Emilio Cadena, Prodensa | Nearshoring in Mexico: Trends, Opportunities and Who Benefits

The audio and video are in Spanish. These notes are a translation.

Forbes, Expansión, El Economista, and even the New York Times. All of them have devoted their covers to explaining the enormous opportunity that nearshoring is for Mexico.

For that, I invited Emilio Cadena, CEO of Grupo Prodensa, who has spent more than 35 years helping manufacturing companies, mainly foreign ones, to open and expand operations across more than 100 projects in Mexico.

Today we talk about everything related to nearshoring: what it really is and why it has such a large impact, whether it is a momentary or a lasting trend, and whether it really benefits Latin America or only Mexico.

We also talk about opportunities: which sectors of the economy benefit the most, what infrastructure limitations keep Mexico from taking advantage of this trend, and what challenges exist around digitalization, financing, and human capital.

Without a doubt, nearshoring is a historic moment, and it is ours to seize!

Youtube Timestamps*

[1:11] - Intro to Nearshoring

In recent months, nearshoring has taken all the attention of the business media in Mexico.

Emilio explained what nearshoring is in the simplest way possible.

The export of parts of the United States supply chain to Mexico is not recent. It goes back decades, with NAFTA, TEMEC, and so on.

Emilio told us what a timeline would look like on a PowerPoint slide describing the history of trade relations between Mexico and the US, and what the most important stages and milestones have been.

In a past interview, he mentioned that they started to see the nearshoring phenomenon in 2012 or 2013, when companies decided to be ever closer to their customers. Recent interest is enormous. Foreign investment in the first quarter grew by 48%.

What is different this time, and why is nearshoring suddenly attracting so much investment to Mexico?
He also shared some numbers and examples to give a sense of the scale of nearshoring.
Is nearshoring a lasting trend, or a window of opportunity of about 3 to 5 years that we have to take advantage of?
Emilio clarified for us whether Mexico is going to benefit from opportunities thanks to nearshoring, and also in what numbers that could reach the rest of Latin America.

[24:50] - Opportunities for StartUps and Technology

More than 50% of the investment corresponds to the manufacturing sector, which makes transportation equipment, chemicals, computing, metals, and so on. But beyond the manufacturing sector, adjacent sectors will benefit as a consequence of the multiplier effect of the investment.

Which sectors of the economy does Emilio see as the most benefited?
Emilio told us that manufacturing companies are not early adopters when it comes to digital, and he also mentioned the opportunities he sees in technical capabilities, software, and infrastructure on the company side.
He said that the lack of infrastructure can keep nearshoring from growing in Mexico, and he told us the infrastructure limitations these companies run into, limitations they perhaps do not find in other, more industrialized countries, and that constrain their businesses.

We have heard complaints from business owners that in Mexico manufacturers are not of as high a quality as in China.

How true is this? And beyond the criticism, what opportunities exist so that Mexican companies and talent can capitalize on nearshoring?

[36:30] - War for Talent

At Prodensa they have worked on supplier development projects with local governments in Mexico, so that small and medium-sized companies in Mexico can be in a position to take part in these value chains.

What challenges do these companies have in order to become more competitive?
Is it true that nearshoring is creating a “war for talent” and that foreign companies are “stealing” workers from other companies?

[43:01] - Rapid-Fire Questions

What excites him most about the nearshoring opportunity for Mexico?
What worries him most?
What message would he give to the entrepreneurs and business owners who are hearing so much noise about the nearshoring opportunity?