How is MEXICO quietly becoming a new POWER?

With a growing economy, strategic geopolitical position and investments in key sectors, Mexico is emerging as a global force, surprising economists and analysts.

Mexico is taking advantage of trade tensions between the United States and China to establish itself as a major global manufacturing hub. With its strategic location, competitive workforce and robust trade agreements, the country has attracted large multinationals and strengthened its relations with its main trading partner, the United States.

The strategy of “nearshoring“, which involves moving production to regions close to consumer markets, is gaining traction as Washington and Beijing move further apart in trade.

Companies such as Tesla, Walmart, Amazon, Samsung, Nissan and Home Depot have migrated part of their operations from Asia to Mexico, driven by factors such as lower operating costs and proximity to the North American market.

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Attracting Investment: An Economic Boom

The flow of foreign investment into Mexico is also on the rise. Tesla, for example, announced a $15 billion investment in a new factory in the north of the country.

In addition, companies from various sectors are redirecting their resources to take advantage of the benefits offered by Mexico, such as tax incentives and privileged access to global markets.

Mexico’s infrastructure also plays a key role. With a robust transportation network that includes modern ports, efficient highways, and rail links directly to the U.S., the country is becoming an ideal location for establishing logistics and industrial operations.

Mexico presents a unique combination of factors, such as political stability, broad trade agreements and a young and growing workforce, that make the country a top choice for global investors.

The strength of trade agreements

The Treaty between Mexico, United States and Canada (T-MEC), which replaced NAFTA, is one of the main reasons for the growth of Mexican exports.

This agreement guarantees preferential access to the North American market, eliminating tariffs in several sectors and creating conditions for the economic integration of the region.

The T-MEC also protects Mexico from potential dependence on China. A specific clause in the treaty prevents members from signing trade agreements with “non-market economies“, a clear reference to China.

This clause reinforces Mexico's trade alliance with the US and Canada, while limiting Beijing's economic influence in the region.

Challenges and International Relations

Despite its recent economic success, Mexico faces significant challenges. Internally, problems such as violence and social inequality continue to be obstacles to sustainable development. Externally, the country must balance its relationship with the United States, its largest trading partner, and China, a global economic powerhouse.

President Claudia Sheinbaum recently responded to criticism from the US government about Mexico's role in bringing Chinese products into the US market.

Sheinbaum stressed that Mexico is committed to strengthening its own industries and reducing dependence on Asian imports.

According to Reuters, the Mexican president stressed that the country will continue to protect its national interests while maintaining a collaborative stance with the United States.

Sheinbaum’s assertive stance reflects a strategic shift in Mexico. Rather than simply following Washington’s directives, the country is seeking greater autonomy in its trade policies while benefiting from increased foreign investment.

Mexico's unique competitive advantages

Mexico has several competitive advantages that make it a top destination for industrial investment:

Geographic Proximity: Mexico's location allows companies to reduce transportation costs and improve delivery times to the US.
Skilled Workforce: The country has a young and growing population, with training in areas such as engineering and information technology.
Sustainable Growth: The Mexican government is investing in renewable energy and sustainable industrial practices, attracting companies concerned with ESG (environmental, social and corporate governance).

Additionally, Mexico is expanding its presence in high-tech sectors such as semiconductors and electric vehicles. In 2024, the country signed a cooperation agreement with the United States to increase production of semiconductor chips, an important step towards solidifying its position as a regional leader in advanced technology.

A promising future for MEXICO?

The trade relationship between Mexico and the United States continues to be a crucial axis for the Mexican economy, but it is also a terrain fraught with challenges. The history of negotiations with Donald Trump during his first term demonstrates Mexico’s ability to navigate tariff threats and maintain economic stability.

However, Trump's return to power promises a potentially more volatile scenario, with new promises of 25% tariffs on Mexican exports, this time motivated by issues such as combating drug trafficking and illegal migration.

While the financial market has shown remarkable resilience to bad news, as Ernesto Revilla, chief economist at Citi, has pointed out, Trump's more radical stance this time could test the limits of that confidence.

Mexico’s new president, Claudia Sheinbaum, faces a complex scenario. Unlike her predecessor, Andrés Manuel López Obrador, Sheinbaum has taken a more hands-on approach, but her initial response to Trump’s threats has raised questions about the effectiveness of her strategy.

The challenges are clear: Mexico must balance its need to maintain economic integration with the United States while protecting its sovereignty and addressing critical domestic issues, such as combating violence and strengthening its industries.

Despite the tensions, Mexico remains a key player in the global supply chain, and its geopolitical importance ensures that threats are often followed by agreements that allow business to continue.

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How is MEXICO quietly becoming a new POWER?