In this new edition we explore two main stories: Mexico's nearshoring promise, which is quietly running into structural headwinds just as the USMCA review approaches in July 2026 — and Argentina's Vaca Muerta, which is breaking production records while a rare investment window remains open under Milei's RIGI framework.
Beyond these two analyses, the Market Intelligence and Policy & Macro Watch sections cover a particularly rich news cycle: Argentina's glacier law reform and its implications for copper investment, Brazil's landmark energy auctions, Chile's internet supremacy and its geopolitical balancing act between Washington and Beijing, and the first ratifications of the Mercosur-EU trade deal.
❐ STRATEGIC OUTLOOK
Mexico's Nearshoring Moment - and Its Limits
Mexico has become the United States' most important manufacturing partner. In 2024, it surpassed China as the top U.S. trading partner, with FDI reaching a record $34.3 billion in the first half of 2025 alone. The structural logic is compelling: geographic proximity, USMCA membership, and a large industrial workforce make Mexico the natural anchor of any North American supply chain reconfiguration.
Yet beneath the headline numbers, a more troubling picture is emerging. Several challenges appear to be accumulating and affecting the promises once offered by nearshoring in Mexico. This comes at a pivotal moment as Mexico navigates the upcoming USMCA review in July 2026 while also preparing to co-host the 2026 FIFA World Cup.
Record FDI, but weakening foundations
The Sheinbaum government has doubled down on fiscal incentives to attract manufacturers: immediate deductions for fixed assets, VAT and income tax reductions in border regions, and the IMMEX program allowing duty-free import of components. These measures have kept the investment pipeline flowing.
But total domestic investment in Mexico actually declined by roughly 10% in 2025 - a paradox that reveals the limits of fiscal policy as a substitute for institutional credibility. The culprit is the tax authority SAT, which has been conducting retroactive audits extending up to a decade back, threatening to suspend import licenses unless disputed amounts are paid upfront. For manufacturers whose entire operation depends on uninterrupted cross-border component flows, this represents an existential operational risk and affects the country’s power to attract long-term capital.
Security: a major deterrent no fiscal incentive can offset
Security is also a major issue for Mexico’s business environment. Approximately one-third of Mexican territory is currently under cartel influence. The recent killing of CJNG leader "El Mencho" - celebrated as a law enforcement success - could in practice trigger a wave of fragmentation and retaliatory violence near cities hosting the 2026 World Cup.
The security risk has also gone digital. Microsoft has warned that nearshoring-driven digitalization has dramatically expanded Mexico's cybercrime attack surface. Ransomware - effectively digital kidnapping - is now the most common attack in the region, with 75% of large Mexican companies reporting an increase in incidents. Cargo theft along key logistics corridors also remains a persistent drag, adding invisible costs that weigh heavily on operating margins.
Northern Mexico: a victim of its own success
The concentration of nearshoring investment in Monterrey and the northern industrial belt has pushed local infrastructure to its limits. Industrial real estate rents surged 39% in a single year, with prices per square meter now comparable to premium districts in Miami. Water and electricity constraints are increasingly cited by manufacturers as binding operational risks, particularly relevant as AI-driven data center investment compounds demand on already strained grids.
Furthermore, competition for specialized technical talent has intensified sharply, pushing up labor costs in precisely the regions that were originally attractive for their wage competitiveness.
Central America: the emerging hedge
As Mexico's growing pains multiply, global manufacturers are quietly beginning to diversify. H&M and other large retailers have already moved toward more regionalized supply chains, with Central American suppliers increasingly viewed as a complement or partial substitute to northern Mexico exposure. Lower labor costs, proximity to U.S. ports, and the absence of large-scale cartel territorial control make Honduras, Guatemala and El Salvador a more predictable operating environment for labor-intensive manufacturing. For companies producing lower-complexity goods, this diversification logic is already translating into concrete sourcing decisions.
🎯 Strategic perspective
Mexico's nearshoring advantage is real but no longer self-sustaining. Geography and trade agreements create the conditions for investment - they do not guarantee it. The country's ability to hold its lead will depend on whether institutional credibility can be restored alongside fiscal incentives.
