1-      Offshoring, Reshoring, Backshoring and Nearshoring.

At the end of the 20th century, especially in the Cold War years, global capitalism underwent a rapid acceleration. New production systems were created, in which countries opened up to world capitalism on a large scale. Companies interested in maximizing their profits chose strategic geographic positions and created global production chains. However, from the 2010s, international production slowed down, with low growth in trade and foreign direct investment (FDI).

This can be attributed to several changes in the global context, such as the increase in labor costs in places previously considered cheap, the increase in uncertainty in the international scenario and protectionism, in addition to the growing trade war between the United States and China. In addition, due to more recent events – namely the Covid-19 virus pandemic and the geopolitical uncertainty expressed, mainly, with the Russo-Ukrainian War – there was a delay and uncertainty in the production of several goods, as well as delays in the deliveries, and difficulties in shipping, i.e. additional factors that further slowed down global production practices.

Due to these changes, companies have been forced to reconsider their offshoring practices, the practice of an organization to provide services or products from points in different territories, through outsourcing or by creating new operations in other countries, the which has led to a resurgence of reshoring strategies, either “backshoring”, when certain aspects of the local production chain are restored, or “nearshoring”, in which production is brought back to the country of origin or to nearby locations. An example of backshoring would be when an American company that produces clothing items decided to create a production chain in China at the end of the 20th century, due to a population surplus and low labor costs and, through the changes discussed, returns the production to the United States. In the same scenario, if production is transferred to Mexico, a bordering country, it is nearshoring.

In this analysis, we will explore the ideas of this resumption of production chains, particularly the nearshoring trend of US companies heading to Mexico and the impact on the country's society and the local community, especially in border regions.

For developing nations, like Mexico or other Latin American nations, which rely on foreign investment as a relevant source of capital, nearshoring practices present a possibility to be explored. The location and construction of a transnational production chain have already been widely studied from the point of view of companies, as a way of maximizing profit, by academics in the business area (read business scholars, administration, business management, etc.). However, attracting nearshoring and obtaining its benefits proved to have complex obstacles for many of these countries, therefore they must also be observed from the point of view of the community that “receives” this company.

2 - Nearshoring in Mexico.

Frontier Industrial & Logistics Real State, a company that buys, develops and manages industrial properties in Mexico, is an example of the expectation of the Mexican-based private sector to encourage the nearshoring of companies to the country. On their website they propose 10 reasons why nearshoring to Mexico is the most profitable. Among them, the trade established by the “United States-Mexico-Canada Agreement” (USMCA), which maintains clear rules for all products between North American countries, with reduced rates or no rates; competitive labor prices vis-à-vis Asia, particularly China, since 2008; a time zone similar to the US; the favorable distance for sending items, which makes it cheaper and faster, among other reasons.

In the public sector, Mexico's Treasury and Public Credit Department released Announcement N° 10, on February 15, 2023, in which Secretary Rogelio Ramírez de la O presents institutional financial programs from Nacional Financiera and the National Bank of Foreign Trade. The Secretary highlighted that nearshoring represents an opportunity to boost exports, productive investment, job creation and improvement of the population's living standards. He stated that this is a key moment to diversify the industry and identify sectors and regions to support the production chain and successfully activate productive investment. Ramírez de la O underscored the need to review public and private policies to boost innovation and technology capacity, training and training of human resources, locating new industrial parks and supporting small and medium-sized companies.

In addition, the Secretary pointed out that Mexico's macroeconomic fundamentals are solid. He pointed out that economic activity grew by 3% in 2022, and growth of over 3% is estimated in 2023. Domestic demand continues to be highly dynamic, favored by consumption and gross investment. In 2022, more than two million jobs were created, while the unemployment rate reached historically low levels. The value of exports expanded by almost 17% last year, with emphasis on non-automotive and oil manufactures. Ramírez de la O highlighted the need to move forward and open dialogues and proposals with exporters, suppliers, small and medium-sized companies and financial intermediaries.

As reported on March 2 by CNNBusiness the next Tesla vehicle assembly plant will be built in Mexico, near Monterrey. During an event for investors, CEO Elon Musk announced the news, stating that production will continue to be expanded in all existing factories. He clarified that this new plant will not replace any of the others, but will be additional production to reach the target of making 20 million cars per year. While Tesla did not comment on the cost of the new plant, Reuters reported that Mexican officials claimed it could cost around $1 billion. Confirmation of plans to build the factory in Mexico was made by President Andres Manuel Lopez Obrador, on Tuesday, before Tesla's official announcement.

The construction of this new Tesla factory in Mexico is a clear effect of the nearshoring advertising policy. Mexico is already home to several automobile assembly plants for a variety of brands, including General Motors, Ford, Toyota, Honda, Volkswagen, Audi, Mazda, Mercedes, Kia and BMW. According to the US Trade Administration before the pandemic, Mexican factories were producing around 4 million cars a year, with 90% of these cars being exported, with 76% destined for the U.S. With Tesla's new factory, production in Mexico will be further expanded, which is good news for the local economy and the auto industry as a whole.

3 - Undervalued workforce, labor rights and impacts on local communities.

Although the practice of nearshoring to Mexico may seem to be something that is exclusively advantageous for Mexican society, as it will generate jobs and move the economy forward, attention must be paid to one of the main reasons why companies are interested in changing their production chain: the cheap or undervalued labor.

Increasing the value of labor has been part of China's five-year plans. With success, the price of manufacturing labor has risen by approximately 40% since 2010. At the same time, if Mexican employees claim more rights or an increase in their wages through state or union policy, it is valid to question whether factories would move again, abandoning the workers who have their lives tethered to the big factories and all the city developments around them.

Especially regarding the case in question, in February 2023, a Tesla factory located in Germany, similar in size to the one that will be built in Mexico, was denounced by the German metallurgist union, IG Metall, which accuses the company of establishing working hours, unreasonable jobs and creating a culture of fear. In addition, he denounced the poor working conditions of the manufacturer. Similarly, a Chinese study published by the Scandinavian Journal of Public Health indicates that the stress caused by the conditions of some industries offshore located in China worsened the mental health status of its employees, raising the incidence of mental illness above the national average. (Wei-Qing; Tze-Wai, Tak-Sun, 2009)

Therefore, it is possible to notice that the public and private sectors of Mexico have in common the intention of attracting factories and companies to their territory close to the United States through the practice of nearshoring, to create jobs and stimulate its economy. Although investment is vital for the development of Mexico, Latin American and Caribbean countries, and other developing countries in the world, it must be remembered that the production sectors of the capitalist world seek to maximize profit to the detriment of health and well-being of the working population, which can result in companies that set up in these receiving countries, do not adapt to the needs of their employees and if there is a claim or conquest of rights or appreciation by the workers, they reinstall themselves in places more financially convenient by leaving a vacuum in place of their decommissioned factories.