By Mark Vickers *
Mexico is currently experiencing a significant manufacturing boom, with foreign companies injecting over US $343 billion into new operations within the country over the past decade. In 2022 alone, foreign direct investment in Mexico surged by 12 percent, reaching a total of over US $35 billion. The pace of cross-border commerce is stunning. Over 245,000 trucks traverse the US-Mexico border every week. Total, in 2022 Mexico’s exports to the U.S. tallied nearly US $455 billion.
So far, the specter of violence and organized crime has not deterred foreign investors from capitalizing on Mexico’s economic potential. In 2022, Mexico’s exports to the U.S. surged by 18 percent
In early 2023, Tesla announced a plan to build a US $10 billion factory in northern Mexico. Ford also made headlines in 2022 with its commitment to invest US $50 billion in order to expand production of electric vehicles at a factory near Mexico City.
Mexico is benefiting as foreign executives look to diversify supply chains away from China. But, Mexico has its own set of unique challenges that could deter some foreign companies from investing. Alarmingly high levels of violent crime and targeted attacks orchestrated by organized crime groups are a direct threat to Mexico’s nearshoring trend.
Under President Andrés Manuel López Obrador, Mexico has witnessed over 156,000 homicides since December 2018. López Obrador’s government has already been marked as the most violent presidential administration in modern Mexican history. The recent surge in organized crime-related violence has already become a direct concern for multinational corporations operating in Mexico, and could jeopardize the current inflow of foreign investment.
Executives of foreign companies considering joining Mexico’s “nearshoring” trend must comprehensively evaluate the risks posed by armed criminal organizations. Cargo truck hijackings, in particular, have emerged as a major cause for concern in Mexico.
Last year, the Mexican federal government reported 7,644 violent cargo truck hijackings—a 3 percent increase compared to 2021. In the first three months of 2023, Mexico witnessed an additional 2,054 truck hijackings, marking a 10 percent surge compared to the same period in 2022. Data compiled by the Transported Asset Protection Association (TAPA Americas) reveals an even grimmer reality, with a total of 76,599 cargo truck hijackings during President López Obrador’s administration—an average of nearly 50 violent cargo hijacking incidents every single day over the past and half years.
The escalating frequency of cargo truck hijackings affects major companies operating in Mexico. Major companies including Ford, Chinese drone-maker DJI, Danone, Wal-Mart, Pepsi, and Coca-Cola have all suffered losses due to stolen truckloads of merchandise in Mexico.
Unfortunately, politicians and TV news commentators in the United States tend to portray organized crime-related violence in Mexico as a mere turf war between rival criminal factions, rather than recognizing it as a broader problem of widespread violence and corruption that impacts various economic activities, including the intricate logistics networks facilitating the shipment of goods to the U.S. border.
The risk of cargo hijackings is particularly severe in central Mexico, where Mexico State (the state surrounding Mexico City) accounted for 3,980 truck hijackings in 2022—over half of the country’s official tally for the year. The neighboring state of Puebla logged 1,749 hijackings in 2022, a 60 percent increase from 2021.
On May 13, 2023, hijackers shot and killed a cargo truck driver during a robbery on a highway in Puebla, near Mexico City. Major companies like Ford, VW, and Audi are already grappling to mitigate the risks associated with cargo truck hijackings along the high-risk interstate roadways near Mexico City.
Companies can take measures to mitigate risks, such as securing insurance for shipments within Mexico, prioritizing toll roads for transportation, employing GPS tracking devices on trailers and trucks, and thoroughly vetting logistics partners.
But, unless Mexico’s President López Obrador finds a way to improve security on highways and lower the risk of cargo truck hijacking, Mexico could scare away foreign executives and miss out on a potential boom of nearshoring investment.
* Mark Vickers is the executive vice president and head of international logistics at Reliance Partners, a major U.S.-based insurance brokerage.
