International factors that will determine nearshoring

July 2023. In a webinar “The incidence of nearshoring in industrial parks in Mexico”, held last March with the participation of the most important free zones in the region – including Evolution Free Zone -, the Free Trade Zones Association of the Americas (AZFA) discussed the factors that will determine the course of nearshoring on a short-term basis, and how the industrial parks must be prepared to face them.

What is nearshoring?

Nearshoring is the outsourcing strategy by means of which a company transfers part of its production to third parties which, although located in other countries, are actually in nearby destinations, with a similar time zone, or one that is located closer to their headquarters.
This practice arises as a response to offshoring, one that has led suppliers to resort to other destinations, generally in Asia, to reduce their costs.

The five factors that will determine nearshoring in the short term.

With the global changes in the political, social, cultural, economic and environmental fields, companies from Europe and the United States have decided to move their operations to America, thus placing Costa Rica in a privileged position and making Evolution Free Zone as a primary option for companies looking for expansion.

What’s happening in the world right now?

1. The power of the United States is being challenged by China.

The centralization of power is no longer in a few hands. In fact, other economies have decided to venture out and establish new criteria of power in different regions.

China’s Gross Domestic Product (GDP) should grow around 5.7% per year until 2025, and then 4.7% annually until 2030, according to the British consultancy Center for Economics and Business Research (CEBR).

This entity has indicated that China, currently the second largest economy in the world, will become #1 and pass the United States by 2030.

2. Companies as leading players.

Market capitalization, intensive use of data for commercial and political purposes, and disinformation, as the biggest risk factor, will be part of what nearshoring faces in this regard.

3. Big Data as exponential power.

This will be a differential factor for the performance of many others. The massive use of information can be used by companies to improve their position in the market.

4. Wars of a commercial or economic nature are becoming more frequent.

The war between Ukraine and Russia led different international mechanisms to impose sanctions on key Russian sectors. Thanks to this, the world has begun to take sides and invest in regions that are closer to their political beliefs.

5. A new world of risks and threats.

The pandemic showed that the world is more vulnerable than ever to threats. These are some of those mentioned by the webinar.

• Economy: Hyperinflation
• Environmental: Climate change
• Geopolitical: Armed conflicts
• Social: Epidemics, pandemics, and food crises
• Technological: Interconnectivity and technological dependence

What are the factors that companies analyze when relocating?

After considering all this, and once the company has decided to resort to nearshoring, there are a series of elements that they analyze to relocate. They are:

• Financial implications
• Legal considerations
• Considerations for construction
• Services
• Security
• Government affairs
• Environmental
• Logistics and supply chain
• Supply chain operations

Advantages of Evolution Free Zone and Costa Rica

1. Evolution Free Zone is in Tacares, Grecia, Alajuela, on a 124-hectare site, strategically located and with direct access to Route 1. This facilitates connectivity with the main highways and ports of the country.
2. It is only 15 minutes away from the Juan Santamaría International Airport, in the west region of the Central Valley, allowing it to benefit from the differentiated Free Zone incentives for projects outside the Greater Metropolitan Area.
3. Trade agreements with various regions, not just the United States.
4. Currently, the country has one of the best literacy rates in the world, with 96.1% of people over the age of 15 able to read and write.
5. In 2019, 86.3 out of every 100 inhabitants in Costa Rica had access to the internet.
6. Despite the global challenges of the pandemic, according to data from the Costa Rican Investment Promotion Agency (CINDE), at the end of the year 2021, new investment projects increased by 30%, when compared to last year, and the establishment of new companies under the Free Trade Zone Regime increased.
7. The country has work models based on ESG (Environment, social, governance) and leaders committed to sustainability.

Evolution Free Zone represents an excellent opportunity to take advantage of the nearshoring trend and put your business to work in Costa Rica, under the best quality standards and a development group with more than 20 years of experience. Join the Evolution here.