Foreign investment in Mexico falls 9.9% between January and September due to the pandemic

Foreign Direct Investment (FDI) that entered the country during the January-September 2020 period amounted to 23 thousand 482 million dollars, which meant a fall of 9.9 percent compared to the same period of the previous year, revealed this Friday the Ministry of Economy.

This figure was the result of the entry of 31 thousand 171 million dollars and an exit of 7 thousand 688 million dollars.

The agency noted that this drop was attributable to the COVID-19 pandemic, since globally, a slowdown in these flows has been observed.

“The United Nations Conference on Trade and Development (UNCTAD) predicted that during 2020 FDI in Latin America will decrease between 40 and 55 percent. From that perspective, by having a lower FDI drop than that expected by UNCTAD, Mexico shows greater resilience in the face of the health and economic crisis, ”the agency said.

The FDI attracted by Mexico in the first nine months of this year reflected a pattern of behavior similar to that observed during other periods of global crisis, such as those of 2002 and 2009.

In these episodes, the data showed that the first response of parent companies to crises is to strategically reorganize their subsidiaries, to shore up financial results and have liquidity.

“This causes new investments to be postponed and, at the same time, loans are restructured within the entire corporate. This pattern is clearly observed at the beginning of 2020, and as the global crisis unfolds, the amount of accounts between companies decreases, later, signs of recovery begin to be detected, as was observed in 2002 and 2009 « , he indicated the Ministry of Economy in a statement.

According to the disaggregated figures, 53.7 percent of FDI was generated through reinvestment of profits, while 24.9 percent was derived from intercompany accounts and only 21.4 percent was attributed to new investments.

By economic sector, manufacturing ranked first with 40.1 percent, while financial and insurance services represented 18.4 percent, transportation 11.8 percent, commerce 7.2 percent, mining 5.5 percent, and generation, transmission, and distribution of electric power. 4 percent; while the remaining 13 percent corresponded to other sectors.

57 percent of the capital that entered the country came from T-MEC partners (39.2 percent from the United States and 17.8 percent from Canada), followed by Spain (13.7 percent), the Netherlands (3.6 percent ) and the United Kingdom (3.3 percent).

The fact that more than half of the investments have originated from the ‘northern neighbors’ is a sign of renewed confidence in the future of the region, the Secretariat said.

“Together, investments originating in the United States and Canada increased 13 percent compared to the first three quarters of 2019. Without a doubt, this growth reflects the positive impacts of the approval and entry into force of the new trade agreement and its potential in the medium and long term ”, detailed the agency.

For 2020, Ernesto Acevedo, undersecretary of Industry, Trade and Competitiveness of the Ministry of Economy foresees that the flows of Foreign Direct Investment (FDI) will remain at the levels of last year, despite the fact that organizations such as the United Nations Conference on Trade and Development (UNCTAD) have predicted that global investments will be reduced by up to 40 percent, due to the uncertainty generated by the COVID-19 pandemic.

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