Luis Rubio
Opportunities are not just opportunities when taken advantage of; they are potential game-changers. Nearshoring, if effectively harnessed, has the power to transform the Mexican economy. It’s not a panacea but a significant opportunity that can be instrumental in accelerating economic development. To materialize this potential, we must fully understand its implications and be ready to accept the entire package.
Throughout the period when Mexico was categorized as ‘category 2’ by the U.S. civil aviation authorities, the real issues that differentiated the perceptions of the authorities across the border were not practical (whether about runways or peripheral airport boundary walls, security procedures, or flight controllers) but instead cultural. The ‘category 2’ status, a classification by the U.S. Federal Aviation Administration (FAA) indicating that Mexico’s civil aviation authority did not meet international safety standards, was a significant barrier. Mexican authorities did not perceive any need to accept the de facto jurisdiction that implied “category 1.” Not until it was understood that the complete package had to be accepted did the wheels begin to turn, reestablishing a functional relationship between the aviation authorities of both nations.
The matter repeats itself in all ambits, each with its own characteristics and relevant actors. The U.S. constitutes an excellent opportunity for Mexico’s development because of its dynamism, size, and wealth, as exhibited by the extraordinary engine of the Mexican economy that exports have become from the first Free-Trade Agreement (NAFTA) more than three decades ago. The neighborhood in which geography has situated Mexico constitutes an enormous opportunity, one that is magnified by the China—U.S. conflict, the latter conferring primacy on Mexico concerning attracting investments, provided Mexico realizes how to take advantage of it: it will not materialize on its own.
Although there has been significant growth in the installation of new plants in diverse points of the country, above all in the north, the truth is that the numbers are minimal. The government has boasted about the growth of foreign investment, but the overwhelming majority of that growth has been the reinvestment of profits, not new investments. The question is what has been lacking.
The challenge resides in a basic option: accept the nature of the correlation of power between the two nations or pretend that Mexico can be prosperous on its own. In the case of nearshoring, the relevant actors are not governmental but business: those who would invest are hundreds or thousands of enterprises of diverse sizes that would be seeking the opportunity to improve their productivity, guarantee the quality of their products, and count on the certainty that the entire process, from the investment to the delivery of the goods to the final consumer, is going to be perfect. This involves factors as simple as or as complex as security, physical infrastructure (industrial parks, highways, border crossings), the availability of electricity (and many potential investors now demand clean energies), amply trained personnel (which implies an educational sector oriented toward the integral development of the people, not one devoted to their ideological evangelization) and transparent and reliable rules of the game (that is, judicial mechanisms for conflict resolution and making contracts be complied with). Above all, there is no differentiation between national and foreign investment in that both assume risk in the same way.
By recognizing the patterns of migration, the expectations of those with relatives in the U.S., the remittances, the investments, and the financial flows, it’s clear that the citizenry sees the relationship with Mexico’s neighbor to the north as an opportunity. Nearshoring dramatically raises that possibility due to the total and potential volume it entails. If, in addition, the government dedicates itself to eliminating obstacles to investment and to the creation of an industry of Mexican suppliers committed to offering parts, components, services, and so on to the new investors, the circle could be virtuous and would involve millions of Mexicans who today do not perceive for themselves any opportunity at all. The point is that this concerns a prodigious potential opportunity, but only if we know how to seize it. Seizing it would imply a complete transformation of how the government perceives economic activity, foreign investment, and the creative potential of millions of Mexicans who could become prosperous entrepreneurs.
I began by saying that nearshoring is not a panacea but, instead, a mere opportunity if we know how to take advantage of the circumstances. Well-conceived, it could be an excellent opportunity to significantly improve the access of many Mexicans, currently excluded, to the formal economy and open opportunities for new entrepreneurs who frequently find much better terrain for prospering in Chicago or Los Angeles than they can in their own country. That is, this is an opportunity that ties in with the criteria of equity and fighting poverty and inequality, which comprise the essential thrust of the next administration.
Leonard Cohen seemed to be thinking about Mexico and nearshoring when he coined his famous phrase, “There’s a crack in everything. That’s how the light gets in.” The challenge is to convert the crack and the light because that’s where the transformative opportunity slips in.
@lrubiof
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