GAI Hosts Mexican Vice Minister of Finance Gabriel Yorio
On July 17, 2023, the Georgetown Americas Institute (GAI) hosted Mexico’s Vice Minister of Finance Gabriel Yorio (G’15) for a conversation on the economic impact of nearshoring in Mexico, including the challenges, advantages, and opportunities. Moderated by GAI Director Alejandro Werner, this event was part of a three-session series on nearshoring in Mexico that is part of the Latin America in the Global Economy program.
The Rise of Nearshoring in Mexico
Yorio explained the rise of nearshoring as a phenomenon that originated when geopolitical tensions between the United States and China prompted the United States to start moving its supply chains to countries that were geographically closer and more politically aligned.
Considering that Mexico is one of the United States’ biggest commercial partners and the high level of economic integration between the two markets, Mexico has become the center of nearshoring. Yorio pointed to additional factors that make Mexico attractive for nearshoring, including a qualified workforce and access to energy and infrastructure, both physical and cyber. In addition, Yorio highlighted Mexico’s macroeconomic stability, a trend that has continued across multiple administrations, and the Mexican private sector’s ability to finance industrial and manufacturing expansion.
Sustainable finance is also central to the nearshoring dynamics in Mexico. Yorio highlighted the finance sector’s commitments to addressing climate change and to environmental, social, and corporate governance (ESG) criteria that match the European Union’s priorities, which is also an attractive pull factor for investing in Mexico.
The Impact of Nearshoring
The vice minister of finance commented that some impacts of nearshoring—like increased demand for real estate and labor, as well as rising foreign direct investment—could already be felt, especially in the northern part of the country. Yorio cited a study by the Inter-American Development Bank which stated that Mexico could make $35 billion from nearshoring.
“As there is increased demand in the labor market accompanied by increases in productivity, wages are likely to rise significantly.” - Gabriel Yorio
Because Mexican experts expect a labor shortage in the near future, Yorio raised the possibilities of work visa programs between Mexico and Central American countries.
Nearshoring is a unique opportunity for Mexico to grow economically and further integrate with the American market. Nevertheless, challenges remain, such as incorporating the southern regions of the country into Mexico’s international trade policy. Yorio explained that Mexico has already created a system of incentives that both encourages new companies to establish themselves in southern Mexico and helps existing companies in the north and central regions expand operations in the south.
Yorio concluded by advocating for technology transfer that enables Mexico to improve productivity and create additional value beyond basic assembly or packaging, thereby increasing investment returns in the long run.
The event series is a part of the GAI program Latin America in the Global Economy, which seeks to advance research on critical economic issues for the region, particularly focusing on the emerging position of Latin America and the Caribbean in a new global economic trade architecture characterized by deep structural changes.