The real test comes with the USMCA review in July 2026. Will Mexico use it as leverage to address the rule-of-law deficits that are quietly eroding investor confidence? Or will it double down on fiscal incentives as a substitute for structural reform? The answer will determine whether the current nearshoring wave consolidates into durable industrial growth or loses ground to lower-cost, lower-risk alternatives in the region.
❐ DEEP DIVE
Vaca Muerta: Argentina’s $30B Energy Bet
Spanning 8.6 million acres across the Neuquén province, Argentina's Vaca Muerta formation has quietly become one of the most consequential energy stories in the Western Hemisphere. In September 2025, the country's oil production hit a new all-time high of 833,874 barrels per day, with unconventional shale output accounting for 66% of total national production. That share was below 30% just five years ago.
Vaca Muerta holds the world's fourth-largest shale oil reserves and second-largest shale gas reserves, with only around 10% of the formation currently under development. What has changed is the investment climate and especially President Milei's RIGI framework that offers 30-year fiscal stability for investments above $200M. This has unlocked a pipeline of projects. The question is no longer whether Vaca Muerta can produce at scale. It is whether Argentina's infrastructure and institutions can keep pace.
💡Key takeaways
A structural cost advantage: Vaca Muerta's breakeven price is estimated between $36 and $45 per barrel, well below the $60–70/bbl average for U.S. shale. At current Brent levels around $63, the formation is comfortably profitable to drill. YPF's CEO has stated the company can develop the entire formation profitably at $45/bbl. As U.S. shale costs are projected to rise toward $95/bbl by the mid-2030s, this gap will only widen.
Solving the infrastructure bottleneck: The critical constraint on Vaca Muerta's growth has always been export infrastructure, not geology. That is changing. The $2 billion Vaca Muerta Oil Sur pipeline - the largest private infrastructure loan in Argentine history, arranged by Citi, JP Morgan, Santander, Itaú and Deutsche Bank - will connect Neuquén to an Atlantic export terminal at Punta Colorada by end-2026.
The RIGI investment window: Milei's RIGI framework has been extended to upstream oil and gas projects, offering fiscal certainty and preferential FX access for large-scale investments. The application window has been extended by one year. Thirty-plus projects worth over $33 billion have been submitted. The window is open but investors are watching closely for any signs of political reversal ahead of the 2027 elections.
The investment outlook is not without friction: the Argentine Senate's recent reform to the Glacier Law - covered in our Market Intelligence section - adds a regulatory variable that investors in Neuquén's periglacial zones will need to monitor closely.
LNG as the endgame: Argentina's long-term energy ambition targets $30 billion in annual energy exports by 2030–31. The anchor project is an LNG export terminal led by YPF in partnership with Golar LNG, Pampa Energía and Harbour Energy and described by industry observers as the fastest-moving LNG project globally from planning to approval. First exports are targeted before 2030, which would transform Argentina into a major LNG supplier to Europe and Asia.
