Today, the focus is squarely on resilience, flexibility and proximity to core markets. A time of exponential change has come to the global manufacturing landscape and companies are future-proofing their operational footprint. Manufacturers are reconsidering the value of location, placing operations closer to customers and suppliers, as the drivers of global manufacturing competitiveness continue to evolve.

With the outcome of the U.S. Presidential election and the anticipation of new tariffs in the coming year, Roland Berger’s research indicates that nearshoring has shifted from a strategic choice to a critical necessity. Market expectations of significant tariffs could translate into substantial economic impacts, affecting operational costs and supply chain structures. According to Roland Berger’s studies, nearshoring can mitigate these risks by reducing tariff exposure and creating excellent supply chain stability, enabling U.S. companies to manage costs more effectively while building a more resilient and agile manufacturing footprint.

This shift presents a distinct competitive advantage. Companies that commit to North American production benefit from avoiding tariff volatility and shorter supply chains, faster response times and better alignment with market demands. Roland Berger’s frameworks suggest that companies embracing nearshoring are better positioned to adapt to policy shifts and secure long-term growth. In this environment, proximity, resilience and flexibility are essential drivers for future-proofing operations and maintaining competitiveness.

The new reality has elevated nearshoring as a top priority. A recent Roland Berger study conducted with Manufacturers Alliance found that 74% of companies are expanding or piloting localization initiatives—a striking indicator of how rapidly the tide is turning. U.S. manufacturing investments have surged, growing 2.3X since 2022, with Mexico emerging as a prime destination. This shift is already reshaping the competitive landscape, as the U.S. imports more goods from Mexico than China. While Mexico can be an attractive option for nearshoring, recent factors like labor shortages, inflation and tariffs have introduced new complexities. There’s no silver bullet—companies must evaluate multiple elements as well as future scenarios to determine a comprehensive footprint strategy that captures long-term strategic advantage.

Why Now? The Strategic Drivers of Nearshoring

The global and US manufacturing sector is still reeling from system-wide failures in supply chains, logistics challenges, ongoing talent shortages and unpredictable customer demand. But nearshoring isn’t just about risk mitigation. The drive to bring production closer to home is a strategic opportunity to recalibrate operations around reliability, cost-effectiveness, sustainability and customer centricity to name a few. Shorter supply chains mean reduced transportation costs and inventory needs, faster response times, increased agility in changes in demand and an alignment with consumer preferences for more localized production. Localization also spurs progress in the customization of products to meet the needs of individual customers, including presenting regional offerings. These benefits resonate with operations leaders and customers, investors and stakeholders increasingly focused on environmental impact and regional economic growth.

A Look at Mexico and other nearby neighbors: The Competitive Edge in Nearshoring

Mexico’s proximity, cost advantage and manufacturing capacity have made it the leading nearshoring destination for U.S. companies. Recent data from Roland Berger’s report reveals that Mexico’s competitive advantages extend well beyond geography. Mexico offers a compelling alternative to offshore locations with a 35% lower landed cost than China, a robust industrial base and incentives from U.S. trade agreements.

That said, there are a number of other countries within close proximity that are also becoming attractive destinations for more localized manufacturing. Dominican Republic, Guatemala and Costa Rica have seen a significant uptick in localized manufacturing production and foreign direct investment (FDI) levels as well as compelling labor rates. Meanwhile Canada and US have one of the largest bilateral commercial relationships in the world, as Canada is the top U.S. partner for trade in goods and services. In 2023, Canada exported 78% of its goods to and imported almost half of its goods from, the United States.

Reduced transit times, lower logistics costs and enhanced supply chain resilience for companies targeting North American markets are not just attractive—they’re transformative. For instance, shipping from Central America and/or the Caribbean to the U.S. costs ~50% less than from East Asia and takes 20-30 days less. This proximity also enables collaboration and quality control, which is difficult to achieve with long-distance suppliers.

