It is urgent for the Mexican economy to grow and one option to achieve this is the arrival of new investments . However, this indicator, which is part of Foreign Direct Investment (FDI), registered a strong deterioration between the third quarter of 2019 and the second quarter of 2020, going from 5,009 million dollars (million dollars) to only 780 million dollars, according to data from the Bank of Mexico (Banxico).
Since the second half of last year, new investments have begun to recover, but this rebound has been insufficient: between January and March 2021 they stood at $ 2.209 million, a figure much lower than that of 2019 and far from the last peak. of $ 15,434 million in the first quarter of 2013.
The economists consulted by Expansión agree that this setback can be largely explained by the uncertainty that has existed in the country throughout this period, as well as the economic and energy policy decisions of the federal government.
“The data on new investments for this first quarter is the lowest for a first quarter since 2013. Private investment has actually been slowing down since 2017, due to uncertainty,” says Iván Arias, director of economic studies at Citibanamex.
“The entry of COVID-19 at a global level that caused the breakdown of global value chains and is causing the reconfiguration of the manufacturing sector, will precisely lead to the modification of FDI in Mexico and the world,” he says. José Luis de la Cruz, director of the Institute for Industrial Development and Economic Growth (IDIC).
Both specialists highlighted the need for a national industrial policy that generates certainty and confidence so that new companies will once again see the country attractive and, thus, increase not only FDI, but also the arrival of new capital and companies from already consolidated sectors – manufacturing and services- as in new niches such as electrical and electronics.
“The problem is that the country has not managed to generate new productive differentials that make the arrival of new investments attractive. What predominates is the reinvestment of profits, companies established in Mexico for several years, reinvest those profits. They no longer take additional risks ”, points out the director of the IDIC.
From January to March of this year, of the 11,864 million dollars that came to Mexico in FDI , 59.2% (7,025 million dollars) were for reinvestment of profits, 22.2% (2,629 million dollars) from accounts between companies and 18.6% (2,209 million dollars ) of new investments, according to data from Banxico.
“For at least 15 years, Mexico has exhausted the strategy that had generated some growth in FDI : the privatization and sale of certain national companies to foreigners. Once that has been exhausted, the last large flows of FDI have been linked to the sale of banks, brewers or some other companies; or some very particular investments in the automotive sector. It cannot have a trend because it depends on some projects that make it stand out, but since they are very particular and temporary projects, the effect ends and does not allow a growing trend to be drawn, ”says José Luis de la Cruz.
Opportunities
The pandemic caused changes in production chains with a relocation to make them shorter, something that countries like Mexico seek to take advantage of to attract foreign direct investment (FDI).
“The entry of COVID-19 at a global level that caused the breakdown of global value chains and is causing the reconfiguration of the manufacturing sector, will precisely lead to the modification of FDI in Mexico and the world,” says the director of the IDIC.
In 2017, Mexico went from 16th to 12th place in the list of countries that receive the most foreign direct investment. However, in 2019 it descended to site 14, according to information from the Ministry of Economy.
“There were investment plans for the hydrocarbon sector in particular, which in the face of the government’s new energy strategy were held back such as the cancellation of rounds of oil fields, more recently there is the issue of modifications to the hydrocarbon law and the electricity ”, says the Citibanamex executive.
From January to December 2020, foreign direct investment by country that arrived in Mexico predominated that of the United States ($ 11.4 billion), Canada ($ 4.22 billion) and Spain ($ 4 billion). While only $ 173 million came from China, according to figures from DataMéxico.
