Mexico will need more than $400 billion dollars in infrastructure in order not to lose nearshoring

The greatest concern regarding nearshoring is in the transportation and logistics sector, according to Undersecretary Rogelio Jiménez Pons. Mexico will require an investment of up to 400 billion dollars in infrastructure by 2032 in order not to miss the nearshoring train and capture all its business opportunities in the country’s regions, said Rogelio Jiménez Pons, Undersecretary of Transportation of the Ministry of Infrastructure, Communications and Transportation (SICT). In a meeting with members of the College of Civil Engineers of Mexico (CICM), the official said that according to a joint study carried out with McKinsey, the greatest concern is in the transportation and logistics sector, to speed up cargo border crossings and reduce logistics costs in order to be more competitive. He highlighted that by 2032, transportation will require an investment of up to 250 billion dollars, to meet the challenges of nearshoring in terms of roads, transportation, ports, etc., while sectors such as energy infrastructure require at least 79 billion dollars, water around 27 billion dollars and close to 48 billion dollars for new industrial parks. “More than 400 billion dollars are estimated in infrastructure by 2032 to fully capture the nearshoring opportunities and this is going to increase the figure because of all the complements in investment for water, energy, industrial parks and above all urbanism and services,” he said. He added that all these potential investments could be carried out through mixed investment models, between government and private initiative that have been tested and could be implemented in the next administration. “This mixed investment model that was approved by the president with which we are building the expansion of an airport in Tepic, Nayarit, practically a new airport and the Puerto Escondido airport, are mixed investments, what we are doing is adapting the conditions of the PPPs where the State will always have control but commercially also very attractive,” he assured. He added that projects are being proposed to expand capacity in new ports, such as in Progreso, Yucatan, and to serve the Eastern market of the United States, in addition to creating internal channels, airports, railroad networks and pointed out that it is absurd to stop investing in highways, the main logistic node for nearshoring companies. “They took away 11 billion pesos of road maintenance, that is very serious. If the transportation sector is so important and being so determinant for our economy, the General Directorate of Federal Autotransportation, has an annual budget of 60 million pesos, it is completely absurd and on the other hand we have more than 20 years without replacement,” said Jimenez Pons. On the other hand, he pointed out that we must insist on creating an international agenda between Mexico and the US to address nearshoring and the new regional logistics challenges.

Logistics, the main challenge for nearshoring in Mexico

Logistics is the Mexican government’s main concern in the development of an efficient relocation network for foreign companies. This will require investments of US$250 billion in transportation, which could increase the system’s cargo capacity by 17 percent. For CICM’s vice-president of planning, Luis Robledo, the government’s estimate falls short, and although resources can be obtained through financing, the main factor will be to know if the government has the debt capacity to develop infrastructure. “It is much more than that (in investment) to meet the nearshoring, the country’s debt capacity will not be enough; we will need private or mixed investment to meet the infrastructure needs, it is not mentioned, but it is clear that the problem of financing underlies,” Robledo remarked. Along with infrastructure, Mexico has to strengthen the generation of human resources: the deficit of construction workers continues to be a challenge, and there is a lack of at least 50 thousand truck drivers, without whom nearshoring will be wasted.