Colombia is one of the emerging markets with the best prospects for nearshoring or relocation of industrial and service operations in Latin America.
This is one of the conclusions of the report “Nearshoring: Unlocking Latin America’s Potential” prepared by the firm JLL Research.
He said that “the country has the potential to increase its exports by approximately 1.498 billion dollars, which would represent an 11% growth compared to its current non-commodity exports.”
The report states that the estimated increase is due to its attractive combination of competitive operating costs, a young and skilled workforce, and a strategic location with access to both the Pacific coast and the Caribbean.
In addition, he adds, the country stands out for “offering a constantly improving logistics infrastructure and having attractive tax incentives in industrial free zones, which increases its competitiveness compared to other countries in the region.”
By identifying the areas with the greatest strengths for these business movements, the study identifies Bogotá and Medellín, which show a business ecosystem and a real estate infrastructure that is attractive for foreign investment.
“Colombia is well positioned to capture a significant percentage of the relocation of industries that are looking for alternatives closer to their main markets, such as the United States. This phenomenon offers great opportunities to generate employment, increase exports and diversify the country’s economy.“says Rodrigo Torres, Director of Research for Latin America at JLL.
The other countries
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The report assesses various Latin American markets and identifies the most attractive cities in the region, taking into account several indicators such as the business environment, history of foreign investment, availability and cost of labor, real estate infrastructure, proximity to the U.S., and logistics performance.
The results highlight the main actors in each dimension and Colombia, especially Bogotá and Medellín, appear.
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For example, he says Mexico stands out for its unrivaled location and economic size, serving as both an export hub and a destination market.
In the case of Brazil, it is worth highlighting that it combines the best logistics performance with the largest economy and population in the region.
Likewise, it mentions that Costa Rica and Chile have favorable business environments and consolidated foreign investment ecosystems as strengths. In turn, Panama is identified as the logistics center of the region, while Argentina and Peru have the advantage of “their qualified and affordable labor,” says the analysis.
(Read: Colombian mobility company will expand for the first time to other countries, which one is it?)
Rodrigo Torres indicates that “This report should be interpreted as a data-driven overview of the diverse opportunities offered by Latin American countries. For specific relocation cases, JLL recommends an in-depth analysis that considers company-specific priorities, supply chain configuration and industry requirements.”.
JLL cites an IDB analysis that estimates the potential for increased exports to the US thanks to nearshoring. (See attached chart.)
Thus, Mexico would be the main beneficiary with around 29 billion additional dollars of exports per year. “In relative terms, the main beneficiaries would be Panama, the Dominican Republic, Colombia and Peru, whose non-traditional exports would have double-digit increases due to this trend.
The benefits
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JLL notes that nearshoring offers significant advantages for companies considering expanding or outsourcing their operations in Latin America. First, cost efficiency is a significant benefit, as salaries and operating expenses in these countries are typically lower compared to developed markets.
(Read: Craft beer market share grows in Colombia)
“It also facilitates greater cultural alignment and offers opportunities for talent development, as similar time zones and cultural particularities lead to better collaboration and understanding. In addition, nearshoring allows companies to optimize supply chains, reduce delivery times and improve customer service by being closer to the end market.””.
In any case, the report indicates that companies that decide to relocate to Latin America “must consider challenges such as water scarcity, energy reliability and security, especially in countries such as Mexico. However, it adds that opportunities to increase supply chain efficiency, reduce delivery times and improve customer service make the region attractive.
CONSTANSA GOMEZ GUASCA
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