Foreign Direct Investment in Mexico

Foreign investment in the country is increasingly important, and with good reason, since Mexico is a country with many opportunities in business development.

Mexico is one of the most competitive countries for productive investments worldwide due to many factors, such as a strategic geographical position, competitive costs with a young and talented population, good size and strength of its internal market, macroeconomic and political stability, economic growth, ability to manufacture high technology products, and an open economy that ensures access to the most important markets worldwide through a network of free trade agreements.

In addition to theimportance of its domestic market, its strategic location represents a gateway to the United States and both Central and South America. According to Trademap.org, only in 2021, Mexico’s exports to the United States represented 80.9%. Due to the foregoing, Mexico is in the second place of import trading partners of the United States, only after China.

According to El Economista (2022), during the year 2021, Mexico remained in the tenth position among the economies that received the most FDI (Foreign Direct Investment) flows, with a total of $32,000 million dollars. It is estimated that in the first quarter of 2022, FDI will be $19,427 million dollars, 5.8% higher than the same period of the previous year.

FDI in the country

According to Forbes (2022), FDI in the country is divided as follows, according to the category:

-By type of investment:
— Reinvestment of profits, 47.7%
— New investments, 45.2%
— Accounts between companies, 7.1%

-By sector:
— Manufacturing, 24.2%
— Information in mass media, 19.4%
— Financial and insurance services, 17.2%
— Transportation, 15.3%
— Construction, 7.3%
— Mining, 5.8%
— Remaining sectors, 10.8%

-By country of origin:
— United States, 39.1%
— Spain, 10.8%
— Canada 7.1%
— France, 3.4%
— Argentina, 3.2%
— United Kingdom, 3.0%
— Other countries, 33.4%

Tatiana Clouthier, Secretary of Economy, mentions that “the amounts reported only consider investments made and formally notified before the National Registry of Foreign Investments of the Ministry of Economy; hence its preliminary nature and the fact that it will undergo updates in successive quarters”. These figures are a reflection of the economic performance of Mexico, which grew 1.6% annually in the first quarter of 2022, according to preliminary figures.

Free trade agreements

Mexico represents one of the most open economies in the world. Currently, Mexico represents a platform for trade with The United States, with Latam and the world.

THE USMCA is the new trade agreement between Mexico, the United States and Canada that replaces the Free Trade Agreement (NAFTA), which led to economic growth and contributed to raising the standard of living of the population of the three member countries, in addition to generating confidence in foreign investors.

This agreement is one of the main supports that allowed maintaining the behavior of Foreign Direct Investment (FDI) during the first half of 2020, very similar to the figures of 2019, even in the midst of a pandemic and uncertainty due to the lack of state of law in our country, representatives of foreign companies agreed.

Investment opportunities

As of 2021, Mexico is the second-largest economy in Latin America and the Caribbean, second only to Brazil. In 2020 Mexico was ranked the world’s 15th largest economy by GDP.

If we talk about investment opportunities in this country, in 2020, Mexico scored 72.4 out of 100 in the Doing Business score, with Mexico ranking first within Latin American countries for the ease of doing business. The country received the highest ranks for Getting Credit (11), Resolving Insolvency (33), and Enforcing Contracts (43.) Mexico also ranked high for starting a business (86.1/100), getting credit (90/100), and trading across borders (82.1/100).

Recently, Mexico is attracting the attention of Fintech companies, thanks to the positive regulations it has made in its law. Mexico’s Fintech ecosystem of more than 515 active companies is the most dynamic in Latin America and is clearly growing.

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