The concept of friendshoring – trade with friendly neighbours – is not new, but the Covid-19 pandemic accelerated it as traditional supply chains broke down and companies had to look for alternatives. The economies that benefitted the most from this trend are India, Vietnam, Thailand, Indonesia and especially Mexico, given it is neighbour with the world’s largest economy, as per Capital Group.
“This is a watershed moment for Mexico,” says Jeff Garcia, Equity Investment Analyst at Capital Group. “China was the United States’ No. 1 trade partner for about a decade. Before that, it was Canada. So it’s a big change. There’s a saying in Mexico that goes, ‘Tan lejos de Dios y tan cerca a los Estados Unidos,’ which translates to, ‘So far from God, but so close to the United States.’ And it basically means that being on good terms with the world’s largest economy is good for Mexico. And it’s good for the US as well,” he adds.
He cites the following advantages of Mexico: a skilled labour force at an attractive cost, solid infrastructure in the north, and easy access to relatively inexpensive US oil and natural gas.
Northern Mexico is an established location for automotive assembly, Garcia points out. “Ford, General Motors, BMW, Daimler, Toyota and Honda all have plants there.” Lately, Tesla and BYD announced that they want to build EV factories in Mexico.
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