OTTAWA - Canada's low labor productivity level puts the country at risk of losing of billions of dollars of investments to Mexico, as the so-called nearshoring boom spurs companies to move supply chains to North America, economists and lobby groups say.
Economists say continued low labor productivity dampens profits as well as makes Canadian output expensive and uncompetitive globally. Mexico's President Andrés Manuel López Obrador has doubled down on investments in public projects, which has helped pushed the country's gross fixed capital formation - a metric to gauge investments in factories and machineries - up 25% in the fourth quarter last year from the first quarter of 2022, according to World Bank data.
Mexico is also attracting investments from an array of automotive supply chain players as part of the transition to electric vehicles, including Tesla. The government has also promised C$2.4 billion to support artificial intelligence-related activities over five years in this month's budget, to improve productivity.