Mexico is booming with American companies that have abandoned China. Organized criminals are cashing in
At just after 6am on a recent weekday, a 46-year-old driver named Nicho steps on the gas pedal, easing his heavy cargo truck from behind the sturdy metal security gate at his company’s warehouse on the outskirts of Mexico City and onto one of the most dangerous highways in the world for truck drivers.
The most recent hijacking he heard about on this section of road was two days ago. “At the toll station they intercepted him. They took him out of the truck violently and [kidnapped him] for a little while, a few hours,” he adds.
Although Nicho has never been attacked by hijackers, he estimates two drivers are hijacked on the Mexico Querétaro Highway every day and stays on the lookout for cars without license plates carrying groups of men.
“There are a lot of fake checkpoints,” he says. “You have to stop. They ask you what you are carrying and where you are going. They have military gear on, assault rifles. But they aren’t police, they are criminals.”
But, in spite of the security problems on Mexico’s highways, Mexican truckers and logistics companies are experiencing a boom. Companies such as Walmart, Audi, Ford, and DHL are working on big new investment projects in the country. To the side of the highway in Mexico State, Nicho points to a massive new logistics complex where Samsung, Amazon and FedEx have set up new operations.
The influx of foreign companies and the persistence of serious security problems in the Mexico City metro area highlights two apparently contradictory trends. Violent crime in Mexico is at a historic high. But foreign corporations are pouring tens of billions of dollars of investment into Mexico’s manufacturing sector as they recalibrate their supply chains and move away from China.
Winning the nearshoring trend
As the world’s supply chains became tangled during the pandemic — and Americans grew frustrated at long shipping times — US companies realized they needed to move their Chinese manufacturing and distribution facilities closer to home.
Mexico has been a big winner.
- The US imported nearly $500B worth of goods and services from Mexico in 2023, according to the US Bureau of Economic Analysis, and the country surpassed China in imports. The total value of Mexican imports is up ~30% since 2019 and roughly 10x up since 1993, the last year before NAFTA went into effect.
- The number of trucks crossing from Mexico to the US increased from 5.7m in 2019 to 7.4m in 2023.
- Foreign investments in Mexico totaled ~$20B in the first quarter this year, a record high, and roughly double the amount in the same timeframe in 2019.
“Nearshoring to Mexico is attractive because the country has both the geographical and industrial sweetspot, as well as a free trade agreement with the United States to boot,” says Ryan Berg, a Latin America expert from the Center for Strategic and International Studies (CSIS), a US-based think tank.
The Hustle
This incoming investment is happening in a context of serious threats from organized crime. Mexico is the highest-risk country in the world for cargo truck hijacking, according to BSI Consulting, a US-based supply chain intelligence company.
Coca-Cola, Danone, Amazon, Philip Morris, and Walmart have all lost merchandise from trucks hit by hijackers in Mexico. And that’s just the tip of the iceberg: Government data analyzed by the transportation insurance company Reliance Partners estimates there were ~7.8k truck hijackings on Mexican highways last year. (Trucking industry chambers and supply chain risk management advisors such as Overhaul calculate that the number is closer to 21k annually, or about 50 every day.)
The pressure on drivers is immense: In nearly nine out ten hijackings the driver is kidnapped along with the truck. Some 150 drivers were murdered in 2023, according to Christian Rauda, CEO of the logistics advisory company AI27.
“They take [the drivers] away until they unload the trucks and then they dump them somewhere. They kidnap them in order to take their trucks,” says Beto Lopez, Vice Chairman of Mexico’s ANTAC trucking chamber. “The fortunate ones get to live, they are let go somewhere.”
The Hustle
Criminal groups steal trucks in order to resell the cargo at informal markets or to sell or use the truck itself.
The trend of cargo truck hijacking in Mexico is part of a broader diversification of organized crime into new rackets that prey on private sector companies. But experts believe it’s largely not affiliated with cartels. The state of Sinaloa, the home base for the powerful Sinaloa Cartel, recorded zero truck hijackings during the first half of 2024 and only two in 2023.
