Mexico Is Trying to Lure the World’s Biggest Car Makers to a Strip of Land in South

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(Bloomberg) — Mexico has talked to some of the world’s largest manufacturers of automobiles, auto parts and steel about investment opportunities in a narrow strip of land in southern Mexico, according to the country’s top trade official.

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Economy Minister Raquel Buenrostro said in an interview on Wednesday that the government has offered General Motors and Toyota Motor Corp, among others, eyeing opportunities in the corridor between the two oceans.

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The corridor, a major project of President Andres Manuel López Obrador, aims to connect a port in the Gulf of Mexico with a port on the Pacific Ocean via a railroad lined with industrial parks. The authorities hope that the project will one day be competitive with the Panama Canal, and are trying to entice potential investors with a favorable tax structure.

Buenrostro said during a visit to New York to meet with investors. “We’ve been traveling over the region with business leaders so they can get to know it.”

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The project is part of a push by López Obrador to attract business to Mexico’s less developed southern states, rather than concentrating it in the central and northern parts of the country. Buenrostro said the southern region has many advantages, including good water supplies, and large amounts of clean energy.

But it’s a tough sell for automakers who have long favored building in the North for easy access to the US market. General Motors and Toyota confirmed that they had talks with Mexican officials about the isthmus but said they had no investment plans to announce.

Honduras, Costa Rica, Guatemala and Nicaragua have all announced projects in recent years to compete with the Panama Canal, but with limited success.

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“We’ve had several meetings with her and her staff to bring our supply chain closer together and to review investment opportunities in the Transisthmic Corridor,” said Teresa Seed, a GM spokeswoman in Mexico. “In addition, we have shared lists of potential new suppliers that could come to Mexico so they can contact them and also show them corridor opportunities.”

Toyota confirmed that its local unit participated with others in meetings organized by the government to learn more about the project. “However, there are no specific talks regarding investment plans,” the company said in a statement.

Mexico is also in talks with Taiwanese auto and semiconductor companies, Buenrostro said, without elaborating.

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Nearshoring boom

Nearshoring, a term used to describe the relocation of international companies to North America to be closer to their US customers, has gained traction in Mexico as companies including Elon Musk’s Tesla Inc. and BMW AG announced new investments south of the border.

Mexico’s foreign direct investment saw the largest influx of new equity investment in nearly a decade in 2022, and the country provides a growing share of US imports. Mexico’s computer and electronic products sector has also benefited from friction between the United States and China.

Read more: Billionaire’s row with AMLO threatens Mexico’s investor appeal

Last month, Lopez Obrador’s government confiscated a 120-kilometer piece of railway in the region from German billionaire Larrea, raising doubts about the security of investments in the country.

Buenrostro reiterated the president’s argument that this was not a forfeiture but a change in the operating privilege of the company, and said she had assured investors that their money was safe in Mexico. She said investors upset by López Obrador’s move, and a legislative proposal that would make it easier for the government to terminate contracts, are being affected by “disinformation”.

— With assistance from Chester Dawson and Andrea Navarro.