Trade Uncertainty Drives Sharp Decline in Mexico’s Industrial FDI

decline in foreign direct investment (FDI) in Mexico’s industrial sector. According to data from the Ministry of Economy, FDI dropped from US$14.81 billion in 2024 to US$12.22 billion in the 1Q25.

All five pillars of the country’s industrial sector, manufacturing, mining, electricity, water, and construction, recorded contractions. Construction suffered the steepest drop, plunging 207%, despite the upcoming FIFA World Cup 2026. Electricity and water followed with a 47.8% decline, while manufacturing and mining fell by 28.9% and 9.4%, respectively.

These figures suggest more than a temporary downturn, they highlight a growing sense of investor unease. According to the Bank of Mexico, tariff threats from Washington prompted many companies to pause nearshoring initiatives. Concerns about a volatile investment environment led to more cautious decision making, putting several industrial projects on hold. The construction of facilities for export-oriented manufacturing lost momentum, even as global demand for expanded operational capacity remained strong. While some states attempted to sustain investment through residential, commercial, and industrial development, these efforts were not enough to counter the broader structural decline.

A further constraint on investment was the limited availability of energy. In regions where demand for industrial space was already high, insufficient electricity supply prevented new investment and hindered the expansion plans of companies already operating in Mexico.

Initial reports from the Ministry of Economy had generated optimism, with preliminary data suggesting a 5.4% increase in FDI in the 1Q25. However, after a subsequent revision, capital inflows showed a 21% year-over-year decline, highlighting the real impact of trade tensions and policy uncertainty.

While industrial FDI bore the brunt of the decline, some service-related sectors recorded unexpected growth. Investment in corporate services surged 73.5 times compared to the previous year, while business support services expanded 5.5 times. Other sectors showed moderate resilience: media and information services increased by 40.7%, and wholesale trade rose by 18.1%. These gains provided some relief, though they were insufficient to offset the broader contraction in foreign investment.