Critical Considerations for Executives Weighing Nearshoring

For executives considering nearshoring as a long-term strategy, the decision hinges on several pivotal factors, such as:

1. Labor Market Dynamics: While labor costs and growing shortage of skilled talent have been impeding factors, the growing industrialization of nearby Central American’s nations, particularly as Chinese wages rise and geopolitical dynamics heat up. The shift to automation and advanced technologies further reshapes the labor equation, making an increased range of skills needed and higher skilled labor accessibility more crucial than ever. Companies need to analyze the local talent pool, wage rates and educational institutions to ensure alignment with their operational goals as well as future upskilling requirements.
2. Infrastructure and Logistics: Quality infrastructure—reliable electricity, internet bandwidth and logistics networks—is essential for most manufacturing operations. Established infrastructure coupled with a network of major roadways, rail lines, seaports and international airports, supports complex supply chains that need rapid and reliable transit times. This level of connectivity can also drive down overall logistics costs significantly.
3. Tax and Regulatory Environment: It is important to look at corporate tax rates, inflation trends, free trade agreements and national, regional and local subsidies available in each potential destination. The U.S., Canada and Mexico each offer unique tax structures, free-trade agreements and subsidies. All three, for instance, benefit from the U.S.-Mexico-Canada Agreement (USMCA), which makes it easier for manufacturers to meet North American content requirements and qualify for duty-free trade. Executives must evaluate how these factors align with their own organizations tax and trade strategies.
4. Raw Material Availability and Local Supplier Base: Access to critical components and proximity to suppliers is crucial for industries reliant on specific materials. Companies must map the availability of essential resources against their production needs to determine location viability and broader supply chain implications.
5. Next Generation Manufacturing (NGM): Digitization, sustainability and financial goals are front and center for many executives today. Nearshoring offers an opportunity to incorporate advanced manufacturing practices that support a number of key business imperatives while at the same time increasing overall competitiveness and resilience. Roland Berger’s approach emphasizes KPIs across these six dimensions—geopolitical risk, sustainability, industry disruption, localization, customization and digitization —to ensure companies select locations that fit their vision for the future of manufacturing.

A Blueprint for Navigating the Shift to Nearshoring

Nearshoring may promise significant advantages, but it is not a one-size-fits-all solution. The journey will take years for many companies, and the transformation will be complex. Roland Berger’s frameworks and expertise in localization provide a systematic approach to evaluating factors like cost, efficiency and risk. By asking the right questions, developing robust scenario planning, and paring it all with a data driven approach, companies can ensure that their nearshoring strategy delivers both immediate benefits and long-term strategic value.

One industry leader told Roland Berger, “Manufacturing isn’t just about cost; it’s a competitive weapon. We assumed that offshore was the cheapest way for years, but now we see that resilience and proximity are the real differentiators.”

Navigating Policy Shifts

Given shifts in U.S. trade and localization policies with each new administration, companies seeking nearshoring solutions must remain agile. Scenario planning is essential for anticipating the impacts of policy changes—particularly around tariffs, immigration and regulatory incentives—on operations and supply chains. For instance, with the 2024 elections affecting trade relations and localization incentives in a number of markets, nearshoring requires balancing proximity, flexibility and safeguards as the geopolitical and policy landscape continues to unfold. ​

Embracing Nearshoring for Strategic Growth

In a world where geopolitical, economic and environmental factors remain in constant flux, nearshoring is more than a trend—it’s a recalibration of the strategy for global manufacturing competitiveness. By moving production closer to home, companies can gain stability, responsiveness and cost savings. As this shift accelerates, nearshoring will become a central pillar for the global manufacturing landscape, positioning high performing manufacturers to thrive in a dynamic, high-stakes global economy.

To read the article as it was published by Industry Week, click here.

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Before leaving office on October 1, AMLO’s super-majority is planning to implement 18 constitutional reforms that would weaken Mexico’s economic regulatory landscape, degrade its investment climate, dissolve checks and balances, and undermine the country’s ability to fulfill international commitments, including the US-Mexico-Canada Agreement (USMCA).  If approved, these legal shifts could seriously challenge North America’s long-term competitiveness and nearshoring potential, jeopardize billions in US and Canadian investments in Mexico, and complicate the 2026 review of USMCA.

