Why Nearshoring is a Safer Regulatory Bet than Offshoring in 2025

Businesses that outsourced to India, Pakistan, and other distant offshore countries are now rethinking their strategies. Changing US trade policy climate has introduced risks: tariffs, regulatory barriers, visa restrictions, and growing calls for “America First” policies. Nearshoring to Latin America is gaining traction as a more stable, cost-effective alternative. Offshoring poses several potential risks, including:

• Tariffs and trade barriers: The current administration has shown readiness to impose tariffs or reciprocal tariffs on countries that have high import barriers or trade policies the administration views as unfair, and offshoring could be targeted under such policies, attracting increased scrutiny or higher costs.
• Visa/immigration & workforce barriers: Many US companies rely on H1-B visas for offshore staff to travel to the US for collaboration or oversight. At this writing, the H1-B visa program has been challenged by the institution of a $100,000 fee for skilled workers, which increases costs for this program dramatically. Other changes in visa policy or immigration restrictions may introduce additional delays, legal challenges, or cost increases.
• Regulatory & political uncertainty: Sudden announcements, changes in trade policy, or shifting priorities create risks for long-term contracts.
• Currency & labor cost inflation: India and other countries with broad offshoring programs have experienced rising labor costs in some sectors caused by attrition and competition for skilled labor, eroding the cost advantage of offshoring. Coupled with policy risks, the cost differences versus alternatives narrow.

While some of these policy issues impact both offshore and nearshore strategies, there are distinct advantages to nearshoring to Latin America in this climate:

•  Proximity and common time zones: Latin America shares time zones with the US, facilitating real-time collaboration, supervision, and faster turnaround. Travel is simplified, and H1-B visas become less necessary. This translates to better project management, fewer delays, and reduces the hidden costs of offshoring.
• Trade agreements & regulatory alignment: Many Latin American countries either have free-trade agreements or are part of trade frameworks that offer preferential treatment, reduced tariffs, or other incentives to US. companies. For example, countries operating under USMCA offer more predictable trade relations with the US. This can help avoid unexpected duties or disruptions.
• Cost savings, but with fewer hidden costs: While offshore often remains less expensive for pure labor cost, Latin America’s cost savings come along with fewer distance costs. Lower staff turnover in many Latin American countries can reduce training and hiring costs. The net cost ends up being competitive when all factors are included.

Any labor strategy comes with potential pitfalls. Whether you choose nearshore or offshore, here are some risks to consider:

• Regulatory & compliance complexity: Even with trade agreements, companies must ensure compliance with rules of origin, customs valuation, tax treaties, etc. Incorrect classifications can negate tariff advantages.
• Infrastructure gaps: Some countries have weaker infrastructure (electric grid reliability and internet connectivity) especially outside major cities. These can yield delays or unexpected costs.
• Political and economic stability: Currency fluctuations, political risk, judicial or regulatory uncertainty still exist in Latin America and vary significantly by country. These must be factored into risk analysis.

Given increasing trade policy risk under the current administration, nearshoring to Latin America offers many of the cost advantages of offshoring, with fewer hidden or emerging risks. For many companies, especially those that value speed, stability, cultural alignment, and logistical simplicity, Latin America is increasingly looking like the safer, more pragmatic choice.