By Michael S. Yoder, Ph.D.
Special to the 830 Times
“Nearshoring,” a term we increasingly encounter in the news, refers to a trend in US-Mexico trade that has the potential to expand economic development in the Rio Grande border cities. It is a play on “offshoring,” a strategy since the 1980s by American and European companies to set up assembly plants in China and other developing countries to take advantage of their supply chain efficiencies and lower wages. However, a reversal is underway because of recent trans-Pacific supply chain disruptions and political tensions with China. This has motivated producers of goods destined for the US market to seek nearby locations for manufacturing, such as Mexico. But is nearshoring occurring already at a significant level? The question is probably best answered by saying that its potential has yet to be realized, but the potential certainly exists and the process has begun.
Several (but not all) Mexican states with strong manufacturing sectors already have seen notable increases in Foreign Direct Investment (FDI) by companies based in the U.S., Europe, and even East Asia (China and South Korea) in new plants or expansions of existing ones. The FDI associated with nearshoring is “measured” primarily by the development of industrial real estate, predominately factories and secondarily warehousing, and ten Mexican states are experiencing such growth.
What might nearshoring mean for Del Rio? In my book, Geographical Scale and Economic Development: Lessons Learned from Texas and Mexico (Springer 2023), I discuss investment by the state of Coahuila in highway infrastructure, which has risen recently on the state’s list of economic development priorities. According to two Del Rio municipal officials I interviewed, about 80 percent of cross-border truck traffic at Del Rio involves maquiladoras in Cd. Acuña, while 20 percent travels along Mexican Federal Highways 29 and 57. The State of Coahuila wants to see more commercial activity along those routes, with enhanced access for Saltillo, Monclova and Torreón to Cd. Acuña and Piedras Negras.
The Ports-to-Plains Highway Corridor will connect Del Rio to I-27 at Lubbock and beyond. Miguel Riquelme, Coahuila’s governor, is prioritizing the improvement of highway access to the state’s border cities to link to I-27 and thereby connect his state to the Canadian border. In late July, the newspaper El Siglo de Torreón reported 26 companies have recently announced combined investments of 1.6 billion dollars in new developments and expansions of existing ones in Coahuila, under the definition of nearshoring.
Mexico has been the leading foreign trade partner of Texas for quite some time, but having surpassed China and Canada, Mexico now holds that distinction for the U.S. as a whole. Nearshoring will add to Mexico’s importance to the Texas and US economies, including that of Val Verde County and Cd. Acuña. It involves long-term investments whose results are not seen overnight. However, the efforts of the administration of Miguel Riquelme and local economic development stakeholders in Cd. Acuña and Del Rio show that economic development is enhanced in cities that value their strategic locations enough to strengthen them. The US-Mexico-Canada production platform clearly is growing stronger as China’s relative importance recedes. Laredo, North America’s leading port, has logistics bottlenecks that will persist for years. Del Rio and Cd. Acuña are well positioned to benefit from nearshoring, and to help to streamline the trucking so crucial to US-Mexico trade.
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Dr. Michael S. Yoder is the author of Geographical Scale and Economic Development: Lessons Learned from Texas and Mexico. Springer Nature and is a research fellow at University of Texas and instructor at Texas A&M International. He can be reached at michael.yoder@tamiu.edu .
