FDI to Mexico falls 9.9% from January to September 2020

Foreign Direct Investment (FDI) captured by Mexico totaled 23,482 million dollars from January to September 2020, a fall of 9.9% compared to the preliminary figure for the same period of the previous year, reported the Ministry of Economy.

Mexico put into effect the Agreement between Mexico, the United States and Canada (T-MEC) on July 1, 2020, providing a boost to the confidence of investors who expect continuous and deep regional economic integration.

The accumulated FDI in the first three quarters of 2020 was financed mainly through reinvestment of profits with 53.7%, followed by accounts between companies, with 24.9% and by new investments, with 21.4%.

Mexico is open to Foreign Direct Investment in the vast majority of economic sectors and has always been one of the largest recipients of FDI in emerging markets.

Mexico’s proximity to the United States and preferential access to the United States market, macroeconomic stability, a large domestic market, a growing consumer base, and an increasingly skilled but cheap labor force combine to attract foreign investors.

Still, recent regulatory changes have raised questions about the investment climate, particularly in the energy sector.

FDI

By economic sector, manufacturing ranks first, contributing 40.1% of FDI arrivals in the first nine months of the current year, while financial and insurance services accounted for 18.4%, transportation 11.8%, trade 7.2%, mining 5.5 % and generation, transmission and distribution of electric power 4%; the remaining 13% corresponds to other sectors.

Finally, by country of origin, Foreign Direct Investment flows came mainly from North America, at 57% (United States, 39.2% and Canada, 17.8%), followed by Spain, 13.7%; The Netherlands, 3.6%; United Kingdom, 3.3%; and from other countries that contributed the remaining 22.4%.

Historically, the United States has been one of the largest sources of FDI in Mexico.

According to the Mexican Ministry of the Economy, FDI flows to Mexico from the United States totaled 12.7 billion dollars in 2019, almost 39.7% of total flows to Mexico.

The automotive, aerospace, telecommunications, financial services and electronics sectors tend to receive large amounts of FDI.

Part of the investments this year came from IEnova, Volkswagen, Ford, Amazon, FedEx, DHL, Nestlé, Walmart, Shell and Ternium, among others.