Nearshoring and Friendshoring – Can Brazil benefit from this?

For those who have never heard of these terms, I explain: the nearshoring, in supply chain, it means shortening the production chains, bringing the links closer to the countries of origin. Thus, companies that transferred their factories and suppliers to distant countries with lower costs (as was the case, for example, of North American companies producing in China and India), would be bringing back their operations and suppliers to closer countries. In case of restoring, production would be returning to the country of origin. In turn, the friendshoring it means the search for friendlier countries with greater cultural fit to be part of the global supply chain of companies, which start to choose countries with a lower risk of wars and easier to do business.

Friendshoring e nearshoring these are not recent terms. Also in 2015, consultant Fernanda Monteiro wrote about this supply chain movement, especially about the nearshoring, which had existed for several years. But the numerous risks of rupture that have emerged lately, especially the closing of China's borders due to Covid-19 and the war between Russia and Ukraine that started in 2022, have brought these discussions back to the fore among global companies, especially in the United States and from Europe.

Figure 1: Volume of searches for the words Nearshoring and Friendshoring. Source: Google Trends.

Choosing closer or friendlier countries can make supply chains more expensive but with less risk. Its implementation may not bring an immediate return in terms of financial results, which is why this movement will not always have the support of executives and shareholders.

In any case, the exclusively financial and short-sighted business visions lost some of their strength in the face of the impacts of the ruptures felt in practice by many companies. Like this, nearshoring, friendshoring e restoring regained strength.

And how does Brazil fit into this context? For Brazil, a western country with little risk of imminent wars and friendly in terms of relations with other countries in the world, such movements in supply chains could generate great opportunities. However, what we see in practice is that Brazil is not as close geographically to powers as the United States and European countries, and although we are not hostile, it is not so easy to do business with Brazil.

During the International Supply Chain Forum carried out by ILOS in October 2022, professor Dale Rogers from Arizona State University, a great expert on the subject and a deep connoisseur of the Supply Chain in the United States and in several countries around the world, was categorical in saying that the great movements of nearshoring e friendshoring in the United States are heading towards Central America and that Brazil is not among the priority target countries for North American companies. The main criticism is the difficulty of doing business with Brazil due to regulations, processes, complexities, requirements and policies that do not facilitate an agile and reliable supply chain.

As an optimist that I am, I believe in Brazil's great potential to become an important economic power, but it is true that there are still countless obstacles to be overcome.

References:

Google Trends (Feb/18 to Sep/22) – Nearshoring and friendshoring

O Globo (06/07/2022) – 'Nearshoring' and 'reshoring': Learn why US companies are leaving China

The Guardian (06/08/2022) – Friendshoring: what is it and can it solve our supply problems?

The New York Times (18/11/2022) – What Is 'Friendshoring'?

ILOS (09/11/2015) - Why are companies returning (almost) home?