The new case of “Made in Mexico”
The so famous “Made in China” may be replaced, in the future, by Mexican manufactures. American multinational companies are choosing to install themselves in Mexican industrial parks, no longer having their assembly entirely on Chinese soil. The intention with this change is the geographic approximation with the American market, that is, to replace “offshoring” with “shoring”.
Why the change?
Shoring is a strategy to bring the production of a product closer to the consumer market. Before, for multinational companies, using the Chinese space for their production was more advantageous. However, with the economic measure of the former US president, Donald Trump, to place a 25% tax on imports from China, it was necessary to find another assembly point. Due to its geographic proximity to the US and high supply of cheap labor, Mexico was chosen.
Hisun Motors, for example, has already set up shop in the state of Coahuila, located in the north of the country, and has announced an investment of US$105 million in the region. Its vehicles are already manufactured in the neighboring country and only raw materials and products come from Asia.
The director general of Hisun USA in Mexico, Marco Villarreal, said in an interview with BBC News that the intention is to supply American and Canadian demand through Mexican manufacturing. Even with materials coming from the US and China, production is expected to be entirely on Mexican soil in the future.
How does this affect Brazil?
The expectation of having Mexico as “the new China” may initially worry Brazilian exporters. After all, China is the largest economic partner, has economic cooperation agreements, is part of the BRICS and is responsible for 27.6% of Brazilian exports, according to the BRICS Policy Center. Even though Brazil has good diplomatic and economic relations with Mexico, the comparison will not be the same taking its main economic partner as a parameter.
However, initially, production will be destined especially for the USA, in the case of Hisun, USA and Canada. In addition to the fact that supplies will still come from other regions, such as Asia, therefore, Brazilian exports of raw materials, such as iron ore, to China will not suffer many impacts in this first stage.
With this, there is also the need for an International Consultancy to analyze the progress of the new manufacturing site and the possibility of exports to Mexico.
Text by Fernando Souto on 03/13/2023.