By TruBit and Reap have announced a partnership aimed at enhancing cross-border payment systems and supporting nearshoring initiatives in Mexico.
This collaboration revealed on November 4, 2024, seeks to streamline financial processes for businesses looking to expand into Mexico, particularly as the trend of nearshoring gains traction amid ongoing trade tensions between the US and China.
With Mexico increasingly positioned as a favorable nearshoring destination, this alliance promises to provide vital resources for companies moving their manufacturing closer to their customer base.
The US-China trade war has significantly influenced this shift, prompting many Asian companies to capitalize on Mexico’s strategic location adjacent to the US.
A Deloitte study indicates that investment from Asia in Mexico has surged by 280% since the onset of the trade conflict in 2018.
This growth underscores the potential for Asian businesses to leverage Mexico’s skilled labor force and beneficial trade agreements with the US.
Maggie Wu, CEO and co-founder of TruBit, emphasized the partnership’s significance in enhancing payment capabilities, stating that collaborating with Reap not only improves cross-border transactions but also reinforces the nearshoring movement in Mexico.
Daren Guo, co-founder of Reap, echoed these sentiments, highlighting the synergy of local expertise and cutting-edge technology within their collaboration.
What is nearshoring?
Nearshoring refers to the practice of relocating business operations to a nearby country, providing a strategic alternative to offshoring, where companies seek suppliers in distant locations to reduce costs.
The primary objective of nearshoring is to bring production centers closer together, thereby mitigating the inefficiencies that arise from long distances and time zone differences, which can disrupt supply chain processes.
While similar to nearshoring, onshoring involves subcontracting the manufacturing of products or components to a more affordable facility within the same country.
Nearshoring between Mexico and US
The Nearshoring to the Americas study highlights the positive impacts of the USMCA free trade agreement among the United States, Mexico, and Canada, demonstrating a strengthening of their economic ties.
Notably, in 2021, following the US-China trade war, Mexico’s share of US imports rose from 13.5% to 13.9%, while China’s share declined from 20.6% to 17.2%.
The trade war has created opportunities for nearshoring in Mexico, as companies seek to relocate operations closer to the US.
According to the same study, businesses are likely to continue diversifying their supply chains, not just by relocating to the US but also by nearshoring in Mexico. If other Latin American countries can offer similar advantages for investment and trade with the US, the nearshoring landscape could see significant growth.
As large American importers seek to reduce their reliance on China for supplies, they will increasingly look to diversify their manufacturing sources to avoid disruptions like those experienced during the COVID-19 pandemic.
This shift presents a substantial opportunity for Mexico, positioning the country as a key player in logistics development and service generation aimed primarily at the North American market.
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