Opportunities in Central America and the Caribbean

Offshore manufacturing has existed for a long time, and it consists in the production of goods or services in another country. The production can be performed by a subsidiary of the same company or by a new foreign provider.

“Nearshore Manufacturing” or “Nearshoring” is a process where companies shift production from overseas to nearby countries that share a language or a time zone.

In recent years, nearshore manufacturing gained popularity for various reasons. The COVID-19 pandemic exposed vulnerabilities in global supply chains, prompting companies to explore alternatives closer to home. Nearshoring results in reduced shipping costs, shorter lead time to market, lower inventory expenses, and improved quality control. Additionally, to these objectives, trade tensions and tariff uncertainties have pushed companies to consider nearshore options.

The largest nearshore partner with the US is Mexico, with exports totaling $459.2 billion in 2023, equivalent to a 4.8% increase over 2022.

One of the key advantages of manufacturing in Mexico are the shipping costs. Most goods can be efficiently transported overland by trucks or railroads. Furthermore, sharing a time zone with many southwestern U.S. states makes for easy communication and travel. Another paramount advantage is the USMCA (United States-Mexico-Canada Agreement), formerly NAFTA that combined with a significant wage differential, makes Mexico the most popular nearshore destination for US companies.

Opportunities in Central America and the Caribbean

Manufacturing in Central America and the Caribbean presents another avenue for businesses in the US to benefit from nearshoring opportunities. Many countries in this region, like Mexico, offer the advantage of their proximity to the United States, making it easier to manage supply chains and reduce transportation costs. Additionally, the region provides access to a skilled labor force, competitive labor costs, and a free trade agreement (CAFTA-DR) which includes Costa Rica, Nicaragua, El Salvador, Guatemala, Honduras, and the Dominican Republic.

A great winner in this region has been the apparel industry which for many years has been one of the most significant areas of economic growth in these countries. In recent years, there has been an increase in medical device manufacturing.

For example, a study of the IFC (International Finance Corp. a member of the World Bank Group) reveals that “The DR is an attractive location for efficiency-seeking medtech firms. The Dominican Republic is a politically and economically stable country with proximity to US headquarters of multinational corporations (MNCs) that are major medical device manufacturers. Exports have grown substantially, and since 2009 the medtech sector has rivaled the DR’s apparel sector for the highest volume of exports and has become the largest exported group of goods with US$2.2 billion in 2022. Many globally leading medtech firms are now present in the Dominican Republic and their plants supply global value chains of some medical products such as disposables, surgical and medical instruments, and therapeutic devices”.

If your business is considering nearshore manufacturing in any of these countries, Promptus LLC can provide the expertise you need to succeed. Our team can assist you in understanding the rules, tariffs, and regulations, as well as organizing transportation and freight forwarding solutions to ensure the safe delivery of your goods to and from their destination country, regardless of size. Contact us today to explore your needs & alternatives.