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Foreign direct investment in Mexico could exceed 36 billion dollars in 2024

by | Mar 30, 2024

Foreign direct investment in Mexico could exceed $36 billion this year, surpassing the “historic” figure of the previous year, Mexico’s Treasury Secretary Rogelio Ramírez de la O recently said.

“Preliminary data on investment announcements indicate that this figure may be exceeded this year. In the future, these new investments will lead to the consolidation and emergence of new industries in the country. We have witnessed an increase in Mexico’s share of US imports, thus becoming the main trading partner. As Mexico positions itself in the global environment, we recognize the existence of areas of opportunity that the government is actively addressing,” said the Treasure Secretary.

He also added that in the last year, the boost to public investment attracted greater private investment since, in 2023 alone, private investment grew around 20% annually, the highest growth rate since 1996.

In 2023, a record flow of foreign direct investment in Mexico was recorded for 36.058 billion dollars; However, new investments had their second-worst performance since 2006, when the Ministry of Economy began to publish records of this data.

A large portion of recent foreign direct investment in Mexico is reinvestment

According to agency data directed by Raquel Buenrostro, at the end of 2023, 4.817 billion dollars was reported for new foreign direct investment in Mexico, representing 13% of the total FDI captured in 2023.

The arrival of FDI to Mexico means there are positive expectations and confidence in the country on the part of national and foreign investors despite the current electoral situation.

In 2024, Mexico and the United States will hold presidential elections, often generating uncertainty for companies and investors.

For this year, it is estimated that around 38 billion dollars of foreign investment will arrive in the country. “If it were not an election year, the figure of foreign direct investment in Mexico could rise to 41,000 million,” says Gabriela Siller, director of financial economic analysis at Banco Base.

 

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Where foreign direct investment in Mexico is landing

Mexico’s vibrant economy and strategic location in North America make it a prime foreign direct investment (FDI) target. But where exactly is this foreign money flowing? Let’s dive into the sectors that consistently capture the most FDI in Mexico.

The Manufacturing Powerhouse

The undisputed champion is the manufacturing sector, boasting a staggering 47.6% share of Mexico’s total foreign direct investment. The country’s free trade agreements, like the USMCA, grant manufacturers easy access to massive markets like the United States and Canada. This, coupled with a skilled workforce and competitive labor costs, makes Mexico a dream location for companies looking to establish or expand production facilities. Mexico’s manufacturing sector is a magnet for foreign direct investment, but within this broad category, there are specific industries that stand out:

Automotive: This is the undisputed champion, with major international car manufacturers setting up shop to produce vehicles, parts, and accessories. Mexico’s free trade agreements and competitive labor costs make it an ideal location for auto production.

Aerospace:  The Mexican aerospace industry is experiencing significant growth, attracting FDI in aircraft parts manufacturing and maintenance facilities. The skilled workforce and proximity to the US market contribute to this sector’s attractiveness.

Electronics:  Foreign companies invest in manufacturing electronic components, devices, and appliances in Mexico. This industry benefits from a skilled workforce and established supply chains.

Medical Devices:  The growing healthcare sector in Mexico and globally fuels FDI in medical device manufacturing. The cost advantages and proximity to the US market attract companies.

Machinery and Equipment:  Foreign investment flows into producing machinery and equipment used in various industries,  taking advantage of Mexico’s manufacturing infrastructure and skilled labor pool.

These are just some of the leading manufacturing sub-sectors attracting foreign direct investment in Mexico. The specific mix of industries can vary depending on factors like global economic trends and technological advancements.

Financial Services on the Rise

The financial services sector is coming in second, attracting a solid 14.6% of foreign direct investment in Mexico. The country’s growing middle class and expanding economy present a lucrative opportunity for foreign banks, insurance companies, and investment firms to grow their businesses internationally. The government’s recent efforts to modernize the financial sector by easing regulations have further spurred foreign investment. The Mexican government has implemented several measures to make the financial services sector more attractive to foreign investors:

Streamlined Licensing:  The process for obtaining licenses to operate in the financial sector has been streamlined, reducing bureaucracy and expediting entry for foreign firms.

