FDI Survey: New Trends and ThreatsBy Rodrigo Brugada | Tue, 07/06/2021 - 18:42
Mexico could benefit from the relocation of global supply chains, indicate the results from a recent survey by the Association of Private Industrial Parks (AMPIP) on perception and trends of foreign direct investment (FDI), in which 30 real estate developers with operations in 22 states participated. The document discusses investment behavior and the strengths and weaknesses of the country.
The numerous disruptions global supply chains suffered due to the pandemic led to changes in the landscape of production, distribution and marketing. The pandemic highlighted concerns that production was centralized in Asia, and a growing number of companies are considering relocating their supply chains near their home base or consumer market. In this context, Mexico is one of the countries that can benefit the most from this trend, especially due to its proximity to the US and the implementation of the USMCA in 2020.
Mexico is the ninth most attractive country for FDI worldwide and the first in Latin America, achieving an accumulated US$29.1 billion in 2020, reports the survey. Although 2020 represented decreases in FDI for most countries, Mexico showed a stable behavior. That period, the country received a total of US$11.9 billion of FDI, 14.8 percent higher than in 1Q2020. Of this total, 59.2 percent originated from reinvestment of profits, 18.6 percent through new investments, and 22.2 percent from intercompany accounts.
The document identified more than 300 projects in 2020 and 112 investment projects in the first half of 2021. Of the latter, 30 percent will come from the US, 9 percent from Germany, 7 percent from China and 6 percent from Japan, to name a few. The main sectors by number of projects are automotive with 19 percent, infrastructure with 9 percent, services with 9 percent, and e-commerce with 8 percent. By main projects, the largest amounts of FDI were awarded to companies in the energy and tourism sectors, followed by e-commerce. In manufacturing, the most important project by amount was announced by General Motors to produce electric vehicles.
In terms of trends observed, the US leads the origin of projects and opportunities registered for potential investments, going from representing 16 percent in 2020 to 25 percent in 2021. China showed more of an exploratory behavior instead of concrete projects, reducing its investment initiatives from 37 percent in 2020 to 21 percent in 2021. Investment interest from South Korea and Germany was up slightly, but interest from Japan, Switzerland and Mexico went down. Canada and Taiwan are participating in investment projects this year, unlike in 2020 when they were not involved.
Some of the reasons highlighted for investing in Mexico were its high levels of productivity and specialization, strategic geographical position and role as a platform for exporting to other markets. On the other hand, among the main inhibitors to FDI in Mexico were insecurity, social risks, violence, poor legal and regulatory certainty related to the rule of law, lack of infrastructure development, road maintenance and poor services, among others.