MEXICO CITY — As American companies reassess the risks of relying on Chinese factories to make their goods, some are taking their jobs closer to home: Mexico.
The trend, known as “near-shoring,” has attracted attention from no less than Walmart, the global retail empire headquartered in Arkansas.
In early 2022, when Walmart needed $1 million worth of uniforms — more than 50,000 in one order — it bought them from Preslow, a family-run apparel business in Mexico, rather than from its usual suppliers in China.
Sign up for The Morning newsletter from the New York Times
It was February 2022 and the contours of global trade seemed set to change. The worst pandemic in a century has increased shipping. The cost of shipping products across the Pacific skyrocketed, and ports choked with floating traffic jams—a clear indication of the dangers of depending on one distant country for critical goods.
Decades of belief among multinationals in the merits of making something in China was being tested, particularly as hostility between Washington and Beijing intensified.
In his office in Mexico City, Preslow’s director of sales, Isaac Presburger, saw the Walmart order as a sign of his country’s growing role in the economy and the opportunities that come from sharing the same side of the Pacific Ocean with the United States.
“Walmart had a huge supply problem,” Presburger said. “They said, ‘Okay, Mexico, save me.’
Key geography is a driver for US companies moving their business to Mexico. It usually takes a month to ship a container full of goods from China to the U.S. — a time that doubles and triples during the worst disruptions of the pandemic. However, factories in Mexico and retail outlets in the United States may be closed for two weeks.
“Everybody understands from sources in China that there’s no way to cross the Pacific — there’s no technology to do it,” said Raine Mehdi, founder of San Diego-based Zipfox, which connects factories in Mexico with American companies. Asia. “There’s always this push from customers: ‘Can you get it here faster?’
During the first 10 months of 2022, Mexico exported $382 billion in goods to the United States, an increase of more than 20% compared to the same period in 2021, according to US Census data. Since 2019, US imports of Mexican goods have increased by more than a quarter.
According to an analysis by the McKinsey Global Institute, in 2021, American investors put more money into Mexico – buying companies and financing projects – than China.
Trade experts say China will remain a central component of manufacturing for years to come. But the shift toward Mexico represents a marginal proportion of the world’s production potential amid recognition of threats—from geopolitical shifts to the intensifying challenges of climate change.
“It’s not going without globalization,” said Michael Burns, managing partner at Murray Hill Group, an investment firm that focuses on the supply chain. “This is the next phase of globalization focused on regional networks.”
The emergence of Mexico as a potential means of saving Americans from the trappings of globalization is a development rich in historical irony.
Three decades ago, business tycoon Ross Perot, then a presidential candidate, warned of a “huge sucking voice from the south” as he described Mexico as a threat to America’s livelihood.
“The reality is that Mexico is the solution to some of our problems,” said Shannon O’Neill, a Latin America specialist at the Council on Foreign Relations in New York. “Closer trade than Canada or Mexico is more likely to create and protect U.S. jobs.”
Given that the United States, Mexico and Canada operate within a large trade area, their supply chains are often interconnected. Each provides parts and raw materials used in the finished product by the others. For example, cars assembled in Mexico often use parts produced in factories in the United States.
In total, about 40% of the value of Mexico’s exports to America is made up of components manufactured in American plants. But only 4% of imports from China are American-made.
A Walmart representative described the company’s interest in Mexico as part of an effort to make its supply chain less vulnerable to problems in any one region.
For now, Mexico does not have the power to replace China as the dominant supplier of a wide range of goods.
At Preslow’s factory, about 50 miles north of Mexico City, on a recent morning, 200 seamstresses leaned against clattering sewing machines, sewing clothes to the strains of Mexican folk music. Local designers were sitting in front of their computer screens, mesmerizing new creations.
However, the storage racks were almost all assembled with Chinese-made synthetic fabric bolts.
“All the key materials are still imported from China because you don’t have suppliers here,” Presburger said. “The pieces I use are not available in Mexico.”
Close to Home
In their bedroom community north of Dallas, Jose and Veronica Justiniano also depended on vital supplies from Asia and were desperate to find a vendor in the same hemisphere.
The couple ran a small business, Veronica’s Embroidery, out of their home. They provided uniforms for their employees to restaurants, construction companies and maids.
Born and raised in El Salvador, they left behind a terrible civil war to build a comfortable life in the United States.
50-year-old Jose Justiniano first landed in Los Angeles, where he worked as a janitor at the Beverly Hills prison, and then as a billboard installer. After moving to Dallas, he took a job at an auto parts factory, eventually gaining experience in the field of mechanical engineering and working his way up to the position of supervisor. Veronica Justiniano, 54, worked as a domestic helper for an elderly couple.
