DP World Set on Mexico - Desteia
DP World Set on Mexico
DP World just announced its intention to invest in Mexico. We looked closely at the logic behind this historic decision.
Context
One of the world’s biggest logistics companies is setting its eyes on a new goal: opening DP World Mexico.
Last week, reporting by the Wall Street Journal brought forth an interesting possibility. DP World, the Dubai-based logistics company—focused, primarily, on port administration—is set on building a large infrastructure project in Mexico. Though the project is still just in the idea phase, it is a great signal for Mexico’s future role in the logistics world.
The announcement itself came from a series of comments from Sultan Ahmed bin Sulayem, who serves as CEO and chairman of DP World. Speaking with the Wall Street Journal, Sulayem announced the company is currently in conversations with the Mexican government to invest in Mexican ports, particularly in a port with ample land surrounding it to build additional industrial facilities.
Reasons for Investment
So, why Mexico? There are really two reasons why DP World is now favoring the Latin American country.
First and foremost, Mexico has slowly risen to become one of the most important countries in international commerce—and this pattern is most likely to continue in the near future. In the past, companies had sought to locate their supply chains in countries that offered a number of benefits from skilled employees to reduced labor costs. But now Western nations are attempting to undo this pattern given heightened fears of supply chain disruptions and the possibility that ideological tensions might separate them from China. The new trend is to move supply chains closer to their end consumers—a process commonly referred to as “ nearshoring”.
Given Mexico’s proximity to the US, plethora of free trade agreements, and an already heavily industrialized economy, the country has become the epicenter of this trend. Perhaps the clearest sign of nearshoring came when Mexico surpassed China as the top exporter to the US.
Data from recent months suggests that Mexican exports to the US have increased at a much faster pace than imports. In July of 2023, for instance, it was estimated that Mexico exported goods valued at $37.3 million to the US. By July of this year, that number has grown to $44.8 million, a growth of 20.1% in the span of a year.
Mexican Trade with the US (2006-2024)
(in USD per month)
A line graph showing monthly import and exports in monetary value from Mexico to the US between 2006 and 2024
.)
The second reason behind the growing interest from DP World is more pragmatic. For years, DP World has attempted to enter the US market but has faced serious opposition from the US government. Notably, in 2006, the company stopped an ambitious attempt to acquire operating positions in a number of US ports after a vote in the House Appropriations Committee signaled a clear political unwillingness to allow the acquisition.
Ever since, DP World has expanded its reach across the Americas without successfully operating ports within the US. As of this writing, the company owned 17 ports or terminals across North, Central, and South America, but there remains a gap in access to the US market.
Ports with DP World Presence in the Americas (2024)
To Mexico, this investment comes at a time of great national interest in logistics. The country’s new president Claudia Sheinbaum— set to take office this week—has made key promises to expand logistics capabilities, including duplicating the amount of cargo Mexico currently handles by rail and investing in ocean ports.
DP World’s Global Presence
According to data from DP’s own website, the company owns terminals at six of the 15 largest container ports in the world.
Ports with DP World Presence Amongst the Top 15 (2021)
(in millions of TEUs)
A bar graph showing the TEUs handled by the 15 largest ports in 2021 with different shades for those that have DP World presence.
In conclusion, the investment in Mexico could further consolidate its position in global supply chains through the support of DP World. These announcements are already good news for the country, indicating a significant shift in the geopolitical landscape affecting global logistics.