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❐ MARKET INTELLIGENCE
❍ AGRIBUSINESS & FOOD SYSTEMS
Colombia: passion fruit industry targets 10% export growth
The Colombian passion fruit industry aims to increase exports to 10% of total production within three years through a technological shift toward cleaner, more sustainable farming. While the EU remains the primary market (90% of shipments), the sector is navigating stricter residue limits and higher inspection costs by developing bio-inputs and seeking access to the US market. (Portalfruticola)Ecuador: record forest exports driven by balsa demand
Ecuador’s forest exports reached a record $737 million in 2025, a 13.4% annual increase. The sector is led by balsa manufacturing (41% of exports), specifically for wind turbine blades, supported by a new long-term MOU between Siemens Energy and the Ecuadorian Wood Industry Association (Aima) to strengthen the sustainable supply chain. (Vistazo)
❍ MINING & CRITICAL MINERALS
Argentina: senate approves reform to Glacier Law for $40B mining boost
The Argentine Senate has approved a bill allowing provincial governors to lift federal protections on periglacial zones, targeting $40 billion in untapped copper potential. Industry leaders argue the reform provides the legal clarity necessary to satisfy global copper demand, though environmental groups warn of significant risks to water reserves. (Bloomberg Línea)Chile/Argentina: BHP and Lundin to invest $18B in Vicuña copper project
The Vicuña District, a BHP-Lundin $18B venture on the border of Atacama and San Juan, targets an annual production of 400,000 tons of copper by 2030. Although the primary new assets are located in Argentina, Chile provides a vital logistical edge: its ports are six times closer than Argentine alternatives, and its advanced desalination infrastructure is considered essential for the project's long-term sustainability. Furthermore, Chilean engineering firms and specialized workers are poised to serve as strategic collaborative partners for the project’s technical development. (La Tercera)Ecuador: new regulatory framework targets mining professionalization
Ecuador has introduced major reforms to its Mining Law to attract private capital and increase state revenue through a new royalty calculation for gold and silver. The changes simplify concession procedures while mandating that miners generate their own electricity, as the El Domo and La Plata projects prepare to launch industrial-scale operations. (BNamericas)
❍ MANUFACTURE & INDUSTRY
Mexico: medical device sector plans $400M investment by 2030
Aligning with "Plan México," the innovative medical device industry (AMID) expects to deploy up to $400 million by 2030 to expand manufacturing and centers of excellence. The strategy aims to strengthen Mexico’s role as the leading supplier to the US ahead of the 2026 USMCA review. (Mexico Business News)Argentina: tire manufacturer Fate closes plant amid "unfair" Asian competition
The historic tire manufacturer Fate has ceased industrial operations, resulting in 920 layoffs. The company attributed the closure to a 34.8% surge in imports and a loss of competitiveness, while industry bodies expressed alarm over the broader impact of Asian overcapacity on Argentine manufacturing. (El País)Paraguay: Spanish firm Focasa selects Alto Paraná for $1M textile plant
Spain-based Focasa, a specialist in technical fabrics for furniture, will launch a $1 million industrial facility in Alto Paraná in early 2026. The company selected Paraguay as its Mercosur production hub due to favorable fiscal conditions and institutional support, with plans to double the workforce in a second phase. (El Nacional)
❍ ENERGY & SUSTAINABILITY
Brazil: 2026 auctions to target 126 GW capacity and first battery storage
Brazil has scheduled major energy auctions for 2026, headlined by a March 18 capacity reserve tender (LRCAP) featuring 368 projects totaling 126.3 GW. The government also plans its first-ever battery storage auction by June to stabilize renewable energy integration. In the oil sector, a July 29 auction will offer 106.5 million barrels from pre-salt fields like Mero and Búzios, supported by new environmental clearances for exploratory blocks in the Campos and Santos basins. (BNamericas)
❍ INFRASTRUCTURE, TRANSPORT & LOGISTICS
Brazil: railway production to expand in 2026 amid $120B auction plan
Brazil expects to manufacture 72 locomotives and 1,900 freight cars in 2026, marking a significant recovery for the local industry. The Ministry of Transport plans eight new railway auctions this year to leverage $120 billion in investments, aiming to reduce the country’s dependence on truck freight. (BNamericas)Peru: Open Skies agreements with Brazil and Costa Rica to boost cargo
Peru has signed "Open Skies" deals with Brazil and Costa Rica, eliminating route restrictions and granting 7th freedom rights for cargo transport. These agreements allow airlines to operate cargo flights between third countries without touching their home territory, facilitating global access for Peruvian exports. (Mundo Maritimo)Colombia: record 38.9% growth leads regional automotive recovery in January
