Skip to main content

Unlocking Mexico’s Market Potential

A Student Journey into Political Risk, Nearshoring and Cross-Border Trade

By Hernan Burgos Hernandez

February 13, 2024

MBA students showing the W hand signal in front of a room during their Mexico trip

Going on a student trip to Mexico was an adventure that transcended the boundaries of conventional education. It was a journey of history, cultural immersion, and personal growth, offering students a unique opportunity to expand their horizons beyond the classroom.

A distinctive feature of the trip was the strategic inclusion of meetings with local businesses, providing an invaluable opportunity for students to gain practical insights into the dynamics of the Mexican market within the broader context of the global economy. Understanding Mexico’s position within the global supply chain, the impact of trade agreements, and the significance of cross-border collaborations became pivotal aspects of the students’ learning experience.

Hernan Burgos
Hernan Burgos Hernandez

Mexico is one of the biggest producer market economies and it shares a border with the biggest market economy in the world. There are opportunities to do business in Mexico like the nearshoring trend, the United States-Mexico-Canada Agreement (USMCA), and cross-border trade with the US. Nearshoring brings production closer to the US. Mexico now has become a hub for manufacturing goods for US consumers; it is only 3 hours from Monterrey, Mexico to Texas. The time that delivery of goods takes from Asia to the US is usually a month, whereas from Mexico it is a week. The stark difference in shipping durations has significant implications for businesses, consumers, and the broader economic landscape. This makes Mexico a more attractive trade partner. The USMCA enhances trade relations, reduces trade barriers, and provides a framework for collaboration in the supply chain. Further, the two countries have a massive volume of cross-border trade; one billion dollars of products cross the border daily. These are a few of the opportunities we learned from the trip to Mexico.

While in Mexico, I gave a presentation about the Political Risks in Mexico and the 2024 Elections. Our experiences revealed promising opportunities for business expansion and a nuanced understanding of political risk that could impact the country’s growth trajectory. Political risk is any governmental action that diminishes the value of firms and encompasses a range of factors at both the national and international levels.

During my exploration of Mexico’s business dynamics, I identified several political risks that warrant careful consideration. Economic challenges, such as pervasive inequality leading to unemployment and poverty, present significant hurdles. Mexico consistently ranks among the countries with the highest levels of income inequality globally, as reflected in the Gini coefficient. International relations, particularly with the U.S., introduce an additional layer of complexity, as changes in either country’s government can trigger shifts in trade policies, tariffs, and trade agreements, directly impacting Mexico’s economy. Natural disasters, exemplified by the recent hurricane OTIS in Acapulco, underscore the vulnerability of the region, exacerbated by the misallocation of funds intended for disaster preparedness. As businesses embrace the opportunities presented by globalization, it becomes imperative to adopt robust risk management strategies to navigate the intricate landscape of political risks, ensuring sustained growth and resilience in an ever-evolving global economy.

In essence, the insights gained from the student trip to Mexico provided students with a practical understanding of the opportunities and challenges within the Mexican market. From nearshoring trends to the impact of international trade agreements, the journey unveiled a wealth of knowledge that fosters a deeper appreciation for the complexities of the global economy. As students return from this transformative experience, they carry with them not only a newfound understanding of Mexico’s economic landscape but also the skills and insights needed to navigate the intricacies of the international business arena.