Foreign Direct Investment in Mexico (FDI)

FOREIGN DIRECT INVESTMENT IN MEXICO (FDI)

INTRODUCTION

Mexico is the top trading nation in Latin America and the ninth-largest economy in the world. No country has signed more free trade agreements – 33 in all, including the two biggest markets in the world, the US and the EU. Altogether these signatory countries make up a preferential market of over more than billion consumers. Much of the FDI in Mexico is attracted by the country’s strategic location within the North American Free Trade Agreement, which has positioned it as a springboard to the US and Canada. Other attractions are competitive production costs and a young, skilled workforce, together with political stability and an open economy.

As a result, the number of foreign companies established in Mexico has risen to more than 16,000. The opportunities for investors are numerous, particularly in sectors such as automotive, electronics, information and communication technology, agribusiness, chemicals and pharmaceuticals, biotechnology, financial services, water and power generation. As part of the Mexican government’s campaign to attract FDI, the 44 overseas offices of the Mexican Bank for Foreign Trade (Bancomext) operate as trade commissions that offer advice and assistance to potential investors.

Mexico has long been one of the more attractive nations in which to make an investment, whether in manufacturing or infrastructure FDI. The large population, inexpensive labor pool, stable political environment and proximity to the US have given it significant advantages over other potential recipients of FDI.

Mexico is a showcase of how emerging markets can attract foreign capital flows into their economies. In 1999, Mexico remained the third main destination of FDI among emerging markets only after China and Brazil.

On a worldwide basis, Mexico ranks 15th among FDI recipients accounting for 1.3 percent of total investment flows. During the first three months of 2000, Mexico received US$3 billion in FDI and it is expected that the year will end at US$12 billion.

In addition to Mexico's economic reforms and liberalization processes, an important element in making Mexico a very attractive market for foreign investors has been the negotiation of bilateral investment treaties (BITs).

To this date, Mexico has established these kinds of agreements with 13 countries (Argentina, Austria, Benelux, Denmark, F...

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... Manufacture Industry participates with 79.0%

• Transportation and Communications with 3.0%

• Financial Services with 2.9%

• Construction with 0.4%

• Extractive Industry with 0.3%

• Farming with 0.1%

• Electricity and water with 0.1%

COUNTRIES FROM WHERE THE FOREIGN DIRECT INVESTMENT COMES FROM

Direct Foreign investments made in Mexico come mainly from the United States, Holland, Germany, Canada, Spain, the United Kingdom and Japan.

FDI has enabled Mexico to acquire new technologies, improve infra-structure, stimulate productivity, and increase competitiveness in world markets. Today, Mexico is a major producer and exporter of automobiles, TV sets and laptop computers.

More and more, foreign companies are participating in Mexico's development and have become a key element in Mexico's industrial transformation. Fresh capital has contributed the remaking of its industrial base, turning the country into what Business Week has called a new "industrial powerhouse."

CONCLUSION