In 2018, the couple bought their first embroidery machine, installing it in their upstairs bedroom. The next year, they secured their most important client – Gloria’s Latin Cuisine, which has 22 fine dining restaurants in Dallas, Houston, San Antonio and Austin.
Justinianos bought the uniforms from an Asian import company. Then they used their machines to sew the logos.
Their distributor maintains a large inventory in warehouses in Texas, usually delivering within a day. But in 2020, as the pandemic intensified, days turned into months. Justinianos delayed his supplies, which was a terrible threat to their business.
José Justiniano hastily sought another supplier.
“The only way was Mexico,” he said.
Eventually, they outsourced most of their business to Lazzar Uniforms, a family-owned company in Guadalajara, a thriving city about 350 miles northwest of the Mexican capital. Ramon Becerra, 39, Lazzar’s commercial director, was eager to get a crack at the huge northern market.
“We know that the United States is the future for us,” Becerra said.
Justinianos’ American distributor operated in bulk, selling only what was in stock and not offering any custom work. Lazzar called, on the contrary, as a design store and clothing factory.
Becerra’s team elaborated on what the Justinianos wanted: a lightweight fabric that wicks moisture away from the heat of the kitchen. The two companies could easily communicate via phone and video without changing the time difference.
They started small, a few dozen chef jackets. By September 2021, Veronica’s Embroidery was receiving 1,000 linen shirts per order at prices close to what its previous distributor was charging for imports from Asia.
On a recent morning, Becerra hosted José Justiniano at his factory in Guadalajara. The two men discussed a potential new partnership in which Lazzar would set up a warehouse in Texas, with Justiniano handling American distribution.
“This year was a wake-up call for the United States,” Justiniano said. “We need to rethink where we make our stuff.”
A Troubled Legacy
The biggest obstacle to Mexico reaching its potential as an alternative to China may be Mexico itself.
Its president, Andrés Manuel López Obrador, neglected the country’s infrastructure, including its ports.
Even Presburger, an enthusiastic promoter of his country’s industrial virtues, admits that Mexico will struggle to match China’s manufacturing capacity.
He recalled his first trip to China to look for fabric more than a decade ago. The scale of production astounded him, with monumental spinning mills alongside specialized dyeing operations.
“The sheer size of the factories there is not crazy,” he said. “I don’t think there is any way back from this. It will not be easy.”
Inside his factory, he showed off a popular item, a black bomber jacket adorned with intricate and colorful patterns. The zipper is made in Mexico, as is the skull-shaped ornament that pulls it. But the rest of the components—the fabric, the thread, the lining—are all made across the Pacific.
Still, the change is palpable.
A huge factory near Preslow’s factory produces about 6 million buttons a day and employs about 1,500 people. The company, Botones Loren, has seen its sales increase by nearly two-thirds in the past year. Its clients — international brands such as Armani and Men’s Warehouse — are shifting orders from China, according to CEO Sony Chalouah.
“They think the United States will continue to fight China,” he said. “They want not to be dependent on China”
Some in the apparel industry expect Mexico’s appeal to wane as normalcy returns to the global supply chain.
Over the past year, shipping prices have dropped dramatically. China has begun easing its COVID-19 restrictions. Chinese apparel makers are aggressively trying to build business by offering steep discounts, according to Bernardo Samper, a longtime New York buying agent.
“At the end of the day, it’s all price driven,” he said.
However, businesses within Mexico are counting on continued friction between the United States and China.
The Trump administration has imposed high tariffs on hundreds of billions of dollars worth of Chinese products. President Joe Biden has continued this policy, adding measures to restrict China’s access to technology.
Washington has accused the Chinese government of genocide in its brutal crackdown on the minority Uyghur community in the western Xinjiang region, a major source of cotton. Any company that buys Chinese-made clothing can be accused of exploiting Uyghur forced labor.
Russia’s aggression in Ukraine and the deepening of its ties with China have reinforced the sense that the world is divided into different camps of allies and enemies.
Companies need reliable supply chains.
Lectra, a French company that makes fabric cutting machines for the garment industry, has seen its sales in Mexico and Central America grow by nearly a third over the past year.
Carlos Sarmiento, the company’s commercial director for the region, said, “The reason for this near stop is the situation between the United States and China.”
“This is not China disappearing from the American market,” he said. “It’s about having more openness to look at Mexico and Central America as an alternative, rather than being totally dependent on China.”
© 2022 The New York Times Company