Constitutional amendments

a. Judicial Reform

Mexico’s Supreme Court has found several of AMLO’s actions unconstitutional, including efforts to undermine private investment in the energy sector and place civilian public security forces under military control. If approved, the judicial reform would gradually remove all Supreme Court justices and federal judges, replacing them through popular elections without clear professional qualifications. As presented, this reform would severely weaken the judiciary’s role as an independent check on presidential power, leaving judicial decisions vulnerable to political influence and donor interests.

Rather than addressing long-standing issues of corruption and impunity within Mexico’s judiciary, this overhaul could lead to significant delays, pauses, or even retrials in cases involving human rights and private investments in sectors not covered by USMCA. Under USMCA, US and Canadian investors in Mexico can only pursue claims in the oil & gas, power generation, infrastructure, and telecommunications sectors. Disputes in other sectors require investors to go through Mexico’s domestic court system before seeking arbitration under USMCA.     

b. Elimination of Oversight and Regulatory Agencies

Other proposed reform would dismantle Mexico’s antitrust agency, along with the Federal Economic Competition Commission (COFECE), the Federal Telecommunications Institute (IFT), and the Energy Regulatory Commission (CRE), transferring their functions to Executive Branch agencies like the Ministry of Economy and the Ministry of Energy. These changes would remove critical checks on presidential power and directly conflict with Mexico’s commitments under USMCA  regarding market access, competition policy, and state-owned Enterprises.  By eroding legal certainty, the reform would severely hamper Mexico’s nearshoring potential, driving investment elsewhere and weakening North America’s position in the global supply chain.

c. State Energy Industries

One proposal would restrict Mexico’s state-owned utility, the Federal Electricity Commission (CFE), from partnering with private companies for electrical transmission and distribution, while prioritizing CFE market dominance over private firms. By imposing additional restrictions on private investment, this reform conflicts with USMCA’s ratchet clause, which prevents countries from rolling back market liberalization measures once they’ve been implemented. This policy would undermine US and Canadian economic interests and any energy they produce in favor of Mexico’s CFE and its state-owned oil and gas company, PEMEX. Canadian and US firms have invested a combined $34 billion in Mexico’s energy sector, including significant investments in renewable energy projects. 

d. Ban on GM Corn and Restrictions on Water Concessions

This proposed reform aims to ban genetically modified (GM) corn for both harvest and human consumption. By introducing trade restrictions without scientific evidence, this reform conflicts with USMCA market access and sanitary and phytosanitary provisions. Mexico, the US’s second-largest agricultural export market, imports over $5 billion worth of corn annually. Such a ban could lead to the loss of thousands of US agricultural jobs and threaten food security in Mexico, as domestic production would likely be unable to meet the country’s corn demand.

Another proposed amendment seeks to limit water concessions to firms in regions with scarce water resources, reserving allocations to public entities exclusively for personal and domestic use. By favoring Mexican entities over US and Canadian firms, this proposal would appear to violate USMCA’s National Treatment and Most-Favored Nation provisions.

e. Ban of Fracking and Open-pit Mining Concessions

Constitutional reform proposals to end concessions for open-pit mining and permanently ban oil extraction through fracking conflicts with Mexico’s commitment under USMCA to maintain agreed-upon market openness in these sectors, potentially affecting the operations and ownership of US and Canadian firms. This could lead to millions of dollars in losses, arbitration claims, or trade sanctions from Canada or the United States. Canadian companies, representing 70% of all foreign mining firms in Mexico, are the largest foreign investors in the country’s mining sector. 

Risks

If approved, these changes would appear to severely limit Mexico’s growth prospects and its ability to create well-paying jobs in the medium and long-term. The resulting legal issues and business uncertainty could trigger billions of dollars in tariffs if US and Canadian authorities or firms request formal dispute settlement under USMCA, as well as significant economic losses for consumers and workers across North America. In other words, Mexico risks undermining the very conditions that foster job creation and investment growth. Additionally, the potential for trade disputes and economic disruptions could deter new investors and negatively impact nearshoring opportunities.

Furthermore, these reforms pose a serious risk to the USMCA’s upcoming review, potentially stalling negotiations with Canadian and US authorities and triggering demands for changes from stakeholders in 2026.This heightened scrutiny could complicate negotiations and result in unsuccessful outcomes in subsequent years. Ultimately, the reforms could jeopardize the agreement’s renewal and increase the risk of its expiration in 2036, undermining the long-term stability and benefits of the USMCA.

