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Mexico increases its FDI by 8.7%

Mexico increased its arrival flows of Foreign Direct Investment (FDI) by 8.7% in 2021, to 31,621.2 million dollars, reported the Ministry of Economy.

The Mexican Foreign Investment Law establishes a legal framework designed to encourage foreign investment in Mexico and to impose certain limited restrictions on foreign investment in Mexico.

For example, the Foreign Investment Law allows foreign investors to own 100% of the capital stock of a Mexican company if certain conditions are met.

The Foreign Investment Law also details which economic activities are reserved exclusively for the Government or for Mexican investors.

In addition, it outlines certain activities in which the foreign investment cannot exceed 10, 25, 30 or 49% of the total investment without the approval of the Foreign Investment Commission.

In 2021, by type of investment (origin of financing), the corresponding FDI reinvestment of profits was 38.6%; to new investments, 43.7%; and to intercompany accounts, 17.7 percent.

By sector, manufacturing covered 39.7%; followed by mining, 15.2%; financial and insurance services, 15.0%; transportation, 8.8%; trade, 8.5% and temporary accommodation services, 5.2%. The remaining sectors captured 7.6%.

Finally, by country of origin, the United States had a coverage of 47.5%; Spain, 13.7%; Canada 6.5%; UK, 5.7%; Germany, 5.2%; and Japan 5.0%, other countries contributed the remaining 16.4%.

Foreign direct investment

The Foreign Investment Law allows foreign investors to purchase securities, known as ordinary certificates of participation, based on variable income securities issued by Mexican companies and traded on the Mexican Stock Exchange that would otherwise be restricted to Mexican investors, provided that certain conditions are met.

With the authorization of the Ministry of Economy, Mexican banks may set up investment trusts, with the banks acting as trustees to purchase these restricted capital securities on behalf of foreign investors.

These trusts, in turn, issue ordinary certificates of participation, which only grant economic rights to their holders, which can be acquired by foreign investors. Each and every one of the voting rights are exercisable only by the trustee.

In May 2019, ProMéxico, a public trust that was previously supervised by the Ministry of Economy, was dissolved and the trust transferred its responsibilities to the Ministry of Economy and the Ministry of Foreign Affairs.

 

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