Nearshoring Pushes Q1 Foreign Investment In Mexico to Half of 2022 FY Total

Foreign direct investment in the country in first quarter totaled $18.63 billion, but which was slightly lower than the amount recorded in Q1 2022

Contenedores
May 22, 2023 | 04:41 PM

Mexico City — Foreign direct investment (FDI) in Mexico registered a first quarter of contrasts, even amid the momentum brought by nearshoring, mainly in the north of the country in the manufacturing industry linked to the United States.

In the first quarter of 2023, Mexico received less foreign investment compared to the same period last year; however, the amount of investment observed to March represents half of all the investment that the country received in the entire year 2022.

FDI totaled $18.63 billion in Q1, slightly less than the amount recorded in the same quarter of last year, when FDI totaled $19.42 billion, according to a preliminary report from the Economy Ministry.

But if one considers the amount of revised FDI for the first quarter of 2022, which rose to $22.794 billion due to extemporaneous notifications made by companies to the National Registry of Foreign Investments, then the investment registered in the first three months of 2023 year was 18% lower compared to a year earlier.

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However, according to the Ministry of Economy, the amount registered in the first quarter is 48% higher than the first quarter of 2022 if the $6.87 billion of investment due to the merger of Televisa with Univision. and the restructuring of Aeromexico, are excluded.

A favorable aspect of the ministry’s report is that the $18.63 billion in first quarter represents half of all the investment that entered the country in all of 2022, ad which is attributed to the relocation of companies to Mexico to be nearer their end-market, the US.

US manufacturing heads FDI in Mexico

The ministry stated that 90% of the $18.636 billion in FDI corresponds to reinvestment by companies, which means that the profits did not return their country of origin. In addition, in Q1 2023 reinvestment was 33% higher compared to the same period of 2022.

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“This behavior represents the confidence of investors to maintain and expand their investments in the country,” the ministry, led by Economy Minister Raquel Buenrostro, stated in its report.

FDI registered in Mexico endorses the US as the country’s main trading partner, since, of the total investment received, 34% came from the United States, with $6.4 billion, while Spain was second place with $3.78 billion and Argentina third with $1.74 billion.

The five states with the highest FDI during Q1 2023 were Mexico City, with $7.03 billion; Nuevo León, with $2.33 billion, and which were followed by the states of Jalisco, Puebla and Mexico state.

By sector, 53% of FDI ($9.92 billion) corresponds to the manufacturing sector, and 33% to financial services.

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In manufacturing, transportation equipment, the chemicals industry, the food industry, computer equipment, electric power generation, metals and mining, and beverage and tobacco stand out as the main target industries for investment.

In Mexico City, investments were made by BBVA, Citibanamex and Nestlé; in Nuevo León, companies such as Ternium, Heineken and Whirlpool invested; while in Jalisco, DIAGEO, Continental and Flextronics invested.

In Puebla, Volkswagen, Audi and Johnson & Johnson invested, and in the state of Mexico, Scotiabank, Suzuki and Bayer made investments.