EU Invested US$11.4 Billion in Mexican Electricity Sector
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EU Invested US$11.4 Billion in Mexican Electricity Sector

Photo by:   Nikola Johnny Mirkovic - Unsplash
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Eliza Galeana By Eliza Galeana | Junior Journalist & Industry Analyst - Thu, 11/17/2022 - 14:32

A study by the Mexican Institute for Competitiveness (IMCO) together with the Friedrich Naumann Foundation (FNF) revealed that from 2012 to 2021, the European Union (EU) spent US$73.74 billion in Foreign Direct Investment (FDI) on ten strategic sectors in Mexico. The investment in the electricity sector reached US$11.44 billion, an amount that represents 11.5 percent of total electricity investments in the country.

According to IMCO, more than half of the investment was concentrated in four sectors between 2012 and 2021: transport equipment manufacturing, the beverage and tobacco industry, credit and financial institutions as well as electricity generation and distribution. The remaining sectors include telecommunications, civil engineering and construction, the plastic and rubber industry, the chemical industry, the basic metal industries and temporary housing services.

The EU is the second largest investor in Mexico after the US. Between 2000 and 2021, the union’s direct investment in Mexico grew at an average annual rate of 33.3 percent, while domestic FDI growth averaged 8.3 percent.

IMCO noted that Spain is the largest European investor in Mexico, and nearly 90 percent of the former’s FDI focuses on five sectors, including electricity and telecommunications. The main destination for Spanish investments has been Mexico City, and Nuevo Leon, Tamaulipas and Jalisco in smaller amounts.

The study highlighted that the Bajio region stands out as a recipient of FDI from the EU. Between 2012 and 2021, 26 percent of European FDI was directed to the area, the main beneficiaries being Jalisco with 6 percent, San Luis Potosi with 5.9 percent and Guanajuato with 5.8 percent. Meanwhile, Queretaro received 3 percent, Michoacan 2.6 percent, Zacatecas 1.9 percent, and Aguascalientes 0.9 percent.

The five countries that invested the most in the Bajio region are Spain with 7.3 percent, Germany with 9 percent, Italy with 2.4 percent, France with 2.8 percent and the Netherlands with 0.5 percent.

IMCO and FNF stressed that despite the opportunities for development that these investments bring, a trade deal remains elusive. The EU-Mexico free trade agreement (FTA) was examined for the last time in 2020 when the negotiation process concluded, and target dates were set. "The procedures necessary for the EU-Mexico FTA to come into force have not been completed yet. These include the legal revision of the agreement by both parties, as well as its translation into all EU languages, and the proposal from the European Commission to the Council and the European Parliament for signature and ratification," the document reads. 

In Mexico, trade relations with the EU represent 7 percent of the country’s total foreign trade flow. In this exchange, 4 percent of Mexico’s exports go to the European region, while 10 percent of imports come from it.

Photo by:   Nikola Johnny Mirkovic - Unsplash

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