On August 22, the figures of Foreign Direct Investment (FDI) that Mexico registered in the first six months of 2022 were released. The figure is, frankly, spectacular: during that period, Mexico attracted capital for a total of 27 thousand 511 million dollars. According to preliminary figures, this figure is made up of approximately 11,837 million dollars in new investments, 11,655 in reinvestments made by the companies already established in the country, and 4,019 million in intra-company transfers.
The figure is so positive that it can even raise suspicions. How is it possible that Mexico can attract this amount of investment, when all the time the news points out the clouds that exist over the world economy? Furthermore, we ask ourselves, what can Mexico offer to these international capitals when there is so much uncertainty internally in the country?
To answer these questions, and at the same time to be able to imagine actions that the country must take in the short term, we must consider the two parts of the story. First, a good part of these investments have come to the country due to totally external factors, beyond our control, such as the geopolitical factors derived from the invasion of Ukraine by Russia, or the escalation of tension between China and the US. from the trip that Representative Nancy Pelosi made to Taiwan.
Since companies do not want to face potential breaks in their supply chains or be unable to serve their customers in different markets, they are forced to consider the option of investing in other countries that are geographically close to the centers of consumption and are perceived as relatively safer.
In the second instance, many governments around the world are investing significant amounts of money to facilitate the phenomenon known as nearshoring, which is nothing more than promoting the return of production processes to their territories, in addition to ensuring that future investments in technology and high manufacturing are also carried out in said countries. This phenomenon automatically makes Mexico attractive: as an example, suffice it to remember that a few days ago, within the framework of the approval of an important financial package in the US Congress to combat inflation, it was determined that the producers of electric cars who carry out operations in our country will be able to have access to these supports.
Mexico is in an ideal position to take advantage of these new trends, but there is another angle to the same story. Our country is not the only actor that is trying to benefit from this phenomenon – nations like Vietnam, Malaysia, Colombia or Costa Rica have exactly the same objective, so even in these international conditions, there is competition between countries to generate the conditions necessary for investments to arrive in a sustained manner.
It is at this point where our country can do much more, and where there is a pending agenda. Conditions for doing business must be improved, greater transparency in procedures must be promoted, as well as allocate resources to promote Mexico’s intrinsic advantages abroad.
We must also guarantee that there will be unrestricted respect for our international commitments, particularly those that are incorporated in the free trade agreements negotiated by the country. We cannot risk sending signals that these obligations are voluntary or optional: let us remember that our country’s GDP is generated primarily by activities related to foreign trade.
If we develop a set of public policies that focus on international trade and investment, the country’s attractiveness will grow, further contributing to Mexico’s development. We still have time to deepen the work, since this “new normal” for business, which for companies implies a series of investments aimed at reducing and diversifying their risk, will still take a few years to settle.
With the right conditions and the right decisions, in a few years Mexico could be receiving twice as much foreign investment as we currently do.
*The author is an academic from the Universidad Panamericana; Prior to that, he had a twenty-year career in the federal government dealing with international trade negotiations.
Twitter: @JCBakerMX
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