Economics: Mexico benefitting from nearshoring trend but must take action to sustain FDI inflows long term

MEXICO - Report 18 Oct 2022 by Mauricio González and Francisco González

Federal officials have been boasting of the very high Foreign Direct Investment results for the first half of 2022. In contrast to gross fixed capital formation, which as of July was running 10% below 2018 levels, through the first half of 2022 FDI inflows were there highest since 2013.

While various hypotheses have been offered to explain the possible factors attracting FDI to post-pandemic Mexico and how it contrasts with weakness in gross private domestic investment, it is important to consider that close to a quarter of the 27.5 billion reported in cumulative FDI inflows correspond to atypical first quarter movements such as January’s 4.8 billion dollar merger of Grupo Televisa and Univision, and Aeromexico's completing its financial restructuring process largely based on foreign capital. Another contributing factor is the nearshoring trend that Mexico is likely to continue benefiting from in the short term, but the country must take other steps if it is to take full advantage of this shift in FDI flows closer to US and Canadian shores over the medium and long term.

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