive edge over Asian offshoring locations.
Mexico has a large, relatively young population and an expanding middle class. Numerous universities and technical schools produce skilled graduates, especially in IT, engineering, and business process outsourcing. Wages are also lower on average compared to the US, allowing US firms access to skilled labor at reduced costs.
Nearshoring to Mexico offers cost-efficiency without compromising on quality. Operating costs are often lower compared to keeping operations solely within the US, making it an attractive proposition for companies looking to optimize their budgets. Additionally, the strategic geographical location allows for efficient supply chain management and logistics, contributing to operational excellence.