FDI in Mexico Grows by 14.8 Percent in 1Q21

Preliminary data from Mexico’s Ministry of Economy shows that foreign direct investment (FDI) has grown 14.8 percent during 1Q2021 compared to the same period last year. This represents the highest FDI recorded amount in a first quarter in the country’s registered history, which began in 1999. Even though several leading economic sectors are facing challenges, the data underlines that Mexico remains an attractive hub for foreign investment.

Mexico attracted US$11.86 billion in total; a significant increase compared to 1Q20’s haul of US$10.33 billion. Reinvested profit from foreign companies operating in Mexico represents 59.2 percent. New investment makes up 18.6 percent and intercompany payables going from parents to subsidiaries amount to 22.2 percent.

Manufacturing remains a mainstay for FDI, attracting 46.6 percent in total. Finance and Insurance services attracted 14.6 percent. The mining, trade and energy industries received 13.9 percent, 11.5 percent and 3.4 percent respectively. The hospitality sector attracted 3.2 percent, and remaining sectors 6.8 percent. The bulk of this investment came from the US with 42.5 percent, followed by Spain’s 12.1 percent. Luxembourg, the UK and Canada also contributed significantly to the preliminary FDI results.

The Ministry bases its methodology to calculate the FDI using international standards set by the International Monetary Fund (IMF) and definitions used by the Organization for Economic Cooperation and Development (OECD). The Ministry of Economy and the Bank of Mexico reviewed the figures, of which the definite version will be published in the Balance of Payments Report.

Positive FDI figures once again highlight the potential Mexico possesses to attract foreign investment as a market. Nevertheless, experts and analysists from several of the country’s key economic sectors warn that the outlook is not as rosy as it might appear based on these numbers. For example, the rush of investment in the oil, gas and energy sectors initiated after the 2014 Energy Reform is increasingly appearing to come to a grinding halt because of López Obrador’s efforts to reverse the reform, which he sees as having unfairly affected the position of state-owned PEMEX and CFE.

Private companies are feeling the uncertainty. For instance, data from the Mexican Wind Energy Association (AMDEE) predicts that investments in the renewable energy sector will drop by 61 percent in 2021. The mining sector is facing similar challenges, said Andrés Pérez-Howlet, Managing Partner at Molina, Hanff & Pérez-Howlet in a recent MBN interview: “The industry has experienced quite a big drop in investment due mainly to administration changes and legal uncertainty. Speculative reforms do no favors for the industry and just add more uncertainty,” he said.