The NAFTA Effect on Nearshoring: More Interaction Between Providers and Clients

One thing about NAFTA: It has managed to remain in the public mind, which is not something that many international commerce pacts can claim. Since negotiations began way back in 1986, the North American Free Trade Agreement has been both praised and scorned. It looks like Salma Hayek to some, Really Ugly Betty to others.

During a NAFTA discussion earlier this week, Karen Antebi, counselor for economic affairs at the Embassy of Mexico in the United States, said that NAFTA "brought a sea chance to Mexico." Economic stability and transparency have led to growth and prosperity as a result, and helped turn the country into "a competitive location for foreign investment." More people can afford to buy cars and refrigerators. Trade with the US has increased five-fold, she said. Citing numbers from the US Chamber of Commerce, Antebi said that six million American jobs are dependent on doing business with Mexico.

More needs to be done, like easing the import/export bureaucracy, she said, but overall, everyone benefits from NAFTA "no matter where you live in the region." (This story provides more details and comments from Antebi.)

Two years before NAFTA took effect, Softtek, the Mexico-based IT and BPO provider, had started offering what it uniquely called near shore outsourcing services. You have to wonder how the trade pact has affected the IT sourcing business between a company headquartered in Monterrey and clients in the U.S. and Canada. What has NAFTA meant in the world of IT services and the nearshore outsourcing biz?

Federico Ferreres, marketing director for Softtek USA, said that the increased foreign investment Antebi referred to has built a healthy business climate, "that of a growing economy in a world that is risking a global recession.... I look at Monterrey [where Softtek has its largest delivery center] and I see it growing, and growing fast."

This kind of long-term financial commitment also helps "remedy the situation" involving the "illegal activities" that a few parts of Mexico have become notorious for.

Ferreres said another important result of the agreement is the TN visa, also known as "the NAFTA visa." They're expedited and issued for three to five years, and can be renewed forever as long as the person has employment. They are not "resident-track-oriented," he said, but are meant to make it easier for professionals to get the work done.

"When it comes to services," Ferreres said, "these temporary visas allow people to meet face to face, to interact. The more interaction, the more productive you can be. Without these visas, face to face would be tougher." With the NAFTA visas, customers can meet with developers, and project managers can travel back and forth. "This is essential in a business with tight deadlines," Ferreres said. In fact, some clients say this proximity and ease of interacting and collaborating is "the main benefit of delivering from Mexico."

And then there's another factor that might seem more ephemeral, a soft benefit, but relates to something you hear regularly in nearshoring circles. More economic interaction between the U.S. and Mexico, between the people of those two countries, results in more cultural exchange.

"I lived most of my life in Argentina," Ferreres recalled, "so when I came to Mexico in '03, I felt like I was in the U.S. I went to a supermarket and it seemed like half the goods were of U.S. origin. That is important for those of us who provide services to the United States."

That exchange of products, sharing the same things, leads to a familiarity and affinity that shouldn't be discounted. NAFTA "has helped us all become culturally closer, which is important in our industry, in the technology market," Ferreres said.