The Colombian auto market saw the highest growth in Latin America in January 2026, with 19,998 units sold (+38.9% interannual). While regional sales grew 3.1% overall, significant contractions were reported in the Dominican Republic and Paraguay, leading to calls for government-backed fleet renewal programs in Colombia. (Autocosmos)Brazil: Embraer and aerospace sector benefit from US tariff exemptions
Commercial aircraft and parts have been exempted from the revised US 10-15% import tariffs, providing a significant boost to Brazil’s Embraer. This exemption removes the disadvantage Embraer previously faced against competitors from Canada and France that entered the US duty-free. (Reuters)
❍ DEFENSE & SECURITY
Chile plans to locally manufacture 112 drones by 2027
The "Drones for Chile" initiative aims to manufacture 112 dual-use drones within 18 months to reduce 98% dependence on Chinese imports. This alliance between the Air Force, Navy, and academia focuses on functional prototypes for border surveillance and emergency response, positioning Chile as a regional aerospace creator. (Defensa)
❍ TECHNOLOGY & INNOVATION
Mexico: OECD presents roadmap for semiconductor ecosystem integration
The OECD and the Mexican government have outlined a technical roadmap to integrate the country into the global semiconductor value chain. The report highlights Mexico’s advantages in assembly, testing, and packaging (ATP) and recommends a digital one-stop shop for investments and enhanced STEM training to boost high-value manufacturing. (Mexico Industry)Chile ranked #1 globally for fixed internet speed by Ookla
Chile has reached the top spot in the Speedtest Awards by Ookla for fixed internet speed, surpassing markets in Asia and Europe. Experts attribute this success to early fiber investment and intense operator competition, though challenges remain in narrowing the digital literacy gap for its population. (BioBioChile)
❍ FINANCE & BANKING
Colombia: Private equity hits record $31.5B in investment commitments
Colombian private capital industry reached a historic milestone with over $31.5 billion in commitments, funding over 2,000 companies. Approximately $23.5 billion has already been disbursed toward infrastructure and acquisitions, with an additional $4.5 billion currently available for new investments in 2026. (Infobae)
❐ POLICY & MACRO WATCH
Chile: Historic trade record and geopolitics of the Chinese submarine cable
Chile’s trade exchange hit a record $18 billion in January 2026, but the country faces increasing pressure to choose sides in the US-China rivalry. The US recently imposed visa restrictions on three Chilean officials linked to a proposed Chinese submarine cable project, warning that Chilean network security is essential to maintaining its visa-waiver status. (Marca Chile / Bloomberg Línea)Argentina and Uruguay ratify Mercosur-EU trade deal
Argentina and Uruguay have become the first nations to ratify the long-awaited Mercosur-EU free trade agreement, creating a zone with 700 million consumers. While Brazil and Paraguay prepare for parliamentary votes, the EU Parliament has frozen the process indefinitely pending legal verification of the pact’s clauses. (DW)Mexico: Death of CJNG leader "El Mencho" sparks USMCA review concerns
Following the assassination of notorious drug lord "El Mencho," analysts warn of potential internal violence and increased US pressure ahead of the summer trade review. While the Sheinbaum administration has accommodated US demands on tariffs and border security, stagnant GDP growth (0.8%) is fueling calls for a rethink of nationalist energy and mining policies. (Barrons)Colombia: Right-wing outsider De La Espriella leads presidential polls
Criminal lawyer Abelardo De La Espriella has emerged as the frontrunner for the May 31 first-round presidential election, leading with 32% in recent polls. Often compared to Nayib Bukele, "The Tiger" runs on a platform of "democratic authority" and hardline security, proposing the resumption of glyphosate fumigation to combat record-high coca production. His pro-US stance and alignment with regional conservative figures like Javier Milei and Donald Trump signal a potential sharp rightward shift for Colombia, despite critics regarding his lack of government experience and controversial past legal clients. (Americas Quarterly)Honduras: President Asfura’s first month marked by fiscal austerity
New President Nasry Asfura has prioritized economic competitiveness by rejoining the World Bank’s ICSID to restore investor certainty after his predecessor’s withdrawal. His "Five-Star Vision" includes merging 20 state institutions to optimize resources and reshaping foreign policy through closer ties with the US and Israel while potentially rebuilding relations with Taiwan. (Atlantic Council)
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