Conclusion

AMLO’s reforms represent a turning point that undermines Mexico’s trade and investment commitments under USMCA, making Mexico a less reliable partner for the US and Canada. The proposed legal and institutional overhaul threatens to undermine Mexico’s investment climate for decades, disrupt regional economic integration, and weaken supply chain resiliency at a crucial moment of global economic realignment.

To read the article as published by the Wilson Center, click here.

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The global supply chain is an ever-changing landscape, always looking to implement the most efficient and effective means to ensure products are sourced, manufactured and delivered as quickly and safely as possible. Many companies have relied on specific regions for sourcing and manufacturing over the decades, but a new survey indicates that the interest is at unprecedented levels. According to a QIMA survey, the appeal of shortened supply chains has reached a record high, with more than 64% of businesses globally expressing interest in nearshoring and reshoring strategies for 2024.

In 2023, a significant shift was already underway, with more than half of the surveyed participants reporting increased purchases from domestic and regional suppliers. This trend, driven by a desire to reduce disruptions, ensure greater supply chain resilience and underscore ESG initiatives, is set to gain even more momentum in the coming year.

While the United States has long relied on Chinese imports driven primarily by cost considerations, access to a large manufacturing base, the wide range of products available to manufacture/develop in the region, geopolitical tensions and trade uncertainties have prompted a reevaluation of this dependency, leading to a significant shift in supply chain dynamics. Even more so, the COVID-19 pandemic exposed the massive dependency the West had on China and other South Eastern Asia countries.

Concerns grow

Concerns over trade disputes, tariffs and geopolitical risks continue to intensify, especially as the U.S. enters another high-profile election year. U.S.-based businesses continue to seek alternative sourcing destinations to diversify their supply chains and mitigate potential disruptions.

While some may view nearshoring and reshoring as protectionist measures, they present real opportunities to foster additional global economic growth, job creation and sustainability initiatives. Mexico has emerged as a preferred destination for these nearshoring and reshoring efforts, especially for U.S. companies seeking to optimize their supply chains.

In fact, the U.S. Commerce Department released data that reinforced Mexico as the top source for goods to the U.S., ahead of China for the first time in two decades.

The Chinese manufacturing industry has also recognized the importance of reshoring and the continued growth of Mexico’s manufacturing sector for U.S. companies. Mexico offers several advantages, including proximity to the U.S. market, favorable trade agreements like the USMCA (United States-Mexico-Canada Agreement), and a skilled labor force at competitive costs.

Leveraging Mexico as an intermediary for Chinese manufacturing provides a buffer against escalating disputes and tariffs, ensuring continuity in supply chains and preserving market access for both exporters and importers. This strategic alignment fosters stability and facilitates smoother trade relations amidst geopolitical uncertainties.

From a supply chain perspective, this strategic shift holds several implications. For one, it reduces reliance on a single source of supply, enhancing resilience and risk management capabilities. By diversifying manufacturing locations, companies in all countries can better navigate geopolitical uncertainties, trade disruptions and unexpected events, such as natural disasters or political instability.

Additionally, the proximity of Mexico to the U.S. market offers logistical advantages, including shorter lead times, reduced transportation costs and increased agility in responding to changing consumer demand. This geographical strategy aligns with the growing trend toward nearshoring and regionalization of supply chains, driven by the need for speed, flexibility and responsiveness in today’s competitive business environment.

The strategic shift toward utilizing Mexico as a manufacturing hub for Chinese goods destined for the U.S. underscores the evolving dynamics of global supply chains. By diversifying sourcing destinations, businesses can enhance supply chain resilience and efficacy, navigate geopolitical unease and maintain seamless trade relationships amidst an increasingly complex and uncertain landscape.

Ivan Hernandez is managing director, Mexico, for QIMA, which provides quality control solutions for supply chains.

To read the full article as it was published by Supply Chain Management Review, click here.

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Electronics manufacturers face the urgent task of strengthening their supply chains amid trade disputes, geopolitical tensions, and the unpredictable impact of climate change events. Making sure everything runs smoothly, works well, and stays secure is key to long-term success. For manufacturers of electronic products, it’s crucial to keep a close eye on every step of the process, from getting parts to making and delivering products.

