Executive Introduction: Geography Is Back on the Board

For years, globalization reduced geography to a cost variable. Distance could be offset with inventory, shipping capacity, and just-in-time logistics. That assumption no longer holds.

Trade disputes, tariffs, geopolitical fragmentation, and supply chain shocks have pushed geography back to the center of strategic decision-making. Mexico now finds itself in a complex phase of transition: facing uncertainty, but still holding one structural advantage that cannot be replicated elsewhere — its proximity to the United States.

As Coface, a global leader in credit risk assessment, emphasizes: Mexico’s geographic position should not be underestimated, particularly at a moment when companies reassess how and where they deploy production capacity.

Mexico Between Turbulence and Transition

Mexico is navigating two parallel challenges:

• External uncertainty, driven by tariff risks and the upcoming review of the USMCA
• Domestic constraints, including infrastructure deployment and territorial security

According to Marcos Carías, Chief Economist for North America at Coface, these challenges have slowed investment momentum — but have not reversed it.

Multinational companies are not exiting Mexico. Instead, they are pausing, recalibrating, and reassessing timelines. The reason is simple: geography has regained strategic relevance.

Proximity as a Risk-Management Tool, Not a Cost Advantage

In today’s environment, proximity is no longer about marginal savings. It is about risk containment.

Being close to the U.S. market allows companies to:

• Reduce lead times and inventory exposure
• React faster to demand fluctuations
• Lower operational complexity during disruptions
• Maintain visibility across supply chains

Carías notes that investors increasingly “look at the map” rather than quarterly volatility. For Mexico, this means that proximity functions as a stabilizer, even when macroeconomic signals are mixed.

Trade Relations: Why Canada Still Matters

While the United States remains Mexico’s dominant trade partner, Coface highlights the importance of coordination with Canada in the context of the USMCA renegotiation.

A fragmented North American strategy would weaken the region’s collective competitiveness. A coordinated approach, by contrast, reinforces Mexico’s role as a continental manufacturing platform, not merely a bilateral partner of the U.S.

This tri-national logic matters because supply chains are increasingly designed at a regional level, not country by country.

Investment Is Paused — Not Abandoned

Coface’s assessment confirms a key distinction often missed in public debate:Investment hesitation is not capital flight.

Foreign investors continue to evaluate Mexico as part of their long-term footprint. According to Carías, multinational firms think in decades, not election cycles. Geography, infrastructure, and workforce availability weigh more heavily than short-term policy noise.

This explains why nearshoring has slowed — but not disappeared.

Infrastructure: The Binding Constraint

If geography is Mexico’s strength, execution capacity remains its weakest link.

Coface identifies infrastructure deployment and territorial control as persistent structural challenges. From an investment standpoint, proximity only converts into value if companies can:

• Access reliable power
• Move goods securely
• Deploy facilities without excessive delays

Without these conditions, geographic advantage remains theoretical rather than operational.

Growth Outlook and Macro Stability

Coface’s macro projections frame expectations realistically:

• GDP growth 2025: ~0.5%
• GDP growth 2026: ~1.5%
• Estimated potential growth: ~2.0%

These figures suggest moderation rather than crisis. Inflation is expected to close near 4%, while interest rates may gradually decline, subject to trade developments.

The continued autonomy of Banco de México reinforces financial credibility — a factor investors consider critical when committing long-term capital.

What This Means for Location Decisions

In practical terms, Mexico’s geographic advantage is not disappearing — it is becoming more selective.

Companies are prioritizing:

• Regions with established logistics corridors
• Locations where infrastructure is already in place
• Environments that reduce execution risk

Rather than broad expansion, firms are focusing on precision placement of assets.

Outlook: Geography Cannot Be Renegotiated

Tariffs can be adjusted. Trade rules can be rewritten. Growth rates can fluctuate. Geography, however, is fixed.

Mexico’s proximity to the United States continues to anchor its relevance in North American supply chains. As Coface’s analysis suggests, this advantage will persist — provided that infrastructure and governance keep pace with investor expectations.

The challenge ahead is not to create demand, but to convert geographic logic into operational reality.

Decision Takeaway

Mexico’s location remains one of its strongest structural assets. Even amid uncertainty, proximity to the U.S. continues to shape long-term investment thinking.

For companies assessing expansion, the key question is no longer whether geography matters — but how effectively it can be translated into execution.

FAQ – Typical Search Questions

Does Mexico’s proximity to the U.S. still matter for investors?Yes. Geography has regained importance as a risk-management factor.

Has investment left Mexico due to tariffs?No. Investment decisions are delayed, not withdrawn.

Why is geography more important now than before?Supply chain resilience, speed, and risk control outweigh pure cost considerations.

What is Mexico’s main internal challenge?Infrastructure deployment and security.

Will nearshoring continue?Yes, but at a more selective and disciplined pace.