Nearshoring in LATAM: Why are companies choosing this region to grow?

[This content was updated on April 17, 2026]

Since publication, nearshoring in Latin America has moved from a broad-based growth narrative to a more selective and execution-driven reality. While the structural drivers remain intact—geopolitical tensions, supply chain resilience, and proximity to the U.S.—recent data suggests that benefits are concentrating in specific countries and sectors rather than spreading evenly across the region. Mexico continues to capture the bulk of manufacturing-related investment, driven by its deep integration with U.S. supply chains and trade frameworks, while other countries are positioning themselves in more specialized niches, such as services (Colombia) or resource-based industrial capacity (Brazil). At the same time, companies are no longer pursuing nearshoring primarily for cost advantages, but increasingly as a risk-mitigation strategy—prioritizing resilience, redundancy, and geopolitical alignment in supply chain decisions.

At the same time, recent developments highlight the constraints that are shaping the next phase of nearshoring in the region. Infrastructure bottlenecks, regulatory uncertainty, and talent gaps are emerging as critical limiting factors, particularly in countries seeking to move up the value chain. In Mexico, for instance, strong inflows of investment linked to nearshoring have not yet fully translated into sustained productivity gains, with concerns around energy reliability, fiscal conditions, and upcoming trade reviews affecting investor confidence. More broadly, the regional landscape is becoming increasingly fragmented, with supply chains reorganizing around specific corridors and industrial clusters rather than a cohesive Latin American strategy. For businesses, this reinforces a key shift: success in nearshoring is no longer about choosing “Latin America” as a region, but about navigating highly differentiated country-level dynamics and execution risks.

[Original article]

In the last few years, the concept of nearshoring resurfaced as a trend among global companies seeking to take advantage of geographic and economic opportunities in certain countries that are considered more cost effective for growing their business. Emerging markets, particularly Latin America, have been among the winners of this phenomenon.

According to the OECD, “nearshoring is the model by which a company decides to produce close to its location, where its market is”.[1] While nearshoring shouldn’t be defined as just a recent trend -since global firms have resorted to using closer input suppliers or service providers that seemed more competitive in the past- it is true that a combination of factors have significantly accelerated the wave beginning in 2020. After supply chain disruptions affected global manufacturing back then as a result of trade restrictions stemming from Covid-19 and tensions between the U.S. and China, companies decided to use nearshoring as a resilience mechanism.

In 2022, this productive strategy -also known as friend or ally shoring- led to a 51% increase in investments allocated in Latin America.[2] For many investors, relocating to these markets promise lower logistics costs and wider customer reach, as they provide access to competitive local suppliers, skilled human capital, and a 660-million consumer base from upper middle income to high-income countries.[3]

In addition, existing trade preferences between Latin America and strategic international markets have made it easier for firms to import certain cross-border inputs that cannot be sourced locally. Supply chain integration between Europe and Latin America was reflected in an increase in regional imports of European intermediate goods in the second quarter of 2023, in contrast to the general decline seen in most regions, with the exception of Asian trade with Africa and European trade with Asia.[4]

To further stimulate investment in the region, governments have introduced incentives in key sectors, including new-generation vehicle manufacturing and sustainable technologies. Electric vehicle production, a source of both industrial modernization and lower carbon emissions for countries, is part of public incentives adopted in the form of tax benefits and other trade facilitation policies.

For instance, Brazil, Latin America’s largest economy[5], recently introduced a package called MoVer[6] to encourage investment in both green mobility and energy. The program will allow companies investing in these technologies to access fiscal incentives worth more than $3 million US dollars ($19 billion Brazilian reals) in the form of tax credits over the next five years. It also included an import tax reduction for car manufacturers that import parts or components and invest at least 2% of the total in R&D and innovation projects in this supply chain. With these measures, the government lead by President Lula da Silva also aims to promote reindustrialization while reducing carbon emissions from the automotive sector to advance on its commitments towards the UN 2030 Sustainable Development Goals.

In Mexico, the region’s second-largest economy[7], the government introduced fiscal incentives for high-export manufacturing industries, including automobiles and auto parts, pharmaceuticals and medical equipment, electrical and electronic products, as well as aerospace equipment, and agribusiness. This policy allows companies to deduct annual tax payments of 56-89%, plus an additional 25% deduction for expenses related to personnel training for a period of three years.[8]

A similar measure was enacted in the country in mid-2023 to promote new investors in the Inter-Oceanic Corridor of the Isthmus of Tehuantepec, a multimodal logistics platform in the southeast. It allowed for a three-year corporate income tax exemption, followed by a 50% corporate income tax deduction over the next three years[9] for investments made in electro-electronic products, semiconductors, vehicles and their components, agro-industry, medical devices or ICT, among others. The latter, combined with Mexico’s preferential trade conditions with economies of the Americas, Europe and Asia, which currently benefit from supply chain integration with the above-mentioned industries, also favor the opportunities opened up by nearshoring.

In the case of Colombia, the fifth largest economy in Latin America[10], tax deductions are available for investments in tourism facilities, non-conventional energy sources and energy efficiency sectors. This country grants a 15% reduction in corporate income tax for projects related to new hotels, theme parks, ecotourism or marinas.[11] New investment projects in energy efficiency or alternative energy sources can benefit from a corporate income tax reduction of up to 50% of the total value of the investment for fifteen years from the start of operations, as well as from VAT exemption on the purchase of goods and services to support the production and use of green energy.[12]

In 2023, the Colombian government published a draft decree that would allow authorized automakers to import components at zero tariffs, with the aim of promoting the production of vehicles powered by green energy.[13] If approved, the decree is expected to boost the country’s automotive production, which was largely affected by Covid-related restrictions.

In the case of Chile, a nation with more than thirty preferential trade agreements with countries all over the world[14] and the sixth largest economy in Latin America[15], investors can benefit from access to competitive foreign supplies as well as tax incentives in specific areas. Chile has free trade zones located in the north (i.e. Arica and Parinacota regions) and south (i.e. Tarapacá and Magallanes) that exempt investors from paying customs duties, VAT and corporate income taxes.[16]

It’s also important to mention that in the last couple of years Chile has implemented policies aimed at promoting the production of green hydrogen. With financial support from the European International Bank and the World Bank[17], the Chilean government is well on its way to becoming a top exporter of this sustainable fuel by 2040.[18] This country has also received significant nearshoring investments in the IT and financial sectors, industries with great foreign investment opportunities ahead.[19]

If you are interested in learning more about the wide range of fiscal and non-fiscal inventives being offered by governments in Latin America or the investment opportunities included in this article, do not hesitate to contact Speyside Group. We are leading global consultancy with a fully-integrated approach to public policy, government relations and corporate affairs in emerging and high-growth markets.

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