Mexico positions itself as the 11th most attractive destination worldwide for foreign investment.
Foreign Investment Flows in Mexico: Bucking the Global Downtrend
Mexico managed to maintain its allure for foreign investors in 2024, managing a slight uptick in foreign direct investment (FDI) despite a global decrease in FDI for the second consecutive year. As per the annual report compiled by the U.N. Conference on Trade and Development (UNCTAD), Mexico received approximately US $37 billion, marking a rise from US $36 billion in 2023, placing it as the 11th largest global FDI recipient.
The report found that the global FDI in 2024 decreased by 11%, amounting to less than US $1.5 trillion. The decline was primarily driven by losses in developed countries, notably China and portions of Europe. In contrast, FDI in 2023 surpassed US $1.67 trillion, according to UNCTAD.
UNCTAD issued a warning about the intensifying challenges that shrinking investment funds pose for developing countries, including Mexico. The report also highlighted the impact of uncertainty on global investment. Interestingly, the report revealed that while FDI in developing economies was virtually unchanged in 2024 compared to 2023, it confirmed a deepening slowdown in productive capital flows.
"This is not just a downturn - it is a pattern," UNCTAD Secretary-General Rebeca Grynspan commented on the report's findings.
Innicuously, the FDI flow to Latin America and the Caribbean declined by 12% in 2024. Despite this, UNCTAD suggested that sectoral and country-level gains indicated underlying resilience and long-term potential. Mexico was only second to Brazil in Latin America, with investment in manufacturing and logistics being the main driver, according to UNCTAD.
Mexico also emerged as the sixth-largest developing economy by project announcements in digital economy sectors over the last five years, having attracted US$29 billion. According to Mexico's Economy Ministry, the country has been successful in attracting FDI for the past decade, with a total of US $300 billion during the 2011-2021 period.
Certainly, Mexico's strategic geographical position, competitive costs, young and talented population, and the size and strength of its internal market contribute to its success in attracting FDI. However, the report cautions about the slowdown in macroeconomic indicators, with global GDP growth forecasts revised downward since the beginning of the year, and projections for capital formation and trade weakened.
Investment shortfalls, the report suggests, are causing a halt in job creation, infrastructure development, and sustainable development, especially in the least developed and most vulnerable economies. "Too many economies are being left behind not for a lack of potential - but because the system still sends capital where it's easiest, not where it's needed," Grynspan remarked.
The report concludes that the investment landscape in 2024 was shaped by geopolitical tensions, trade fragmentation, and intensifying industrial policy competition. Moreover, the report emphasizes that in the past decade, the number of countries imposing FDI controls, citing national security, has increased from 21 to 46.
With reports from El Economista, Reforma, and La Jornada
Enrichment Insights:
- Mexico’s strategic advantages, including the USMCA trade agreement, geographical location, government policies like “Plan México,” affordable and skilled labor force, and favorable corporate financing, contributed to the slight increase in FDI in 2024.
- The majority of the FDI in 2024 came from reinvestment of profits by existing foreign companies in Mexico ($28.71 billion) and intracompany loans/payments (13.5%), while new investment was a smaller portion ($3.17 billion or 8.6%).
- New and reinvested FDI supports expansion in manufacturing, logistics, financial services, and other sectors, boosting employment and industrial output and reinforcing Mexico’s role as a key manufacturing and logistics hub within North America.
- Mexico's increased FDI occurred despite increased FDI control measures worldwide, with the number of countries imposing FDI controls citing national security rising from 21 to 46 over the past decade.
- The slight uptick in foreign direct investment (FDI) in Mexico, bucking the global downtrend, was attributed to its strategic advantages, such as the USMCA trade agreement, geographical location, government policies, an affordable and skilled labor force, and favorable corporate financing.
- In Williamson's report, it was noted that although the global FDI in 2024 showed a 12% decline, sectoral and country-level gains indicated an underlying resilience and long-term potential, with Mexico being only second to Brazil in Latin America in terms of FDI, where investment in manufacturing and logistics sectors played a significant role.
- Despite Mexico's success in attracting foreign investment for the past decade, reaching a total of US $300 billion, the report cautioned about slowing macroeconomic indicators, suggesting that investment shortfalls were causing halts in job creation, infrastructure development, and sustainable development, particularly in the least developed and most vulnerable economies.
