Mexico flag Mexico: Investing in Mexico

Foreign direct investment (FDI) in Mexico

FDI in Figures

Mexico is one of the emerging countries most open to foreign direct investment, the world's ninth largest FDI recipient. In 2020, the inflows to Mexico was relatively resilient compared to the rest of the region, as the country was already suffering a recession in 2019. According to UNCTAD's 2021 World Investment Report, FDI inflows fell to USD 29 billion in 2020 from USD 34 billion in the previous year (-15%). Nevertheless, 60 per cent of inflows were generated during the first quarter of the year, when reinvested earnings are usually recorded. The total stock of FDI is estimated at USD 597 billion in 2020. Overall, FDI inflows were affected by rising uncertainty over the government's economic agenda, its focus on fiscal austerity, the slump in fixed investment and the contraction of GDP (-8.2%). These factors were compounded by persistent concerns about the current administration's critical stance on public-private partnerships (PPPs) and the role of the private sector in key industries, together with the financial situation of the state-owned oil company Pemex and the massive assistance it receives from the government (valued at USD 3.5 billion). Besides, shifts in the five-year plan and in the policy of CFE, the state electricity supplier, discouraged private investment in public utilities and contributed to a 67% drop in FDI in electricity generation, transmission and distribution.
Investments mostly come from the United States, Spain, Canada and Germany. The sectors receiving significant foreign investment are manufacturing (especially the automobile industry), financial and insurance services, retail and wholesale trade, and communication. Foreign investments are mostly concentrated in towns neighbouring the U.S border (where many assembly factories are located), as well as in the capital. Thanks to its robust tourism industry, the Yucatan Peninsula also receives substantial foreign investment. FDI flows to the country fluctuate strongly depending on the arrival and departure of large international groups.

As a member of USMCA, OECD, G20, and the Pacific Alliance, Mexico is very well integrated into the world economic order, making it an attractive country for FDI. Additionally, Mexico enjoys a strategic location, a big domestic market, a wide variety of natural resources, a relatively well-qualified workforce and diversified economy. However, in recent years, Mexico's competitiveness has suffered from the rise of organised crime and lack of reforms in the energy sector and in tax regulations. Corruption and administrative inefficiency have also been major issues and the business climate continues to suffer from safety risks in the country. Mexico is ranked 60th out of 190 in the World Bank's last Doing Business ranking, which was published in 2020, losing six spots compared to the previous year. Among the biggest investments that occurred in recent years is the purchase of Mexican bank ABC Capital by Argentine fintech Ualá, in 2021. However, the value of the transaction was not disclosed.

 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 34,41127,93431,621
FDI Stock (million USD) 567,782545,612578,792
Number of Greenfield Investments* 641304376
Value of Greenfield Investments (million USD) 27,85913,95119,883

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 
Country Comparison For the Protection of Investors Mexico Latin America & Caribbean United States Germany
Index of Transaction Transparency* 8.0 4.1 7.0 5.0
Index of Manager’s Responsibility** 5.0 5.2 9.0 5.0
Index of Shareholders’ Power*** 5.0 6.7 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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What to consider if you invest in Mexico

Strong Points

Mexico attracts the most FDI in Central and South America:

  • In addition to being very open to foreign direct investment, the country is very well integrated into the world economic order: it is a member of NAFTA, OECD, G20 and the Pacific Alliance. 
  • It enjoys a strategic geographic location and acts as a transit platform to North America and Latin America. 
  • The country has a wide variety of natural resources, which allows the development of all types of industries at very competitive prices. 
  • The cost of labour (a young and abundant labour force) is not very high and is relatively well qualified. 
  • The country is the seventh biggest  tourist destination in the world and has in parallel a large and important industrial base.
Weak Points

There are still many obstacles to investment in Mexico:

  • The country relies heavily on its partnership with the United States and is therefore vulnerable to any changes to the free trade agreement
  • The level of corruption is high and the crime rate is rising
  • The country faces important structural problems (economic and social)
  • Some sectors are reserved for the Mexican state or Mexican citizens
  • Very strong competition in certain sectors
  • An economy vulnerable to fluctuations in the oil prices
  • Infrastructure (transport and oil sector in particular) and a system of education that are generally deficient and ineffective
  • Drug gang violence is a major danger, both socially and economically in many areas, especially in border areas with the US.
Government Measures to Motivate or Restrict FDI

The Mexican government has created an open and secure environment for foreign investors. The ‘Invest in Mexico’ Business Center was established in 2022 to facilitate investments. Land grants or discounts, tax deductions, and technology, innovation, and workforce development funding are commonly used incentives.
Other incentives to encourage foreign investment include:

  • Special Economic Zones (SEZs) were created to attract investment to the economically underdeveloped areas in the southern states of the country. Companies setting up in these SEZs will receive various incentives, trade facilities, duty-free customs benefits, infrastructure development prerogatives and easier regulatory processes.
  • Free trade zones (FTZ), where goods directed to foreign markets can leave Mexico duty free.
  • Refund of import duty paid on definitive imports. This incentive establishes a benefit for importers, who can obtain a refund of the import duty paid on the definitive import of raw materials or finished goods when exported within 12 months of being imported.
  • The IMMEX program, formally known as the IMMEX maquiladora program, allows foreign manufacturers to import raw materials and components into Mexico, tax and duty free, under the condition that 100% of all finished goods will be exported out of Mexico within a government mandated timeframe
  • New certified companies programme (NEEC). NEEC certification allows companies to move goods in and out of Mexico quickly and with less paperwork.
  • Real estate investment funds (REITs)
Bilateral investment conventions signed by Mexico
Mexico has signed onto bilateral investment treaties with over 35 countries. The UNCTAD website allows you to visualise the list of conventions signed by Mexico.

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Latest Update: September 2022

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