TRENDS Nearshoring: The opportunity to open new markets

NEARSHORING: THE OPPORTUNITY TO OPEN NEW MARKETS

Eppur si muove (“and yet it moves”), is the phrase attributed to Galileo Galilei who, in the midst of a trial, after being forced to retract his claim that the Earth revolved around the sun, affirmed that he was heard to say, with concern and between his teeth.

We can reach a similar conclusion today when we see that, despite the great challenges that the 2021 health crisis has represented for world trade and for supply chains in general, the market continues to move. With changes, turns, new challenges, but it moves.

At a global level, especially manufacturing industries, have always opted to establish themselves in Asia where they found low operating and production costs, low labor force and the possibility of managing diversified operations. The pandemic has reconfigured the board, directly impacting global business strategies. What has changed? Companies want to manage their operations closer to their customers, not having so much distance between the producer and the final consumer and thus avoid long distances and time differences that generally harm the supply chain.

The great lesson has been and is that there are external risk factors such as a global health pandemic that affects the operations of the industries and that can lead, as we have just experienced firsthand, to the operations being paralyzed by an external agent. global that we cannot control.

It is there where the trend towards nearshoring or relocation becomes more growing and with good prospects.

Nearshoring, experts say, is the outsourcing strategy by which a company transfers part of its production to third parties that, despite being located in other countries, are located in nearby destinations and with a similar time zone. This practice is born in response to offshoring, which rather seeks to reduce costs by seeking suppliers in other destinations, generally in Asia.

Other advantages offered by nearshoring as a new operational strategy is that, under this process model, a company brings its outsourced production centers closer together; it transfers the operational processes of the business including technology, incurs better costs and shorter delivery times, and also improves the study of the regional or country market, helping companies to have greater control of the demand and needs of their client.

For the Inter-American Development Bank (IDB), nearshoring is a new product that they want to promote. According to his calculations, the potential gain for Latin America and the Caribbean in the short and medium term could represent an increase of up to $78 million in new exports of goods and services, with important opportunities for the region in industries such as the automotive, textile, pharmaceutical and renewable energies, among others.

The figure of $78,000 million refers to $64,000 million in trade in goods and $14,000 million in trade in services. For Mauricio ClaverCarone, president of the IDB, “Mexico and Brazil would have the greatest opportunities, although all countries would benefit. In the case of Panama, there would be an increase in exports of goods and services for $802 million”.

The issue goes through the reconfiguration of global supply chains, trends in trade sustainability and climate change and the growing digitalization of the economy so that Latin America and the Caribbean can see the benefits of nearshoring reflected since, according to points out the expert, in these segments more than 50% of the commercial exchange occurs and there is already an increase of 80 billion in exports per year, which are qualified as short-term opportunities offered by this new trend in commercial strategy.

NEARSHORING IN PANAMA

The competitive advantages of Panama as an interoceanic maritime and logistics hub, added to a multimodal structure that offers tax, immigration, labor and customs benefits; They open the range of possibilities for the nearshoring system to attract more foreign investment that wants to establish manufacturing and export operations in Panama.

Seeking to encourage competitiveness and attract investment, the Ministry of Commerce and Industry created the special regime for Multinational Company Headquarters (SEM), and the Special Regime for the Establishment and Operation of Multinational Companies for the Provision of Services related to the Manufacturing (EMMA).

Both legal instruments with special regimes have already had results. As of March 2022, Panama has 178 SEM licenses for manufacturing, transportation and logistics, technology, telecommunications, basic and industrial chemicals, pharmaceuticals, energy, oil and gas, engineering and construction from the United States, China, Switzerland, the Netherlands and Germany.

The EMMA regime - which protects products established in special economic zones, free zones, or free zones and provides tariff incentives - seeks to increase the generation of jobs and transfer of technological knowledge through manufacturing, assembly, re-manufacturing, conditioning, maintenance and repair of products, as well as logistics services that it includes.

In May this year, AEGIR MARINE company became the first company to obtain an EMMA license, providing strategic, technical support and assembly services for sealing and propulsion parts. Currently, they have a presence in the Netherlands, Singapore, Shanghai, Namibia, the United States and the United Arab Emirates.

Many more companies are expected to trust Panama and see the potential it offers for nearshoring logistics operations. The road is not fast, but it is promising. It is necessary, as the leaders of the region point out, that value chains be strengthened, that supply chains be reconfigured, that trade be economically and socially sustainable to protect the world from climate change and eventualities; and create the necessary publicprivate alliances that allow the execution platform that this new trend requires. (CONNECTION MAGAZINE. 2022 META).