Relaxed Ownership Restrictions:  In some areas, the government has loosened restrictions on foreign ownership of financial institutions. This allows foreign companies to have a more significant stake in Mexican banks, insurance companies, and investment firms.

Focus on Fintech:  The government recognizes the potential of financial technology (fintech) and has implemented regulations that encourage innovation in this space. This creates an environment where foreign fintech companies can thrive.

Promoting Competition:  Measures have been taken to increase competition within the financial sector. This benefits foreign investors by creating a more level playing field and offering a more comprehensive range of opportunities.

Harmonization with International Standards:  Mexico is working towards aligning its financial regulations with international standards. This fosters greater transparency and predictability for foreign investors.

Trade: A Gateway to the Americas

Mexico’s strong trade infrastructure positions it as a crucial gateway to the Americas. This is reflected in the trade sector’s 7.5% share of FDI. Foreign companies are drawn to Mexico’s network of free trade zones and its strategic location bordering the United States. This allows them to efficiently import raw materials, manufacture goods, and export them to major markets with minimal trade barriers.

Mining Unearths Investment Potential for Foreign Direct Investment in Mexico

Mexico’s rich endowment of natural resources makes the mining sector a magnet for FDI, capturing 5.9% of the total. Foreign companies invest in extracting minerals like silver, copper, and gold, contributing significantly to Mexico’s export revenue.

While Mexican mining giants like Grupo Mexico and Industrias Peñoles are prominent players, a significant portion of investment in Mexico in the mining sector comes from foreign companies. Here’s a breakdown of the major foreign players:

Dominant Source: Canada

Canada is the undisputed leader in foreign investment for Mexico’s mining sector. Statistics show that around 75% of total foreign investment and 79% of exploration projects are from Canadian companies.

Some prominent examples include companies like First Majestic Silver Corp., Fortuna Silver Mines Inc., and Torex Gold Resources Inc., all heavily invested in exploring and extracting precious metals like silver and gold.

Other Major Players

United States: While less dominant than Canada, the United States holds a solid presence with companies like Freeport-McMoRan Inc., a leading producer of copper and gold, actively participating in Mexican mining projects.

Global Players: Several multinational corporations worldwide invest in Mexican mining. Some examples include Switzerland’s Glencore, a diversified mining and commodities trading company, and Mitsubishi Corporation from Japan, which has interests in various mining projects across Mexico.

Beyond the Leaders: Other Attractive Sectors for Foreign Direct Investment in Mexico

While these four sectors reign supreme, others are attracting growing interest. The tourism industry is a prime target with its beautiful beaches and rich cultural heritage. The government’s push to modernize infrastructure, including transportation networks, is also attracting foreign direct investment in Mexico’s construction and engineering sectors. Telecommunications, aerospace, and even renewable energy are areas with significant potential for future foreign investment.

Investing in Mexico’s Future

Mexico’s FDI landscape constantly evolves, with the government actively seeking to attract investments in sectors like advanced manufacturing, clean technology, and healthcare. By fostering a business-friendly environment and addressing concerns around policy stability, Mexico can solidify its position as a top destination for foreign direct investment.

Are you looking to invest in Mexico? LATAM FDI can conduct thorough research on your chosen sector to help you understand the regulatory landscape and seek guidance from local experts. With its strategic location, skilled workforce, and growing economy, Mexico presents a compelling opportunity for investors seeking a foothold in a dynamic and promising market.

In conclusion, Mexico is a beacon of opportunity for foreign direct investment across various sectors, driven by its vibrant economy, strategic location, and government initiatives to foster a conducive business environment. From the manufacturing powerhouse to the burgeoning financial services sector and trade to mining, Mexico offers diverse investment avenues with promising returns. As the country modernizes its infrastructure, embraces technological advancements, and prioritizes sectors like advanced manufacturing and clean technology, it further solidifies its position as a top destination for investors seeking long-term growth prospects. With expert guidance and a thorough understanding of the regulatory landscape, investors can confidently explore Mexico’s opportunities, contributing to its continued economic growth and development.

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