“Cargo robbery is a crime that small specialized groups can commit. We are not talking about cartels,” says Luis Villatoro, Director of Supply Chain Security and Intelligence for Latin America at Overhaul. “You have a spectrum of small groups [and] big organizations that are specialized in robbery.”
Although police intelligence units in Mexico State, which encompasses Mexico City, have used security cameras to coordinate rapid response patrols to detain and arrest criminals during in-progress hijackings, prosecutors in many states in Mexico have been slow (or hesitant) to put together long-term investigations to dismantle hijacking groups.
Too often in Mexico, the National Guard and other police forces rely on preventive patrols rather than using police intelligence to arrest and prosecute violent criminal groups. Some local gangs running profitable hijacking operations enjoy the benefits of friendships with powerful regional organized crime groups and political power brokers.
The Hustle
Mexico’s president-elect, Claudia Sheinbaum, the former mayor of Mexico City, has promised to address the problem of cargo truck hijacking and plans to invest in building up the investigative capacity of Mexico’s National Guard and finding ways to coordinate action between federal, state, and local law enforcement agencies.
The country needs safer roads for the nearshoring boom to reach its full potential.
Hijacking Mexico’s chances for development
Mexico’s outgoing president, Andrés Manuel López Obrador, wanted the nearshoring boom to reach the country’s historically underdeveloped south. After all, annual GDP per capita in Chiapas, Mexico’s southernmost state, is only $2.2k, less than one-fifth the per capita GDP in Nuevo León, northern Mexico’s most successful manufacturing hub.
To address this stubborn regional economic imbalance, López Obrador poured tens of billions of dollars into infrastructure projects such as an oil refinery and a train to spark new economic activity. He touted the central-eastern state of Hidalgo as an ideal spot for Tesla’s first Mexican factory.
Setting up shop in southern Mexico — or central Mexico, which includes Mexico City and is more developed than the south — would benefit companies and the environment: northern Mexico features an arid climate with high levels of water scarcity, especially in Monterrey, an industrial powerhouse in Nuevo León.
But the problem of cargo truck hijacking is overwhelmingly concentrated in central and southern Mexico. About half of the official tally of this year’s hijackings have occurred in Mexico State, which encompasses Mexico City, and most of the rest have occurred in Puebla and Michoacan.
The Hustle
Some companies have opted for manufacturing facilities and distribution options in northern states.
- In 2023, Tesla announced its first Mexican factory would be in Nuevo Leon rather than Hidalgo. (Construction has been delayed.)
- In June, Ford announced that it would test the option of shipping new vehicles out of a small port in the northern state of Sonora rather than from the central state of Michoacan (a hotspot for hijacking), a shift it believes will lead to lower logistical costs.
Although Heineken announced a plan to build a $476m brewery in the southern state of Yucatan in 2023, Mexico’s poorest states, Chiapas, Oaxaca, and Guerrero (all in the south), received the lowest levels of foreign direct investment in the country last year.
Hijacking theft adds up to “a real cost, one of many security concerns that hold back international investment in Mexico, especially compared to other emerging markets,” says Shannon O’Neil, a Mexico expert at the Council on Foreign Relations, a New York-based think tank.
“Given Mexico’s truck hijacking epidemic, it is a hard sell to entice companies to invest further south,” Berg, the Latin American expert with CSIS, adds. “Unless Mexico gets a handle on this facet of its security challenges, Mexico’s nearshoring dream of leveling up the south will not happen.”
Matt Silver, CEO of Cargado, a Chicago-based cross-border logistics software company, explained that many trucking companies won’t go into certain parts of Mexico, either.
“Everybody [is] worried about theft,” Silver said.
Foreign companies are also dealing with a dearth of drivers — Mexican trucking chamber CANACAR warned this year that the industry was facing a shortage of ~50k.
At least for now, Nicho has continued driving on some of the most dangerous roads in Mexico State.
The police protect drivers entering and exiting his company’s warehouse, but on the open highway he’s well aware of the risks. Two months ago, one of his friends was hijacked.
“They kidnapped him for a few hours,” Nicho said. “They held him at a safe house until their job was over."
