Mexico is already the United States’ largest trading partner but a greater emphasis by SMEs on exporting agricultural products, backed by $3 billion pesos of investment from Santander Mexico, would generate even wider economic benefits.
 

Mexico is seeking to entrench its position as the main trading partner of the US by increasing sales of vital food commodities, in addition to the billions of dollars worth of cars and consumer goods it sends north every year.

For more than three decades American companies have built long supply chains to import components and manufactured goods from Asia. However, interruptions in manufacturing output combined with a sharp rise in shipping costs and trade tariffs have forced many to source the products and materials they need closer to home: an evolving process known as nearshoring.

The result is that US businesses are increasingly looking south of the border for suppliers to fill the void and Mexico has proved attractive with its low labour costs, increasingly sophisticated infrastructure and growing industrial strength.

Nearshoring has led to vast commercial building programmes in Mexico, with the value of construction of industrial, commercial and service buildings in the private sector in the north and northwestern regions growing by more than 50% in the last two years.

Mexico’s share of US imports reached 15.5% last year, surpassing China and other Asian manufacturing countries. The automotive industry is one of the drivers of the current phase of nearshoring and Mexican exports of trucks, buses and other vehicles reached $182 billion in the last 12 months, of which 83% went to the United States.

Televisions, video equipment, semiconductors and ships have also been traditional strengths, but another major Mexican industry sector has tremendous untapped potential – agriculture.

The country’s close proximity to the US combined with low production costs, good transport links and large areas of fertile land in which to expand operations are key attractions. Mexico also has technical expertise in ameliorating the effects of drought and improving productivity.

Santander Mexico, the second largest lender in the country’s agricultural sector, has pledged $3 billion pesos over the rest of 2024 to help small and medium enterprises (SMEs) take advantage of growing demand from North America.

Mexico is already the second largest supplier of agricultural products to the United States, after Canada, with a market share of 31% equivalent to $44.2 billion a year, according to the Santander’s Nearshoring Data Monitor. The main exports are berries, beef, avocados and tomatoes.

A greater emphasis on nearshoring in agriculture would generate wider economic benefits. The sector is already responsible for 3.4% of Mexico’s gross domestic product (GDP) and generates volumes of foreign exchange surpassed only by remittances from abroad.

Many of these remittances are sent by family members forced to leave the country to find work. Closer farming links with the US would generate more jobs on Mexican farms, allowing many more people to stay at home in secure, well-paid employment.

Nearshoring trends in manufacturing have mainly benefited the northern region so far. Development of agriculture links to the US would bring significant benefits to central, southern and southeastern states and ensure the fruits of prosperity from north-south trade can be enjoyed across a broader spectrum of Mexican society.