WFY’24: Mexican factoring market is expected to evolve rapidly

In 2023, the Mexican economy experienced robust growth despite a slow recovery after having suffered during the pandemic. Pilar Turanzas, Regional Head Product and Propositions LAM, Global Trade & Receivables Finance at HSBC Mexico describes the local receivables finance market in the regional article included in the World Factoring Yearbook 2024 (WFY’24).
Comparing the economic figures of Mexico versus those of the rest of Latin America, Mexico emerged as one of the top winners last year. Despite the global disruptions to world trade such as US-China trade tensions, the Covid-19 pandemic, the Russia-Ukraine war, and recently the vessel attacks in the Red Sea, Mexico has been one of the beneficiaries, because these disruptions have led to the relocation of manufacturing, particularly the nearshoring of manufacturing.
Given the above, it is not surprising that Mexico became the top source for US imports for the first time, with China in second place.
The year 2023 ended with the Mexican economy showing contrasting features. The year 2024 opened with complex issues to deal with and looming local elections.

FACTORING INDUSTRY ENVIRONMENT
At the beginning of 2023, the growth forecasts for Mexico underestimated the final results at the end of the year. One of these forecasts indicated that growth would be 3.2 per cent for the second consecutive year, and that employment and GDP would reach the levels that we had before the pandemic. A slowdown of the US economy was also expected last year but this did not happen.
For the year 2023 the IMF ranked Mexico as the 12th largest economy, surpassing economies such as Spain, South Korea and Australia. Therefore, it is not strange that Mexico has become the number one trading partner of the US, surpassing China for the first time in 20 years.
If Mexico continues to be the leader in exports to the US, it is likely that export volume could increase by as much as 10 per cent beyond the level that it is today.
Given what has been said earlier, Mexico has become a strategic commercial point for foreign investment through nearshoring. This is the commercial model that global companies are implementing, transferring part of their production to another country in order to be closer to their domestic markets, and in this way reduce their operating costs by optimising their supply chain.
With the coming into force of the free trade agreement between Mexico, the US and Canada (T-MEC), the country has further strengthened its position as a nerve centre for investment and trade in the region. Around 53 per cent of foreign direct investment in Mexico is channelled into the manufacturing sector. According to the Mexican Association of Private Industrial Parks (AMPIP), there is increasing interest from foreign companies wanting to establish themselves in Mexico.
An example of this was in February 2023 when Tesla announced that it would build a new automobile assembly plant in the north of the country. The plant will have a production capacity of 500,000 vehicles per year and is scheduled to begin production in 2025.
…
To read the whole article and much more, order the World Factoring Yearbook 2024 here.