Latest / International Business with Fexingo: Global Trade, Cross-Border Deals, and Multinational Operations / How Mexico Is Winning the Nearshoring Race in 2026
Transcript
- Lucas: So Mexico just reported its 2025 foreign direct investment numbers, and they hit a record 42 billion dollars—up 38 percent year-over-year. That's not just a blip; it's a structural shift in where global manufacturing is happening. Luna: 38 percent is massive. What's driving that? Is it all nearshoring from China, or is there more to it? Lucas: Mostly nearshoring, but with a specific twist. A huge chunk comes from Chinese companies themselves setting up factories in Mexico to get around US tariffs. Then you have US and European firms moving supply chains closer to home. And the poster child for all of this is Tesla's factory in Nuevo Leon. Luna: The one that was controversial because of water usage rights? I remember that made headlines. Lucas: Exactly. Tesla worked through the water permits, and by Q1 of this year, that plant was producing 500,000 vehicles annually. That's half a million cars from one facility in northern Mexico, most of which get exported to the US and Canada. Luna: So the USMCA trade agreement is working as intended—at least for automotive. But does Mexico have the infrastructure to keep growing at this pace? Lucas: That's the big question. Border crossings are already bottlenecked. The average wait time at Laredo, Texas—the busiest land port—was over two hours in May. And energy infrastructure is strained. But the Mexican government is pouring money into industrial parks near the US border. There are something like 60 new industrial parks under construction right now, mostly in Nuevo Leon, Chihuahua, and Baja California. Luna: You know, it's interesting because a lot of the conversation around nearshoring focuses on cost advantages. But we're now in a world where proximity itself has become a strategic asset. Lucas: Absolutely. And I think this is a good moment to mention that the show you're listening to—International Business with Fexingo—exists because of listeners like you. We keep it ad-free, and the only support we ask for is a coffee if today's conversation moved your work forward. That's at buy me a coffee dot com slash fexingo. Luna: Yeah, it's a small way to keep these deep dives coming. And honestly, if you've ever used a statistic from this show in a meeting or an email, that's exactly the kind of listener we're grateful for. Lucas: So back to Mexico. The weak peso has actually been a tailwind for these factories. The peso has depreciated about 12 percent against the dollar over the past year, which makes Mexican labor even cheaper for US companies. But it also means that imported components cost more, which squeezes margins for smaller suppliers. Luna: Right, because many of these factories rely on imported parts from Asia or the US. So the same currency move that helps the final assembly also hurts the input side. Lucas: Precisely. And that's where the trade data gets interesting. Mexico's total exports rose to about 620 billion dollars in 2025, up from 578 billion the year before. But its import bill also rose, partly because of those components. The net effect is that Mexico's trade surplus with the US is growing—it hit 152 billion last year—but its deficit with China is widening too, because Chinese parts are still flowing in. Luna: So you have this rerouting effect where Chinese-made components go to Mexico, get assembled, then ship to the US as 'Made in Mexico.' That's got to be on the radar of US trade authorities. Lucas: It is. There have already been anti-circumvention investigations on solar panels and steel. But for now, the US seems willing to tolerate it because the alternative is worse—pushing all that production back to China or to Southeast Asia with longer supply chains. Luna: What about other nearshoring destinations? Countries like Vietnam, India, even Turkey have been competing for this business. How does Mexico stack up? Lucas: Mexico has two big advantages. One is geography—overnight trucking to the US Midwest. The other is the USMCA, which gives tariff-free access for most goods if they meet regional content requirements. Vietnam and India don't have that. Plus, Mexico has a deep manufacturing ecosystem already. It's not just assembly; they have suppliers for suppliers. Luna: But labor costs in Mexico are rising. Minimum wage went up about 20 percent this year, I think. Doesn't that erode the cost advantage over time? Lucas: It does, but productivity gains are offsetting some of that. And compared to Chinese factory wages, which have been rising for a decade, Mexico is still competitive. The bigger risk is political. Mexico's next presidential election is in 2027, and there's some uncertainty around whether the current administration's industrial policy will continue. Luna: And on the US side, if a new administration were to renegotiate USMCA or impose new tariffs on Mexican goods, that could shift the calculus quickly. Lucas: Right. But for now, the momentum is clear. Mexico is on track to become the top US trading partner by 2028, surpassing Canada. And that's not just about cars. Medical devices, aerospace parts, and even semiconductor packaging are all expanding there. Luna: Semiconductors? That's interesting. I thought most of the chip industry was focused on Southeast Asia and the US CHIPS Act projects. Lucas: Most is, but there's a niche. Texas Instruments has a big facility in Aguascalientes. And Intel just announced a new assembly and test plant in Guadalajara, partly funded by the Mexican government. It's not cutting-edge fabrication, but it's critical for the supply chain. The bottom line is that Mexico is becoming the manufacturing hub for the Americas, and that has huge implications for global trade patterns. Luna: It really feels like a shift that's still underappreciated. Most business news still talks about China and Southeast Asia, but the numbers show Mexico is where the action is right now. Lucas: Absolutely. And one last number to drive it home: the Mexican stock exchange—the IPC index—is up 18 percent year-to-date as of this week. That's outperforming both the S&P 500 and emerging market indexes. Investors are betting on this story continuing. Luna: So for listeners who want to follow this trend, what should they watch? The peso, obviously. But also the monthly us mexico trade data and any news on USMCA reviews. Lucas: Exactly. And I'd add the infrastructure spending numbers from the Mexican government. If they can keep the border crossings moving and energy reliable, the nearshoring wave has room to run for years. Luna: All right, Lucas, good discussion. See everyone next time. Lucas: Thanks, Luna. Catch you then.