Mexico has reported record levels of foreign direct investment (FDI), with $11.86 billion entering the country in the first trimester of 2021. For investors interested in company formation in Mexico, or entering the market some other way, the news will be a welcome indication of the country’s coming post-pandemic recovery.
Speaking at a videoconference on May 20, the country’s Secretary of Economy Tatiana Clouther stated that FDI in the first three months of this year had reached their highest level for a similar time period since figures began to be recorded in 1999.
That represents a 14.8% increase on the same period last year, with Clouther stating that trade facilitated by the US-Mexico-Canada Agreement (USMCA) was crucial to the country achieving such results in spite of the pandemic.
Clouther was keen to highlight that such positive numbers were not bolstered by declines in FDI in Mexico due to the pandemic, with the year-on-year comparison covering the pre-pandemic period of 2020.
“The numbers of falling GDP begin to occur in months after March,” she stated during the video conference.
Broken down by sector, approximately 46.6% of FDI in Mexico between January and April went to manufacturing, while 14.6% went to finance and professional services, 13.9% to mining, and 11.5% to international trade.
In terms of origins, around 42.5% of that investment came from the United States, while 12.1% came from Spain. Luxembourg, the United Kingdom, and Canada were also major sources of FDI in Mexico during the period.
While close to three-fifths of the trimester’s FDI in Mexico was the result of profit reinvestment, almost one-fifth was due to new investment in the country, while the remainder was due to inter-company accounts.
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Record FDI in Mexico a positive sign for investors
The news will be welcomed by the international investment community as a sign of the coming economic recovery following a year of global economic turmoil caused by the pandemic.
Analysts have already suggested that the more open-armed economic approach of the Biden administration in the United States would have positive effects on the Mexican economy, while recent studies have suggested that the country could recover sooner than predicted, following some gloomy forecasts at the end of 2020.
FDI in Mexico is one of the highest among countries in Latin America, with FDI inflows of $29.4 billion registered in 2019 (all figures in USD). The country is particularly attractive to foreing investors in part because of its strategic location bordering the United States and the presence of major ports serving both the Atlantic and Pacific Oceans.
It also benefits from a network of free trade agreements (FTAs) it has in place, including via the USMCA and the Pacific Alliance — an economic integration that also includes Chile, Colombia, and Peru, and which recently celebrated its tenth anniversary.
Business opportunities in Mexico
The latest figures for FDI in Mexico point to a positive future for doing business in the country. On that basis, some good business opportunities in Mexico are considered below:
Financial technology (fintech): Fintech is growing at considerable pace in Latin America, with Mexico a major hub for tech innovation in the region. With Guadalajara the epicenter of the country’s tech ecosystem, the country has witnessed some major investments in the financial technology sector.
Medical cannabis: With an ideal climate and available agricultural land, as well as the major markets of the United States and Canada so nearby and easily accessible, the medical cannabis sector in Mexico presents a host of opportunities, especially as public acceptance of the product grows.
E-commerce: Mexico is already the 17th-largest e-commerce market globally, and with a large population of over 128 million people, rapidly growing internet coverage that reached 70.1% in 2019, and the proximity of the massive United States and Canada online markets, the country offers great prospects in online sales in the future.
Tourism: Prior to the pandemic, the Mexican tourism industry was expected to grow approximately 15% to exceed $9 billion in 2021, and could reach almost $17 billion by 2025. While the sector has taken a big hit during the global health crisis, it should be expected to rebound.
Biz Latin Hub can assist you doing business in Mexico
At Biz Latin Hub, our multilingual team of back-office specialists is equipped to help you take advantage of business opportunities in Mexico. With our complete portfolio of corporate support options, including legal services, accounting advisory, recruitment solutions, and company formation in Mexico, we can be your single point of contact to help you develop your business interests in this popular investment market, or any of the other 17 countries around Latin America and the Caribbean where we are present.
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