To combat these multifaceted challenges, many are now turning to reshoring and nearshoring strategies. These approaches build resiliency into supply chains and provide solutions to the pressing issues manufacturers confront daily.

Diversified Supply Chains are More Resilient

Electronics companies today are relying more on supply chain and manufacturing diversification as a key strategy. This approach acts as a vital shield against growing trade tensions, political uncertainties and the increasing occurrence of natural disasters.

By spreading their sources for electronics components, locations for sourcing, and manufacturing bases, companies are fortifying themselves against potential disruptions. This strategy not only improves their bargaining power but also enhances their agility in responding to market demand shifts.

Embracing Nearshoring for Supply Chain Diversification

Nearshoring plays a pivotal role in diversifying supply chains by relocating manufacturing operations closer to end markets. This approach helps companies reduce their reliance on single-sourcing locations and lowers the risk of disruption. By spreading production across multiple geographic regions, nearshoring creates a supply chain that is both resilient and flexible.

Moreover, nearshoring offers easier access to local suppliers and resources, allowing companies to quickly adapt to changes in market demand and supply chain dynamics. For electronics companies seeking to diversify their supply chains, nearshoring is a powerful tool to increase resilience against disruptions.

China Plus One

Ongoing unease about the stability of the Chinese economy, United States trade tensions with the country, and continued uncertainty about China’s potential future actions towards Taiwan are leading many electronics manufacturers to reconsider their reliance on that country for manufacturing electronics components and PCB assembly. Facing an unpredictable future, these companies are broadening their strategies.

Many have adopted the “China-plus-one” strategy. This approach means maintaining operations in China while also establishing a presence in another country. Its goal is to mitigate risks and ensure business continuity. This strategic move reflects a broader trend toward factory flexibility and resilient supply chains, driven by digital technologies and a focus on sustainability.

Another emerging practice involves the utilization of factory networks. These networks streamline PCB assembly and system integration, facilitating swift and efficient management of large orders. Moreover, they ease the transition to reshoring, fitting within or outside the framework of a China-plus-one strategy. The portability and flexibility of these factory setups enable consistent lead times and competitive pricing from various manufacturing facilities. This gives customers access to substantial production capacity while enhancing supply chain resilience.

Finding the Right Nearshoring Location

Networks of manufacturing facilities linked by technology-enabled platforms enable manufacturers to tap into unused capacity. Mexico, in particular, has become a nearshoring haven. The ongoing geopolitical tensions between the U.S. and China and the global restructuring of supply chains following the COVID-19 pandemic are expected to solidify Mexico’s status as a prime nearshoring destination in the coming decade.

This is primarily due to Mexico’s proximity to the U.S. market and its competitive labor costs, which make it an attractive option for companies seeking to diversify their manufacturing operations. As businesses prioritize resilience and agility in their supply chains, Mexico’s strategic location and cost-effectiveness are likely to make it a preferred choice for nearshoring activities, further bolstering its position as a leading player in the global manufacturing landscape.

In addition to a favorable labor market, Mexico also affords electronics manufacturers with intellectual property protections similar to those in the U.S. Also, due to numerous global agreements, electronics manufacturers who nearshore to Mexico are safeguarded by a wide-ranging network of trade and investment treaties covering over 50 countries, with the USMCA chief among those protections.

Overcoming Challenges with Expert Partners

Finding the right nearshoring facility–as part of a plus-one strategy or out of it– remains challenging, however.

Navigating unfamiliar markets can present many challenges for electronics manufacturers looking to reshore their operations. There is the time-consuming process of vetting a new facility, ensuring it possesses the necessary capabilities, skills, capacity, and quality standards to meet company needs. Carefully evaluating changes in cost structure due to labor costs, shipping, and other factors is also key to successfully reshoring. Language and cultural differences add another layer of complexity, requiring effective communication and understanding.

Perhaps the most daunting challenge when relocating production from a country like China, where electronics products may have evolved subtly over time, is managing the materials needed for production. Even when a product appears the same, changes may go unnoticed, requiring manufacturers to revert to their original specifications using globally sourceable parts. This may require time and expertise to essentially reverse engineer a product back to its original specifications.

