Japanese Businesses Continue to Eye Mexico Investments

Recently, some Japanese companies belonging to the automotive sector announced business expansions in Guanajuato, where the total amount of Japanese investment in the state is above US$790 million. According to data from the Guanajuato government, during the administration of Gov. Diego Sinhue Rodríguez Vallejo, 11 Japanese companies have invested more than US$313 million, generating 4,650 new jobs. 

Despite an uncertain political situation, with the presidential elections approaching,, and amid an increase in the insecurity problems in most of the country, Mexico is still Japan’s leading trading partner in Latin America. The main business for Japan in Mexico is  the automotive sector.

Gov. Rodríguez Vallejo visited Japan at the beginning of June with the objective to promote Guanajuato as a good destination for Japanese investments but also to confirm investment projects by Japanese companies. The seminar, Investment in Guanajuato, was held on June 7 at the  Japan External Trade Organization (JETRO) Tokyo. Organized by the government of Guanajuato, the Amistad Group and JETRO, the seminar was attended by more than 130 Japanese businessmen. During the seminar, Takao Nakahata, Director General of JETRO Mexico, forecasted that total automotive production in Mexico would reach 3,600,000 units in 2023. 

Nine Japanese investment projects in Guanajuato have been confirmed since Gov. Rodríguez Vallejo’s trip to Japan: Toyota will invest US$328 million, generating 2,577 new jobs; Honda will invest US$313 million; Mazda has invested US$60 million during the last year; Okita Iron Works will invest US$40 million, adding 200 new jobs; Suminoe Textile will invest US$19.5 million, generating 150 new jobs; Denso will invest US$13 million, generating 450 new jobs; the expansion of Mitsui High Tech with US$7.22 million will generate 180 new jobs; the expansion of Furukawa Electric Group through Furukawa Automotive Systems Mexico with US$5 million will generate 700 new jobs; and finally, Yazaki will inject US$5 million, generating 875 new jobs. 

According to data from the Ministry of Economy of Mexico, from 1999 to 2022, Japan invested more than US$31,149 billion in Mexico. In 2022, Japanese investment represented 5.2% of total Foreign Direct Investment (FDI) in Mexico, with US$1.838 billion, most of which focused on car and truck manufacturing. 

Nowadays, there are about 1,300 Japanese companies in Mexico, according to the Consulate General of Japan in Leon, 300 of which are established in Guanajuato. Most of these are in the automotive sector. Guanajuato ranks seventh in Mexico in  attracting  FDI. In 2022, Japan invested US$174.2 million in the state. 

Why is Japanese investment not only still in Mexico but also increasing? First of all, the country’s proximity to the US is very valuable. At the same time, the current incentives from the US government to develop the semiconductor industry are very attractive for suppliers located in Mexico. As well, the Mexican labor force is abundant and qualified, and the size of land and price is still attractive to foreign businessmen. Recently, government officials from Sinaloa, Aguascalientes, Nuevo Leon, Guanajuato and Sonora visited Japan to promote their facilities for attracting investment in each state. These actions show the real interest in Japan, promoting trust and friendship. 

It is important to note that Japanese investment in Mexico had been decreasing in the past five years; however, Japanese businessmen are realizing that electromobility is rapidly advancing worldwide, and their business in many countries, such as Mexico, should be ready to make the change. Electromobility industry suppliers must be developed very soon.

Certainty and trust are extremely important for Japanese businesses. Mexico must continue promoting both elements through dialogue between the state and federal governments and the private sector, not only in Mexico, but at international talks and events. On June 27 of this year, the Ministry of Economy of Mexico, the Ministry of Foreign Affairs of Japan, and the public and private sectors of each country, including JETRO on the Japanese side, celebrated the XIII Meeting of the Committee for the Improvement of the Business Environment (CIBE) in Mexico City. This mechanism is part of the Mexico-Japan Agreement for the Strengthening of the Economic Partnership, entered into force in 2005. CIBE helps to maintain dialogue between the main authorities of both countries with the objective of discussing problems that are affecting the business environment in Mexico and Japan. Some frequently discussed topics are problems related to insecurity, customs, sanitary and phytosanitary measures, and labor, among others. Mexico and Japan have had a cooperative and friendly relationship for decades, and both countries have been international allies in agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and at international forums, such as Asian-Pacific Economic Cooperation (APEC). At JETRO, we continue working on the promotion of mutual trade and investment for a better common future.