FDI from Mexico to the US sets a record in 2021

Mexican companies have sent flows of Foreign Direct Investment (FDI) to the United States for a cumulative total of 48,130 million dollars, according to data from the Department of Commerce.

Since a new methodology for this indicator was implemented in 2006, the largest annual increase in these flows occurred in 2021, when Mexican companies added 6,031 million dollars to the accumulated figure.

Among the Mexican companies that have invested in the US market are: Bimbo, Gruma, FEMSA, Kuo, Lala, Grupo Salinas, Kaltex, La Costeña, IUSA, Katcon, Alpek, Sigma Alimentos, Nemak, Cemex, Industria CH, Banorte, Bachoco , Grupo Bal, Cinepolis, Grupo México, Mexichem and Metalsa.

The stock of Mexican FDI in the United States has increased significantly in the last 20 years, from 4.1 billion dollars in 1997 (the first data available) to 48.13 billion dollars in 2021 (per ultimate owner).

The ultimate beneficial owner (UBO) is the person or entity, proceeding in the chain of ownership of a US affiliate, beginning with the foreign parent, that is not more than 50 percent owned by another entity .

The UBO is the owner or the one that controls, and therefore obtains the benefits and bears the risks of ownership or control of a subsidiary. The country of the UBO is usually the same as that of the foreign parent, but can be another country or the United States.

For years prior to 2006, revenue is presented net, that is, after deduction of US and foreign withholding taxes. Beginning in 2006, they are filed gross, before US and foreign withholding taxes are deducted.

economic relationship

FDI has been an integral part of the economic relationship between the United States and Mexico since the implementation of the North American Free Trade Agreement (NAFTA) in 1994.

However, the Treaty between Mexico, the United States and Canada (T-MEC) maintains the NAFTA State-State mechanism for the resolution of most disputes, as well as the binational dispute settlement mechanism to review disputes over resources. commercial.

Maintains Investor-State Dispute Settlement (ISDS) only between the United States and Mexico, without Canada, regarding government contracts in the oil, natural gas, power generation, infrastructure, and telecommunications sectors , which was very important to US investors in Mexico.

It also maintains ISDS between the United States and Mexico in other sectors, provided that the plaintiff first exhausts domestic remedies.

Lead manufacturing industry

Of the total accumulated Mexican FDI in the United States, 25,284 million dollars correspond to the manufacturing industry, followed by wholesale trade (3,542 million), real estate, rentals and leases (1,390 million), information industries (895 million) , financial sector (869 million), retail trade (181 million) and professional, scientific and technical services (77 million).

The remaining $15.9 billion was funneled into other activities, some of which are omitted to prevent disclosure of individual company data.

On the contrary, the liberalization of restrictions on foreign investment in Mexico in the late 1980s and early 1990s, together with the investment provisions of NAFTA, played an important role in attracting FDI to Mexico.

Bilateral investments have boosted trade between the two countries. Mexico ranks second, after Canada, among markets for US merchandise exports.

The value of US merchandise exports to Mexico increased from $41.6 billion in 1993 to $276.5 billion in 2021.

Mexico ranks second, after China, among suppliers of US imports. US merchandise imports from Mexico increased from $39.9 billion in 1993 to $384.7 billion in 2021.

roberto.morales@eleconomista.mx