U.S. nearshoring doesn’t automatically benefit Latin America

The rise of geopolitical tensions between the U.S. and China, the Covid pandemic, and, most recently, the Russian invasion of Ukraine have led to a growing interest in the U.S. in building more resilient supply chains and promoting so-called “nearshoring” or “friend-shoring” — the relocation of U.S. manufacturing from China and other rivals to regions considered more politically secure, in an effort to reduce economic reliance on geopolitical competitors. 

In this context, a growing number of analysts have argued that the potential reordering of value chains provides an opportunity for Latin America to attract greater U.S. investment. 

According to an estimate by the Inter-American Development Bank, nearshoring could add an annual USD 78 billion in exports of goods and services in Latin America and the Caribbean in the near and medium-term. 

Shannon O’Neill, the deputy director of studies at the Council on Foreign Relations, a think tank, points to potentially “massive rewards” for Latin America by attracting advanced manufacturing, citing the already existing trade agreements between the U.S. and countries in the Western Hemisphere, and Latin America’s rich natural resources. 

In a recent op-ed, Richard Feinberg, a professor at USC San Diego and former policymaker, also sees ample opportunities in Latin America and argues that “democratic values among most of the Western Hemisphere nations sharply reduce the reputational risk [to U.S. companies] and the dangers of geopolitical disruptions.”

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