"nearshoring"the phenomenon that attracts companies and investments to America

Investments and companies are coming closer to America than ever before, with Mexico and Brazil at the forefront, thanks to the phenomenon of chain relocation or “nearshoring”, in which manufacturing companies relocate to be closer to their markets, especially from Asia .

The ravages of the covid-19 pandemic, the disruption of value chains, inflation and the trade war between the United States and China They push companies to America to get closer, above all, to the US market.

But in the region there is an uneven picture, in which not all countries are prepared to attract investment due to internal crises and the lack of labor.

MEXICO: THE INVESTMENT MAGNET

Mexico, where the peso had its best exchange rate in seven years last week due to this phenomenon, is the country that has benefited most from the relocation of chains, as shown by the investment of more than $5 billion from Tesla to install its largest electric car plant in the world.

The Mexican maquila expects an investment of up to 18,000 million dollars this year thanks to nearshoring, Luis Manuel Hernández, president of the National Council of the Maquiladora and Export Manufacturing Industry (Index), revealed in an interview with EFE.

This would mean an increase in the injection of capital to the country of 63%, compared to 11,000 million dollars in 2022.

“It is bringing assets to Mexico, having the highest capacity, the greatest production capacity so that the orders fall to Mexico instead of Asia,” added the representative of the 1,000 most important export manufacturing companies in more than 20 strategic points. from Mexico.

A PROTECTIONIST AMERICA

Since the arrival of Joe Biden to the United States Government in January 2021, reducing the high dependence on China has been one of his main economic objectives, as shown by the CHIPS law, approved to encourage the construction and expansion of national semiconductor factories.

Also has launched protectionist measures such as the “Build America, Buy America” law, which requires that all iron, steel, manufactured goods and construction materials for infrastructure projects be produced in the United States.

Despite everything, the relocation of companies in the country is not yet a majority trend, but it is with Mexico, as shown by the Tesla plant in the northern city of Monterrey.

According to data from the Inter-American Development Bank (IDB), total exports from Mexico as a result of the industrial relocation process they would reach 35,280 million dollars and 30,000 would correspond to manufactures sent to the United States.

BRAZIL: BETWEEN POTENTIAL AND SHYNESS

Brazil is the second Latin American country with the greatest possibilities to benefit from relocation, with a potential to increase its exports by 7,844 million dollars annually, according to a 2022 IDB study.

But for now the installation of foreign companies to produce in Brazil is “shy”, Constanza Negri, manager of Trade and International Integration of the National Confederation of Industry (CNI), told EFE.

For Negri, Brazil has “an opportunity to integrate into global value chains”, but to “participate in this process, there are pending structural challenges.”

The promotion of competitiveness, greater technological development, the strengthening of modern industrial policy and an integration strategy are the “structural challenges” that Brazil needs to face in order to be a “nearshoring” destination, the CNI spokeswoman completed.

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AN OPEN URUGUAY

Although in Uruguay there are no records of manufacturing companies that have relocated to another country or that decide to return to their origin, there is a “very open policy” to attract foreign companiesindicated to EFE Inés Bonicelli, executive deputy director of the agency for the promotion of investment, exports and country image Uruguay XXI.

In this sense, he highlighted “the attractiveness” of his country to attract new investments with conditions such as economic, political and social stability, institutionality, respect for the rules, and quality of life, aspects that he considers as a “letter of introduction” to generate interest in a region where there is instability.

“It is known that the fact that foreign companies come and settle is an engine of employment, an engine of development and that it spills over to the rest of the ecosystem. Uruguay is very interested in having these types of companies settle, so that is the flow that we’ve seen,” he said.

ARGENTINA: THE BRAKE OF THE CRISIS

The economic situation that Argentina is dragging, with restricted debt markets, high inflation and fiscal pressure and shortage of foreign currency –the “exchange stocks” severely limits access to the official exchange rate dollar to import and transfer profits– is pushing citizens and companies to move their operations or residences to Uruguay.

Between 600 and 800 people from Argentina have become tax residents in the neighboring country since the start of the pandemic, and join the Argentine companies that have expanded their businesses to the other side of the Río de la Plata, according to what EFE was informed by Uruguayan embassy in Argentina.

The consultant Marcelo Elizondo mentioned three phenomena to EFE: the businessman who goes to live in Uruguay but leaves his production plants in Argentina, the one who sets up his operations center in Uruguay and the businessmen who continue in Argentina but make new investments in Uruguay.

Regarding the Argentine businessmen who decided to reside for tax purposes in Uruguay, the emblematic cases are the founder and president of Mercado Libre, Marcos Galperín; that of Globant, Martín Migoya, and the oilman Alejandro Bulgheroni, president of Pan American Energy, who also has agricultural businesses in Uruguay at Estancias del Lago and wine businesses with Bodega Garzón.

DOMINICAN REPUBLIC, A DRIVER

The Dominican Government actively promotes the country for the relocation of foreign companies, highlighting its geographical location, the commercial agreements that it maintains with countries like the United States and the legal certainty that guarantees foreign companies.

According to data from the National Council of Free Export Zones, MICM dependency, from August 2020 to April 2023, 231 companies were approved in the country, of which there are 103 from the Dominican Republic and the rest are headed by EE .UU with 68, Canada 10 and Spain 6. There is only one from China.

The data indicates that operating companies went from 695 in 2019 to 783 in 2022. Most of them have to do with cigar factories and their derivatives, medical and pharmaceutical products, clothing workshops, agro-industrial products, jewelry, food, among others.

Exports went from 6,249 million dollars in 2019 to 7,832 million dollars in 2022. Regarding jobs, they point out that they went from 176,555 in 2019 to 192,461.

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