“Latinos: Driving Prosperity, Power, and Progress in America” is the theme of the 2023 US Hispanic Heritage Month. It’s a powerful statement that underscores the dynamic role that Latino businesses play in shaping the economic landscape.
Let’s delve into a significant trend that could further amplify this impact: Nearshoring in Latin America, particularly Mexico. Against the backdrop of the United States-China trade war, it’s a subject that has stirred conversations among analysts, media and entrepreneurs.
But let’s look beyond the surface.
Should Latino companies simply bide their time, hoping for the winds of investment to bring economic growth their way? Or, should they seize the moment, recognizing the immense opportunity before them and take proactive steps to harness it?
For those unfamiliar with nearshoring, it involves relocating production to strategically chosen countries with lower costs. These nations offer competitive labor rates and streamlined bureaucratic processes, resulting in more efficient operations and administration.
Now, US companies can benefit from different advantages of nearshoring practices in Latin America. These include:
- Cost savings: Latin American countries often provide cost advantages, including lower labor costs compared to the United States. US companies can reduce production and operational expenses by nearshoring to Latin America while maintaining proximity for efficient management.
- Proximity and time zone alignment: Latin American countries typically have the same or similar time zones as the United States. This proximity allows for more accessible communication, collaboration, and quicker response times, which can be especially advantageous in industries that require real-time decision-making or support.
- Skilled workforce: Many Latin American nations boast a well-educated and skilled workforce, particularly in sectors like information technology, customer service, and manufacturing. US companies can tap into this talent pool to meet their staffing needs.
- Language and cultural affinity: Language barriers are often reduced when nearshoring to Latin America, as many countries have a significant populations of English speakers. Additionally, cultural similarities can facilitate smoother business interactions and customer service.
Amidst the strained relations between the United States and China, Mexico emerges as an attractive option for American businesses. Its strategic proximity, coupled with the ease of trade due to various international agreements, a skilled workforce, and efficient transportation infrastructure, make it an appealing choice.
For Latin American nations and companies, a golden opportunity awaits. According to Banco Santander’s Nearshoring Data Monitor report, nearshoring in Mexico can drive an impressive 8% growth in Mexico’s Gross Domestic Product over the next five to six years.
This potential is not to be missed.
However, it’s vital to acknowledge that while opportunities abound, they come with challenges. Latin American organizations cannot simply wait for foreign investments to fall into their laps. Instead, they should view this moment as an ideal time to reshape their business landscape, expand their horizons, dismantle trade barriers, and explore other markets, particularly more developed ones.
Relying solely on foreign investments can limit the vision of business leaders and deter them from venturing into first-world markets. Such an approach fosters doubt and the belief that failure is inevitable.
On a personal note, I’ve been there. As a Latin American businessman who ventured into the US market, I understand both sides. My first company, a mortgage bank, succumbed to the 2008 mortgage crisis. While external factors played a role, I needed more control and the resources to navigate the crisis effectively.
In contrast, my second venture, Growth Institute, thrived because I built it from the ground up, surrounded myself with strong leadership, and adapted to the needs of each growth stage. Consequently, the company secured a place on the Inc. 5000 list for four consecutive years.
The disparity between my two companies stems not from external circumstances but from internal elements: the people, leadership, systems, and strategy in place in my second endeavor.
The substantial opportunity presented by nearshoring in Latin America holds immense promise. However, this promise still needs a solid foundation and a clear growth plan for your company. The lesson is clear: Companies cannot rely on serendipity to seize vast opportunities; instead, they must actively work to enhance their systems and scalability, ready to take the moment when it arises.
Contributed to EO by Daniel Marcos, an EO member in Austin, who is co-founder and CEO of Growth Institute, which provides online executive education based on the Scaling Up methodology and has been named to the Inc. 5000 list of America’s fastest-growing private companies four years in a row.
To learn more about the contributions of Latino and Hispanic EO members, check out Cesar Quintero’s post, Latino Leadership: An Engine of Progress and Power in the U.S.