Image credits: Ryan Parker
News Article

Mexican Logistics Investment Gains Speed During 2021

By Jorge Ramos Zwanziger | Mon, 07/05/2021 - 19:47

In 1Q2021, Mexico broke records for the highest amount of Foreign Direct Investment (FDI) during a first-quarter since 1999, according to the Ministry of Economy. That period, the country received a total investment of US$11.86 billion, 14.8 percent more than in 1Q2020. Mexico continues to be an attractive investment destination as the country positioned itself as the 9th largest investment recipient in the world and the top in  Latin America, according to the World Investment Report 2021 made by the UN Conference on Trade and Development (UNCTAD).

While expectations remain positive, there are challenges ahead, including the slowdown in investment from Chinese companies, highlights the Mexican Association of Private Industrial Parks’ (AMPIP) Survey on perception and trends of FDI in Mexico in 2021. During 2020, China represented 37 percent of Mexico’s new project initiatives in industrial parks, which is more than double those of the US, reveals AMPIP’s survey as previously reported by MBN. At the time, the Coldwell Banker Richard Ellis Group (CBRE) forecasted that, during the next three years, one in three investments in the Mexican industrial real estate market would come from China. However, in 2021 investment initiatives from China decreased by 16 percentage points for a total of 21 percent, explains AMPIP, as China’s investments turned out to be exploratory, not concrete initiatives that would translate into projects.

Is Everything Lost?

On the other hand, investments in the logistics and distribution segments have increased, particularly in the Bajio region and Queretaro thanks to their strategic location between Mexico City and the US border, according to AMPIP. This connectivity has become increasingly important after the entry into force of the USMCA, as companies can now take advantage of relocation trends such as nearshoring, reshoring and allyshoring.

“Recently, the pandemic highlighted concerns that production was centralized in Asian countries […] so it seems that more and more companies are considering to relocate their missing links in the chain in a country close to their base of operations or consumer market,” according to AMPIP. AMPIP’s surveyed companies agreed that Mexico was becoming more relevant after the conflict between the US and China. Moreover, Mexico’s privileged location allowed for investment from US companies in the real estate sector to increase by 9 percent in 2021 when compared to the previous year, explained AMPIP, showing that the trends in reshoring and allyshoring are becoming important for the country’s northern neighbor.

To continue on this path, Mexico must create policies and strategies that promote FDI in the manufacturing sector in different states, particularly ones that have an increasing demand for logistics and distribution, says AMPIP.

The data used in this article was sourced from:  
MBN, AMPIP, CBRE, UNCTAD, Ministry of Economy
Photo by:   Ryan Parker, Unsplash
Jorge Ramos Zwanziger Jorge Ramos Zwanziger Junior Journalist and Industry Analyst