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Area Development - Site Selection, Facility Planning and Workforce Development

Navigating the Dynamic Landscape of Logistics in Mexico

Companies considering nearshoring operations to Mexico will find a resilient and interconnected logistics network to handle their import and export processes.

Q1 2024
Ever wondered about Mexico’s logistic infrastructure and how trade flows in the country? As a logistics enthusiast, I felt compelled to write about Mexico’s logistics landscape and how it unfolds a vibrant tapestry rich in diversity and opportunities, particularly in the context of the nearshoring phenomenon. With 50 strategically located Customs offices along border regions, eight railroad crossing points spanning from Tijuana to Matamoros, 117 seaports, 64 international airports, and an extensive network of 27,000 km of railways and 172,000 km of highways, Mexico’s infrastructure exemplifies a balanced blend of robustness and flexibility.

On one hand, we have Mexico’s Customs system which operates smoothly — with land, maritime, and aerial Customs collaborating to manage the import and export processes. Key land Customs — including Nuevo Laredo, Ciudad Juárez, Tijuana, Mexicali, Reynosa, and Nogales — handle the majority of these operations. Maritime Customs are situated at crucial ports like Veracruz, Manzanillo, Lazaro Cardenas, and Altamira, playing a vital role in Pacific and Gulf of Mexico trade. Aerial Customs operate in major airports such as Mexico City, Cancun, Guadalajara, and Monterrey, specializing in the handling of perishable and high-value goods. Additionally, strategically positioned inland Customs in areas like Querétaro, Aguascalientes, San Luis Potosí, and Puebla contribute to the efficient movement of goods within the country, facilitating domestic commerce between regions.

With 50 customs offices strategically positioned across border regions, ports, airports, and trade hubs, Mexico's trade operations exemplify resilience and dynamism. Luis Ernesto Rodríguez, the president of the Confederation of Associations of Customs Agents of the Mexican Republic (CAAAREM), revealed that Mexico’s 50 Customs offices collectively manage 31 trade operations per minute. In 2023, there were 21,475,728 foreign trade operations, marking a 3.9 percent increase compared to 2022. Of these, 9,612,670 were export operations, showing a growth of 0.4 percent, and 11,863,058 were import operations, indicating a 6.9 percent increase. In the same year, the 21 border Customs offices collected 365,510 million pesos. Nuevo Laredo, Ciudad Juárez, and Colombia Customs offices contributed 66.2 percent to the total revenue of border Customs, establishing them as among the most significant in this category, according to information from Ministry of Finance and Public Credit (SHCP).

U.S.-Mexico Land Ports
Focusing more on land operations, among the eight authorized border entries with the U.S., Laredo is the busiest port according to U.S. Census data analyzed by USTradeNumbers. As of September, imports through Laredo this year were up 8 percent year over year, valued at $148 billion, while exports totaled $93 billion, representing a 7 percent increase. “The World Trade Bridge” connects “los dos Laredos,” the neighboring border cities of Laredo-Nuevo Laredo, a community that sits at the heart of North American trade and pumps goods like avocados, car parts, and tractors through interstate highways to every state in the continental United States. Some 10,000 northbound trucks pass through the Port of Laredo each day, a number expected to grow as trade between the U.S. and Mexico increases.

“Infrastructure always plays a role on how well or how badly you’re going to move cargo,” states the Director of the Port of Laredo for U.S. Customs and Border Protection Alberto Flores, and I could not agree more with him. Currently, an ongoing infrastructure development at the port includes the expansion of eight additional lanes at the World Trade Bridge and the construction of a new international rail bridge funded by Kansas City Southern. Imports through Laredo this year were up 8 percent year over year, valued at $148 billion, while exports totaled $93 billion, representing a 7 percent increase.

On the northern outskirts of town, the Laredo-Colombia Solidarity International Bridge, once underused due to planning issues with Mexico, is experiencing increased capacity. With current truck numbers ranging between 2,600 and 2,800 at Colombia, it is operating at 65 to 70 percent capacity. Anticipated improvements, such as the upcoming Mexican highway expansion project “La Gloria,” are expected to directly link the Colombia bridge with the industrial city of Monterrey, further enhancing its connectivity and utilization.

Rail and Intermodal Connections
Furthermore, there has been a surge in railway freight movement, and this can be attributed to factors such as foreign direct investment (FDI), nearshoring, and the impressive dynamism exhibited by the economy. From January to September 2023, a substantial 69.5 billion tons per kilometer of goods were transported by train, indicating an annual growth of 6.2 percent, according to data from the Railway Transport Regulatory Agency (ARTF). During the same period, Ferromex experienced an almost 7 percent annual expansion, facilitating the movement of 38.75882 billion tons per kilometer. The Canadian Pacific Kansas City in Mexico, recently consolidated at the beginning of this year, saw a 3.92 percent annual increase. Ferrosur followed with an impressive growth rate of 14 percent, as detailed in the regulatory agency’s report.

We must not overlook the significance of intermodal services, as there is a notable competition among carriers striving for supremacy in the escalating transportation of goods between Mexico and the U.S. The competition was triggered by the previously mentioned merger of Canadian Pacific and Kansas City Southern into CPKC, creating the first single-line railroad spanning the U.S., Canada, and Mexico. Various companies, including CPKC, Union Pacific Railroad, CN, and Grupo México Transportes, have launched competing intermodal services. BNSF Railway has recently entered the competition in partnership with J.B. Hunt Transport Services, Inc. The service will operate between major Mexican markets and the U.S. and will be one day faster than existing routes, with an alternative route through El Paso, Texas.

However, it’s not all smooth sailing; challenges exist in this sector, particularly concerning employee turnover. The turnover rate, a metric that reveals the percentage of employees departing from a company within a specific period, essentially estimates the number of employees retained from the beginning to the end of that period. According to a study conducted by EGADE Business School and a logistics consulting firm, in a scrutiny of seven industrial sectors, logistics tops the list with the highest annual turnover rate at 27 percent, as of the study year 2022. The retail sector closely follows with a turnover rate of 23 percent, trailed by the automotive sector at 14 percent, and the food industry at 13 percent.

There has been a surge in railway freight movement, and this can be attributed to factors such as FDI, nearshoring, and the impressive dynamism exhibited by the economy. Construction experiences an 11 percent turnover rate, health/pharmaceuticals at 10 percent, and manufacturing at 8 percent. This elevated turnover in the logistics sector can be attributed to the prevalence of modest compensations. It is crucial for organizations to actively investigate creative incentive plans and recognition initiatives designed to express gratitude and reward the significant contributions of employees.

In Sum
In conclusion, the robust logistics connections between Mexico and the U.S., characterized by efficient truck transportation of materials and products without reliance on containers and seaports, underscore Mexico’s appeal for nearshoring — offering not only cost advantages, but also aligning with corporate social responsibility and sustainability goals by reducing transportation times, carbon footprints, and supply chain disruption risks. Land, maritime, and aerial Customs collaborate seamlessly, contributing to a dynamic import and export process. Laredo emerges as a key U.S. port, while infrastructure developments promise enhanced efficiency. The rise in railway freight movement and intense competition in intermodal services showcase the industry’s dynamism. However, challenges, notably high employee turnover, persist. There is no doubt that Mexico must implement effective solutions to navigate the evolving logistics sector and thrive in the era of nearshoring.

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