2025 Mexico Nearshoring Incentives
Most of the recent business press on Mexico manufacturing has been focused on the on-again-off-again 25% tariffs that the U.S. is considering for Mexico.
Wherever the tariffs land, a new $1.4B tax incentive package intended to strengthen Mexico’s manufacturing base will surely increase the attractiveness of businesses investing in growing their Mexico-based operations.
The Nearshoring Decree, effective January 22, 2025, provides accelerated depreciation for new investments in fixed assets as well as tax deductions for expenses related to staff training.
Here are some of the details:
- The $1.4B incentives are available for all domestic and foreign companies across all industrial sectors
- $74M is earmarked for staff training, specifically for 25% of the increase in expenses over the average of the last three fiscal years
- $49M will be allocated for enterprises with annual revenue less than $5M
- Incentives are available for expenses through 2030
The Nearshoring Decree is part of a broader economic development strategy called the 2025 Mexico Plan.
One other important aspect of the Mexico Plan is an increase in geographic areas that establish additional tax incentives for investors in Strategic Sectors (semiconductors, electronics, energy, logistics, tourism, agroindustry, infrastructure, IT, electromobility and automotive, medical devices, and pharmaceuticals).
There is now a total of 17 Investment Zones.
Who’s Been Investing in Mexico?
Foreign investment in Mexico has been robust the past few years, with foreign direct investment from companies from the U.S. ($27B), Germany ($8B), and Japan ($6B) leading the charge in 2024.
There are now several Chinese industrial parks in Mexico, but the total investment by Chinese companies totaled less than $200M in 2024.
A multitude of Chinese companies, led by BYD and LGMG, had announced multi-billion-dollar investments that now appear to be uncertain.
The Future for Mexico Nearshoring
The 2025 U.S. tariffs on foreign goods are creating a lot of questions around nearshoring for North American manufacturers.
If the tariffs are applied evenly across all countries, there is still some advantage for North American manufacturers to nearshore their supply base Mexico, whether it’s a dramatic shift or pursuit of a China + 1 strategy.
The recently announced Mexican nearshoring incentives can be a difference maker.
On the other hand, if U.S. tariffs on goods produced in Mexico are not implemented, or implemented at a lower rate than other countries, nearshoring the supply base to Mexico is likely to grow at a faster rate than we’ve seen in recent years.
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