According to the latest JLL Research report, “Nearshoring: Unveiling the Potential of Latin America,” Colombia has established itself as one of the most promising emerging markets for relocating industrial and service operations to Latin America. This phenomenon is driven by the growing need to improve the resilience of global supply chains. This surge in nearshoring in Latin America has shifted the business landscape as companies seek more stable and cost-efficient alternatives to traditional outsourcing destinations.

The study highlights that Colombia has the potential to increase its exports by approximately $1.498 billion, representing an 11% growth compared to its current non-commodity exports. This growth is driven by a unique combination of competitive operating costs, a young and skilled workforce, and a strategic location with access to Pacific and Caribbean coasts, making it an attractive destination for businesses pursuing nearshoring opportunities.

Strategic Advantages of Colombia

One key reason for Colombia’s prominence in the realm of nearshoring in the region is its improving logistics infrastructure and favorable tax incentives, particularly within industrial free zones. These factors significantly enhance Colombia’s competitiveness compared to other countries. Bogotá and Medellín are key cities, boasting a growing business ecosystem and modern real estate infrastructure designed to attract foreign investment. Both cities offer high connectivity to global markets, making them ideal for companies seeking to establish operations near crucial consumer and business hubs.

Key Figures from the JLL Report:

• Potential export growth: $1.498 billion (11%)
• Highlighted cities: Bogotá and Medellín
• Competitive infrastructure: Free zones and industrial parks with lower rental costs compared to other cities in the region
• Workforce: Highly qualified, with lower operating costs compared to other emerging markets in Latin America

According to Rodrigo Torres, Director of Research for Latin America at JLL, “Colombia is well-positioned to capture a significant percentage of the relocation of industries seeking alternatives closer to their main markets, such as the United States. This presents great opportunities to generate employment, increase exports, and diversify the country’s economy.” This statement underscores how nearshoring in the region, particularly in Colombia, offers significant potential for business expansion, especially in industries like manufacturing, IT services, and logistics.

Regional Comparison: Nearshoring in Latin America

The report evaluates various Latin American markets based on critical indicators, including the business environment, foreign investment track record, labor availability and cost, real estate infrastructure, proximity to the U.S., and logistical performance. In addition to Colombia, the report highlights other emerging countries as critical players in nearshoring. Mexico, Brazil, and Costa Rica stand out as regional leaders.

Mexico: Renowned for its strategic location and large economy, Mexico continues to serve as both a hub for exports and a destination market. Nearshoring in Latin America is strongly tied to Mexico’s ability to leverage its proximity to the U.S. and its industrial solid clusters, particularly in the automotive and aerospace sectors.

Brazil: With Latin America’s largest economy and population, Brazil is distinguished by its robust logistical infrastructure. However, the country faces challenges in regulatory complexity and higher operating costs than its regional counterparts.

Costa Rica: Known for its favorable business environment and well-established foreign investment ecosystems, Costa Rica is a major player in sectors like life sciences and IT. The country has capitalized on regional nearshoring by attracting shared services centers and multinational corporations.

Panama: Panama is quickly emerging as the region’s logistics hub, thanks to its strategic location and the Panama Canal, which facilitates international trade and distribution.

Key Findings from the Report:

• Mexico stands out for its unrivaled location and economic size.
• Brazil combines the best logistical performance with the largest economy in the region.
• Costa Rica and Chile excel due to their favorable business environments.
• Panama emerges as the region’s logistics hub.
• Colombia shows solid performance across multiple dimensions of nearshoring in Latin America.
• Argentina and Peru offer skilled and affordable labor forces, making them competitive.

Opportunities and Challenges

Nearshoring in Latin America offers numerous advantages for companies looking to expand or relocate their operations. The cost efficiency of operating in Latin American countries, where wages and operational expenses are generally lower than in developed markets, is a primary driver of this trend. Additionally, nearshoring provides greater cultural alignment and better collaboration due to similar time zones, language, and cultural similarities between Latin America and major markets such as the U.S.

Moreover, nearshoring allows companies to optimize supply chains, reduce delivery times, and improve customer service by positioning their operations closer to their end markets. This has become particularly critical as companies seek to mitigate risks associated with supply chain disruptions caused by global events.

However, there are challenges to consider. Countries like Mexico face water scarcity, energy reliability, and security issues, which can impact business operations. Despite these challenges, nearshoring in the Latin American region continues to attract interest from companies looking to relocate parts of their production closer to key markets.

Successful case studies

San José, Costa Rica: The transformation of call centers into shared services centers for large corporations like Roche, Equifax, JLL, and Pfizer highlights Costa Rica’s success in the nearshoring trend. The country’s skilled workforce, political stability, and commitment to sustainability have made it a top destination for life sciences and technology companies.

Mexico: Mexico’s automotive industry leads the nearshoring movement, with significant investments from companies such as BMW, Ford, and Honda. The country’s proximity to the U.S. and well-established industrial base reduce transit times and transportation costs for companies operating in these sectors.

Guatemala: Emerging as a regional hub for call centers, Guatemala offers low real estate costs and affordable wages, making outsourcing business processing operations attractive.

These examples illustrate how nearshoring in Latin America has become a viable strategy for companies across various sectors. It offers cost-effective solutions while enhancing operational efficiency.

Conclusion: A Bright Future for Nearshoring in Latin America

Nearshoring in Latin America presents a unique opportunity for U.S. and global companies looking to diversify their production locations and minimize operational risks. With key markets such as Mexico, Brazil, and Costa Rica leading the charge, the region is well-positioned to attract foreign investment and foster economic growth.

Colombia, in particular, stands out due to its strategic advantages, competitive operating costs, and growing infrastructure. As companies continue to explore nearshoring options in Latin America, Colombia is likely to emerge as a top destination for industries looking to relocate their operations closer to key markets in North America. The ongoing nearshoring trend is expected to boost the region’s economic development, create jobs, and enhance supply chain resilience across Latin America.