Working closely with experienced partners can help to overcome these challenges by providing guidance, expertise, and local knowledge, in addition to helping to source materials and locate the best manufacturing facilities.

An expert partner with a deep understanding of both the local market and the intricacies of electronics manufacturing can offer valuable insights and support and make reshoring efficient and cost-effective. They can also align these operations with business goals. Moreover, by leveraging their expertise, they can prevent potential disruptions and quality issues before they happen.

Nearshoring: Recent Growth and the Future

While nearshoring may appear to be a new tactic for ensuring supply chain resiliency, the trend shows no signs of slowing down. A recent McKinsey survey found that nearly two-thirds of respondents were working with suppliers located closer to their production sites over the past 12 months. That’s double the share of companies who reported using those strategies last year.

Additionally, 64% of their respondents say that they are actively using nearshoring as a strategy to mitigate risks to their supply chain risks. As global uncertainty looms, it seems that nearshoring is, in turn, becoming a certainty in electronics manufacturing.

Mexico has already surpassed China as the largest supplier to the United States, with no real end to the trend in sight. S&P Global Market Intelligence projects that the trend will continue, projecting that U.S. imports from Mexico will surpass $600 billion by the end of this decade.

Maintaining robust and resilient supply chains is critical for electronics manufacturers to ensure smooth operations and security at every stage of the production process. Recognizing the importance of supply chain diversification, many companies are embracing strategies like reshoring and nearshoring.

Looking ahead, nearshoring is poised to continue its growth trajectory in the electronics manufacturing sector. As companies prioritize supply chain resilience and agility, nearshoring will remain a cornerstone strategy for navigating uncertainties and ensuring business continuity. With Mexico leading the way as a preferred nearshoring destination, the trend is set to reshape the global manufacturing landscape, paving the way for a more resilient and adaptable industry in the years to come. 

To read the full article as it is posted on Supply & Demand Chain Executive, click here. 

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However, out of the blue on November 3, 2023, President Joe Biden convened the other APEP leaders to join him in the East Room of the White House for an inaugural “Leaders’ Summit of the Americas Partnership.”

Despite the manifest lack of progress on APEP, all but two of the invited leaders attended (the president of Panama was ill while Mexico was ably represented by its foreign minister). Remarkably, several left-leaning presidents (Gabriel Boric from Chile, Gustavo Petro from Colombia, and Mia Mottley from Barbados) heeded the last-minute call from the leader of the free world. Whatever may be said about declining U.S. power worldwide, in the Western Hemisphere most leaders still want to be seen with the U.S. president. Some still hope that regional diplomacy can yield beneficial results.

Not wanting to arouse the trade skeptics within the Democratic Party, the Biden White House has carefully steered away from initiatives that would further open U.S. markets to international commerce. But APEP could build upon the foundations of existing free trade agreements—primarily the U.S.-Mexico-Canada Trade Accord (USMCA) and the Central America Trade Accord (CAFTA-DR). For these trading partners, the hot-button topic of trade liberalization had already been addressed. APEP could therefore focus on politically less sensitive but still economically vital matters such as building infrastructure, digitalizing customs, and promoting small-scale private businesses.

APEP could even address regional supply chains, couched less in terms of trade and investment and more in the language of national security and in promises of more secure, diverse, and resilient sources of supplies vital to U.S. industries.

APEP is primarily a sub-regional agreement, targeting the Greater Caribbean Basin. Absent FTAs with the United States, Brazil and Argentina—the two largest countries of South America—do not qualify. And APEP is limited to “friendly, trusted” nations that share democratic values; hence, Venezuela, Nicaragua and Cuba are excluded. The invitation list also omitted the democracy backsliders of Central America’s Northern Triangle (El Salvador, Guatemala, and Honduras). Looking forward, however, APEP is open to countries that can meet its standards.

The Resurrection of APEP

In January of this year the United States and its APEP partners released a declaration labeled “The Americas Partnership”. Nevertheless, this disappointing text still lacked focus, action items, negotiating formats and timetables, and implementation guidelines. Within the U.S. government APEP lacked a resolute champion. Biden’s Office of the United States Trade Representative (USTR) remains in the hands officials who tend to perceive deepening globalization as inimical to the interests of U.S. workers and the middle-class.

