Mexico and Brazil Amid the Panama Canal Crisis: The Answer to a New Era in Global Trade?

The Panama Canal crisis highlights the vulnerability of traditional trade routes and the urgent need for solid infrastructure in Latin America. The canal, which handles 6% of global maritime trade, connects vital routes linking the United States with Asia, South and Central America; Europe with South America; and Asia with Central America, facilitating the movement of goods between hemispheres.

Given their trade patterns, Mexico and Brazil are well-positioned to offer strategic transport and logistics alternatives to complement Panama Canal routes, according to World Bank data and government sources. Most of Mexico’s exports (84%) go to the United States, while 39% of its imports come from the U.S. and 35% from Asia, reinforcing its role as a vital link in trade between the Americas and Asia. Brazil, meanwhile, directs 48% of its exports to Asia, 18% to Europe, and 30% to the Americas (17% south and 13% north), while its imports mainly come from Asia (41%), North America (23%), and Europe (21%). These trade patterns establish Brazil as a natural connection point between continents, enhancing its role in global merchandise flows.

Additionally, Mexico and Brazil have solidified their positions as Latin America’s most developed centers of industrial infrastructure. Over the past decade, both countries have seen significant growth in their industrial real estate markets, driven by demand for logistics centers and state-of-the-art warehouses. According to SiiLA data, as of Q3 2024, Mexico has over 96 million square meters of Class A and B industrial space, largely dedicated to manufacturing (55%), consumer goods (16%), and transport and logistics (9%). In Brazil, the inventory surpasses 26.8 million square meters of Class A+, A, and B space, mainly serving consumer goods (34%), transport and logistics (30%), and manufacturing (15%).

Their role as hubs for alternative logistics routes, while not substitutes for the Panama Canal, will be increasingly crucial if the crisis persists. Countries most affected include South America’s commodity-exporting economies—like Chile, Brazil, and Argentina, which face lower logistics costs thanks to direct ocean access—and Asia’s manufacturing economies that rely on the canal to reach the U.S. East Coast, making them particularly vulnerable to delays and added costs.

However, José Ignacio Martínez Cortés warns that this situation will not incentivize mass nearshoring to Mexico or other Latin American regions, as companies are looking to diversify their supply chains rather than completely relocate them.

“For example, many Asian companies are only moving some production lines without closing their operations in Asia,” he explains. This cautious approach indicates that Mexico and Brazil are well-positioned as strategic alternatives without entirely replacing these companies’ local operations in the short and medium term.

Furthermore, the economist notes that strengthening their infrastructure and improving their tax incentives are essential for Mexico and Brazil to capitalize fully on this opportunity.

“Transportation and logistics companies are evaluating alternative routes to mitigate the impact on their supply chains. One viable option is international cargo transit through Latin American ports, which allows maritime, land, and air transport to bypass the canal’s congestion. However, although the geographical conditions and tax benefits of countries like Mexico and Brazil offer clear advantages for international trade, a robust investment in logistics infrastructure is crucial to solidifying them as viable long-term logistical alternatives.”

According to Martínez Cortés, Latin America faces a structural challenge: evolving from a commodity-focused economy to one that promotes added value, as already in Asia. In this context, Mexico and Brazil could capitalize on these advantages and further establish themselves as key nodes in global logistics routes, mitigating the effects of a crisis that may endure for a long time.

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