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The relocation of investments, an opportunity for Latin America

The relocation of investments, an opportunity for Latin America
The relocation of investments, an opportunity for Latin America

The emergence of Southeast Asia into the global economy generated very positive benefits for Latin Americaespecially during the first two decades of this century, when Chinese demand raised the prices of primary products to historical values ​​and went out to invest globally in order to supply its growing domestic demand.

Although the region could see its possibilities of attracting industrial investments threatened, this new scenario assured, for most economies, the opportunity to become suppliers of primary products with global reach and for a few, the possibility of increasing their industrial competitiveness. through opening and local and foreign investment.

Finally, the golden stage of globalization that had made center-left governments flourish in our region became gloomy when trade tensions due to the rise of China In their dispute for leadership of the world economic order, they began to shake the world economy.

From donald trump until the COVID-19 pandemicglobal instability generated uncertainties in the Latin American economies that had assumed the role of suppliers of raw materials in the “new international division of labor”. The strengthening of the Chinese-Russian alliance; disruptions in global supply chains; rising costs and the real estate crisis in China generated distrust in the political, economic, commercial and business centers in Western countries, opening the possibility of relocating productive investments from Asia to Latin America. Gradually moving investments from Chinese plants to the region presents challenges, but also the opportunity to reduce logistics costs, generate new jobs, and strengthen technological development and regional economic integration. The results of this relocation or “Nearshoring” in 2023 were notable.

Mexico has been the main beneficiary of the relocation of investments due to its geographical proximity to the USA, a robust network of trade agreements, and its advanced industrial capabilities. According to both public and private estimates, Relocation has contributed between US$25,000 million and US$30,000 million to the Mexican economy in 2023. The benefited sectors were automotive, electronics, and technology manufacturing, with large investments from companies such as General Motors, Ford, and Flex.

Brazil, also received a significant share of these investments due to its large domestic market and expanding infrastructure. Although exact calculations vary, it is estimated that investments relocated to Brazil amounted to approximately US$10,000 million in 2023. The benefited sectors were technology, advanced manufacturing, and renewable energy.

Will Argentina be able to take advantage of this new historic opportunity?

Relocation in the region, mostly in Mexico and Brazil has to do with aspects of geographical proximity, lower operating costs compared to China, improvement in logistics, diversification, risk mitigation and macroeconomic stability of these economies. Yeah Argentina If you want to integrate into this reconfiguration of global value chains, you need to have a clear production strategy.

Nearshoring in Latin America is expanding, and more American and European companies are expected to follow this trend in the coming years. It is projected that the total value of reshoring-related investments could continue to increase significantly, driven by the need for supply chain resilience and proximity to key markets such as USA. After all, deglobalization might not be so bad.

Candidate for Doctor in International Relations at IRI – UNLP and Professor at the Department of Social Sciences at UNDAV. @FeVaccarezza

Source: Ambito

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