BY JAMES A. COOKE, EDITOR AT LARGE SOURCING
strategicinsight

Shifting production to Latin America sounds like a can’t-miss proposition for companies looking to boost speed to market.

Unfortunately, it’s not as simple as it sounds.
So near and yet so far

COMPANIES THAT ENGAGE IN “NEAR SHORING”— manufacturing in countries that are close to target markets—may think they have it made. After all, they’ve cut transit times, reduced transportation costs, and improved their products’ speed to market. But those that shift production from Asia to Latin America will find there’s more to the story. While the distances may be less daunting, they’re likely to confront a whole new set of transportation challenges.

For starters, there’s infrastructure. Few Central and South American countries boast the kind of transportation infrastructure found in the United States. That means that with some exceptions (like Mexico or Colombia, where manufacturing sometimes takes place in the country’s interior), a company looking to locate a plant in Latin America will likely find its options limited to sites near an airport or seaport.

Another potential complication is access to suppliers. While companies that offshore operations to China have little difficulty finding domestic sources of parts and materials, that’s not the case in most of Latin America. In order to run an assembly operation in that part of the world, a company will most likely have to bring in parts and components via ocean.

Despite these obstacles, Latin American countries continue to generate interest from companies interested in pursu-

ing the near-shoring option. Four nations in particular are drawing attention these days: Mexico, Costa Rica, Honduras, and Brazil. What follows is a capsule look at the transportation climate in each of these countries.

Mexico. If it weren’t for the country’s ongoing drug war, Mexico would be the site of choice for virtually every U.S. company contemplating near shoring. There are a number of reasons for that. To begin with, there’s proximity. Because Mexico borders the United States, it offers the shortest transit times of any Latin American country. Plus, exporters have the option of using trucks, rather than steamship lines, for U.S.-bound shipments. In addition, Mexico offers a trained work force, with skills acquired during decades of maquiladora manufacturing. On top of that, the North American Free Trade Agreement (NAFTA) has virtually eliminated trade barriers.

As for inbound transportation options, companies bringing materials into Mexico from Asia typically use the Port of Lázaro Cárdenas. Located on the country’s Pacific coast, Lázaro Cárdenas can accommodate large containerships. With inbound shipments from Europe, companies typically use Veracruz, Mexico’s oldest and largest port.