Mexico grows more attractive for foreign investors

Mexico ranked second place in Latin America for countries with the most Direct Foreign Investment in 2017
Mexico grows more attractive for foreign investors
Foreign currency – Photo: Qilai Shen/EFE
07/06/2018
16:18
Leonor Flores
Mexico City
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Mexico has recently improved its position among the countries with the most Direct Foreign Investment (IED) in the world. In 2016, it was ranked 16th, whereas last year, it ranked 12th, according to the United Nations Conference on Trade and Development (UNCTAD).

According to the report, Mexico received nearly USD$30,000 million in foreign investment last year, a figure similar to the one obtained in 2016. This income has allowed the country to remain the second most important destination in Latin America for capital influx.

However, the UNCTAD considers that future expectations are not promising for Latin America in general, given that investment flows will stagnate or decrease marginally by around USD$140 million, due to the uncertainty related to elections in some of the area’s largest economies.

UNCTAD’s perspective comes from a combination of a timid economic growth environment in the territory and a series of negative challenges, such as electoral processes and possible underflows caused by an increase in interest rates for developed economies and the international financial market, he explained.

In Mexico’s case, he stated that, even with its complex financial environment, the automotive sector managed to attract 32% more foreign investment in 2017, reaching USD$7,000 million, whereas projections for the energy sector point to an increase in the next few years, due to the fact that several renewable energy projects of almost USD$5,000 million were announced

On the other hand, Brasil had the most foreign investment in Latin America. The UNCTAD’s report indicated that their economy received an inflow of USD$63,000 million, doubling Mexico’s 30,000 million, which was second place in the region.

Overall, Latin America received a total amount of USD$151,000 million, which represented an 8% increase, according to the report.

The Conference stressed that direct foreign investment flows to Latin America were driven by the economic recovery.

Although 2017 was the first year to show a flow increase after six years of downturns, Latin American countries still haven’t surpassed their all-time record of 2011, when raw materials were booming.

The organization emphasized that the region managed to revert its negative figures in foreign investment, due to the sustained demand of its products worldwide, as well as to an increase in prices for basic commodities, especially soy, metals, and oil, which are Latin America’s main exports.

In addition, favorable financial conditions have also played an important role. According to James Zhan, director of Investment and Enterprise at the UNCTAD, the rebound of foreign investment in Latin America and the Caribbean, as well as the gradual recovery of the regions’ largest economies should indicate a positive outlook on these cash flows.

However, he warned that considerable downside risks remained, especially with regard to the international market uncertainty, which significantly reduces Latin America’s prospects for foreign investment.

The countries with the most foreign investment in the world in 2017 were the United States, with USD$275,000 million; China, with USD$136,000 million; Hong Kong, with USD$104,000 million; Brasil, with USD$63,000 million; Singapur, with USD$62,000 million; the Netherlands, with USD$58,000 million; France, with USD$50,000 million; Australia, with USD$46,000 million; Switzerland, with USD$41,000 million, and India, with USD$40,000 million.

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