Yet pressure was building for a renewed interest in APEP. Several U.S. Senators, including influential Democrats, urged the Biden administration to pay more attention to our neighbors to the South. Biden’s energetic special advisor for the Americas, former Senator Chris Dodd, persistently pressed the White House for greater presidential attention to the region.

And at a time of rising geopolitical tensions, the administration may have decided it would be wise to shore up support in our own near-abroad—much as President Franklin D. Roosevelt had done so successfully with his “Good Neighbor” policies on the eve of World War II.

Furthermore, the administration was intent on refining its early focus on strengthening the resilience of industrial supply chains. The initial thrust was “reshoring,” or building industrial capacity in the United States. But it became increasingly apparent that to be competitive, U.S.-based supply chains would require some components to be sourced overseas, where costs were lower and some necessary inputs including minerals were more abundant.

Secretary of the Treasury Janet Yellen has become a vocal advocate of “friendshoring.” At a conference on regional investment hosted by the Inter-American Development Bank the day before the November 3 White House meeting, Yellen committed the United States “to support the region’s supply chain integration through comprehensive efforts.”

Regional Supply Chains: A New Glue of Inter-American Relations?

In expanding regional supply chains, the administration has initially focused on three strategic sectors: semiconductors, medical supplies (medical equipment and pharmaceuticals), and renewable sources of clean energy (including electric batteries). Beginning with semiconductors, the administration has certified three regional partners: Mexico, Costa Rica, and Panama, and will likely add other friendly nations to this privileged list. Beyond the occasional ultra-high tech fabrication plant (“fabs”), regional participation in microprocessor supply chains can include design development, manufacturing electrical components, parts assembly and testing, and packaging and shipping.

The foundations for regional supply chains are already in place. Free trade accords (USMCA, CAFTA-DR, U.S. bilateral accords with Colombia, Peru, Chile, and Panama) have removed many barriers to trade and investment flows—the engines of regional “friendshoring”. And some countries are already integrated into select supply chains. For example, both Costa Rica and the Dominican Republic employ tens of thousands of workers producing medical instruments and pharmaceutical products for international brands.

More must be done, however, if nearshoring is to reach its potential to become a new glue of inter-American relations, especially for the Greater Caribbean Basin. Both the Latin American and Caribbean governments grouped in APEP, and the United States, must marshal the political will and financial resources to seize this moment of opportunity in regional development.

For regional partners, that means accelerating reforms across the business ecosystem. International investors seek lower, cleaner energy sources, world-class logistical systems, transparent regulations and standards, the rule of law, and perhaps most importantly, a skilled workforce. The multilateral development banks—the Inter-American Development Bank, the World Bank, the Development Bank of Latin America and the Caribbean (CAF)—have the financial resources and technical know-how to assist in each of these tasks.

In deciding on locations for investment and trade, U.S. corporations will be driven by market forces. But they will also look to signals from the U.S. government. Which commercial partners are considered “friendly and trustworthy”? Where are U.S. government agencies, such as the U.S. International Development Finance Corporation (DFC) and the U.S. Export-Import Bank, placing their bets? Which countries are eligible for the new U.S. industrial policy incentives and subsidies orienting supply chain decisions?

The November 3 East Room APEP declaration proclaimed that “we intend to establish the Americas as the home of the world’s most competitive, inclusive, sustainable, and resilient regional value and supply chains.” The APEP partners agreed to meet at the leaders’ level every two years to assess progress, and Costa Rica has volunteered to host that stock-taking conclave in 2025. Establishing such timetables is one step toward transforming APEP from a lofty statement of aspirations into a historic idea that transforms inter-American relations.

Richard E. Feinberg is professor emeritus at UC San Diego, a member of Global Americans’ International Advisory Council, and the book review editor of the Western Hemisphere section of Foreign Affairs magazine. He is the author of Widening the Aperture: Nearshoring in our ‘Near Abroad’ (Latin American Program, Wilson Center, 2021).

To read the full article, click here.

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