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Nearshoring to Mexico: Benefits and ROI for Companies in the United States

Salma Elbarmawi
Salma Elbarmawi
Aug 23, 2023 · 5 min read
Nearshoring to Mexico: Benefits and ROI for Companies in the United States

Mexico and the United States have long had strong economic ties.

In fact, a report by the Congressional Research Service reveals that four out of every five Mexican exports find their way to the United States. By extension, strong economic activity in the United States is a key driver of growth in Mexico. With economic growth comes an increasingly educated and talented population, creating opportunities for the growing economic relationship between the two countries to expand and diversify.

In the last few years, US companies have shifted beyond export agreements to begin tapping into the top-notch talent found in Mexico, attractive not only for its proximity, but for its friendly business environment and technical skills of their talent.

In 2022, Foreign direct investment increased 12% in Mexico to $35.3 billion, almost half of which came from the United States. In the same year, American companies reshored more than 350,000 jobs proving that the region is becoming increasingly hot for talent sourcing.

This is particularly true in the IT sector, through which Mexican workers benefit from higher broadband accessibility and computing technology that matches (or even exceeds) U.S. standards. Here, you’ll discover why nearshoring to Mexico is an increasingly attractive option for your company.

Mexico Is Home to Highly Skilled and Young Talent

The average age in Mexico is just 29 years old. Compare that to the United States, which has an average age of 38.9, and you see that Mexico has a growing talent pool of young and educated employees looking to make their mark in business.

Of course, youth isn’t a guarantee of high working standards. Education is just as important, and it’s here that we see Mexico’s continued growth in action. Over half of the country’s population (50% of men and 54% of women) complete their basic education, with 12% of the country’s workers being able to speak English to a high standard.

Turning attention to further education, Mexico has a growing workforce of graduates in the science, technology, engineering, and math (STEM) sectors. Over a fifth of the country’s graduates earn STEM-related degrees, with Mexican universities producing approximately 110,000 engineering graduates annually. All of these highly-educated graduates form a collective talent pool that makes the country attractive to American tech startups, manufacturers and technology development companies, as well as any other organizations that require more technically skilled labor.

In short – Mexico has an increasingly educated pool of talent from which your company can source qualified candidates.

Digging Into IT – Mexico Has Latin America’s Strongest IT Infrastructure

IT is already big business in Mexico, a report from Ivemsa offers some highlights:

  • Mexico’s population downloads more mobile apps than any other Latin American country, with downloads growing by 30% in 2021 alone.
  • The country’s IT industry services many complex sectors, including the financial industry and aerospace manufacturing, as a collective quality software developer.
  • Thanks to growing foreign investment, Mexico has 38 IT clusters, with Queretaro becoming a computing hub that serves almost two-thirds of the country’s data centers.

In addition to being Latin America’s largest exporter of IT, Mexico is the third largest in the world, generating $21 billion in IT exports annually. Here, you see the link between the high STEM output of the country’s universities and its increasing IT output – young talent work in IT because Mexico has developed infrastructure that creates opportunities.

Those opportunities aren’t limited to the United States, as is clear by the fact that Mexico is such a huge IT exporter. The question you may be asking is: how does Mexico’s growing IT infrastructure benefit your business?

A chart shared by Remoti, which highlights Mexican tech salaries in 2021, provides the clearest answer about ROI. According to the chart, the average net pay for an intermediate software developer in the United States is $10,154 per month. In Mexico, it’s $3,156. Your business pays 67% less for labor (in the IT sector) when hiring Mexican software developers than it does hiring U.S. developers. Combine that with a lower minimum wage in general - $1.50 per hour in Mexico compared to $9.50 in the United States – and nearshoring to Mexico has clear economic advantages.

Mexico’s Key Infrastructural Advantages

It’s clear that Mexico’s booming IT sector is an infrastructural advantage from which your business can benefit. But that’s far from the only benefit, infrastructurally speaking, that the country offers.

Strengthening Manufacturing Clusters

The World Bank says that Mexico is transitioning into a “knowledge-based economy.” You see this already in the country’s increasingly educated populace, but it translates more readily when you consider the fact that the country has a growing collection of skilled employees working in its manufacturing clusters. Mexico has more skilled workers than ever before. Those higher skills, especially in the engineering and manufacturing sectors, translate to stronger infrastructure across multiple industries.

A Powerful Transportation and Logistics Infrastructure

Mexico is directly connected to the United States.

That alone gives it a logistical advantage compared to other countries, such as China, that U.S. businesses often rely upon for manufacturing. The supply chain shortens drastically, with Mexico’s transportation system able to deliver goods to New York in six to 12 days. Compare that to Shanghai, which takes up to 35 days to ship goods to the same state, and it’s clear that nearshoring to Mexico gets goods in your hands (and ready to sell to customers) faster.

Approximately 2,000 airports, 16 major ports, and ground-based highway and railway systems connect Mexico to the United States. This is an array of logistical options that other countries simply can’t offer.

A Stronger Economy

Oxford Economics points out that the Mexican peso is getting stronger, and will appreciate by 4.9% during 2023, achieving an average of US$19.2 to one peso throughout the year. Admittedly, the strengthening of the peso means the dollar doesn’t stretch quite as far as it did in the past. But it’s also an indicator of increasingly positive investment sentiment.

Compare this economic strengthening to other countries to which America traditionally offshores work. Past market darlings, such as Chile and Colombia, are experiencing macro imbalances resulting in current account deficits, labor market informality, and income inequality right at the point where Mexico is starting to improve in those areas. The result is a more trustworthy source of labor, bolstered by foreign investors viewing Mexico as a “safe haven” thanks to intelligent monetary policies that helped the country overcome the macro imbalances seen in others.

Locational and Operational Benefits of Nearshoring to Mexico

You’ve already seen one of the key locational benefits of nearshoring to Mexico – you receive goods faster. At least, that’s the case for physical goods, which take about a third of the time (or less) to ship from Mexico to their destination when compared to the same goods shipping from China. But manufacturing logistics don’t affect every American company. In the IT sector, for instance, “goods” are often delivered online and instantly, eliminating the logistical issue. But even in those cases, U.S. businesses enjoy several locational and operational benefits when nearshoring to Mexico.

Nearshoring Talent from Mexico – Your Next Business Opportunity

Mexico provides opportunities on several fronts for U.S. companies.

The 2006 introduction of IMMEX set the stage for the country to evolve into a powerhouse for manufacturing. Continued focus on educating its populace, particularly in the STEM fields, along with the development of IT infrastructure to the point where it reaches American standards means Mexico is competitive on the technological as well as manufacturing front.

Then, there’s the clearest advantage – it simply costs less to leverage Mexican labor than it does to use U.S. workers. In IT alone, you’ll spend 67% less on intermediate software development, and Mexico’s lower minimum wage results in increased ROI on goods produced in the countries or services rendered by its increasingly educated population.

If you’re searching for quality, early or mid-stage talent in Mexico, Localized, the talent sourcing platform for candidates in emerging markets, can help you source skilled, bi-lingual talent for remote and local jobs. Localized is helping companies like Google, Cisco, Meta and more build a pipeline of skilled candidates to close the skills gap and fill open roles. Learn more by clicking here to set up a demo.

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