With much fanfare it is presumed that the nearshoring is generating a strong arrival of Foreign Direct Investment (FDI) to the country, but the detailed figures still do not demonstrate that new companies are establishing themselves in Mexico. Wow, this phenomenon of plant relocation has been celebrated for more than two years, but we still don’t see it clearly.
The key is in the figures… Last week, the Ministry of Economy (SE) reported that Mexico reached a new historical maximum of FDI, by registering 32,926 million dollars (mdd) during the third quarter of 2023an increase of 2.4 percent compared to the same period last year, when it stood at 32,147 million dollars.
If the effect of the atypical operations of Televisa-Univisión and Aeroméxico that occurred in 2022 is excluded, the growth in FDI from January to September 2023 would be 30 percent year-on-year.
But what is striking is that the concept of new investments, that is, foreign companies that are settling in Mexico to develop new projects, They barely represent 8 percent of total FDI. 76 percent corresponds to reinvestment of profits.
So new investments in those nine months of 2023 totaled 2,806 million dollars, a drop of 80 percent compared to January-September 2022, with preliminary figures.
The statistics reveal that the amount of new investments for that period is the lowest since 2014when they totaled 435 million dollars.
What do other specialists say? Gabriela Siller, director of economic analysis at Banco Base, points out that due to the fall in FDI from new investments, it is expected that in 2023 this component will explain the lowest proportion of the total Foreign Direct Investment on record.
“The low growth of new investments indicates that the opportunity of the nearshoring“says the economist. And we totally agree. If the flow of new investments had continued at a rate similar to that observed in 2022, Siller estimates, in January-September 2023, total FDI would accumulate close to 44.65 billion dollars, which for the full year would imply a potential sum close to 50 billion .
In conversation with this space, the consultant in public policies, government relations and international trade, Jorge Molina Larrondo, questions: if there were no problems with attracting FDI, why does the Ministry of Economy disguise the statistics so much and why have they left to provide information that even the government of Enrique Peña Nieto offered? Why not simply give the quarter’s figures without so much makeup?
He is also a newspaper columnist The financial believes that the embellishment of the figures is evident in the way the authority presents the information: in aggregates without identifying the amounts for each quarter.
“For example, in this third quarter they give the nine-month aggregates and to get the figures for the third quarter one has to generate the data using the releases from the first and second quarters. With Peña and with the previous presidents they gave you the exact figures for each quarter. Giving the figures as quarterly aggregates disguises the drop in deposits quarter by quarter. “I’ll leave it there!” says the expert analyst.
At Top Money Report we reinforce the point by warning that just seeing or boasting the total data, as the government does, is a clear way of masking reality: new investors are not coming to invest in Mexico as assumed.
Of course, it is excellent that FDI in global figures remains “strong” (even when they are presented with questionable numbers), but The truth is that the opportunity is being wasted. nearshoringno matter how much they sing the oppositesince it is the reinvestments that are maintained, but not the new flow of investment capital.
No matter how you look at it, this trend is negative and shines a “yellow light” on the decisions of businessmen and money owners who are preferring not to make so much productive investment in Mexico. To believe that the weakening of the country’s economic foundations, due to a government that wastes and goes into debt, has “nothing to do with it” would be naive.
Let us remember that all of the above happens while Mexico still enjoys the “investment grade” granted by international credit risk rating agencies and that, if lost – something that is a matter of time – it could generate outflows instead of greater capital attraction, which which implies a serious risk for the country’s economy.
All of this – I insist – has to do with the government’s decisions, such as the decision to skyrocket public spending, the deficit and debt in 2024, which compromise the future of Mexico in the long term. Like that or more clear?
Editor’s note: This text belongs to our Opinion section and reflects only the author’s view, not necessarily the point of view of High Level.
MORE NEWS:
William Barba Master in Economics from the Austrian School; liberal, gold market specialist and editor of the investment newsletter Top Money Report