According to different analysts and statistical data, an economic recovery and a higher level of foreign investment to Mexico is predicted for 2021. However, FDI (Foreign Direct Investment) is conditioned to the possibility of new “waves” of COVID-19, along with the recovery of business confidence and a greater sensitivity on the part of the government towards the needs of the foreign private sector in Mexico.

The analysis is as follows: Following the economic numbers presented by BANXICO and the Ministry of Economy at the end of last year, during the concentrated period 2010-2020, FDI in Mexico presented a growth of 2.3%, going from US$27.14 billion in 2010 to US$27.78 billion in 2020, while for the first quarter of 2021 FDI reached US$11.86 billion, which represents an increase of 14.8% compared to the first quarter of 2020.

However, this figure of US$27.78 billion represented a decrease of 18.8% compared to 2019. “This contraction is associated with the pandemic,” explained the analysis carried out by the consulting firm Salles Sainz Grant Thornton. In fact, the United Nations Conference on Trade and Development (UNCTAD) estimated that in 2020 global FDI flows decreased 42%, compared to 2019, according to the “World Investment Report” published in January 2021, which shows that Mexico had a better performance attracting FDI compared to the rest of the world.

According to the report on FDI presented by the SE, these US$11.86 billion in the first quarter of 2021 were reported by 1,872 companies with participation of foreign capital, 883 trust contracts and nine foreign legal entities.

The SE report further shows that the main element of FDI in the first quarter of 2021 has been thanks to the reinvestment of profits, US$7.02 billion (59.2%); for accounts between companies, US$2.62 billion (22.2%), and for new investments or equity only US$2.20 (18.6%).

When referring to the origin of the investments, the SE report indicates that the main country from which Mexico has received FDI is the United States, US$5.04 billion (42.5%), followed by Spain, with US$1.43 billion (12.1%); Luxembourg, with US$0.96 billion (8.2%); the United Kingdom, with US$0.65 billion (5.5%); Canada, with US$0.56 billion (4.8%), while other countries added the remaining 26.9%.

The main destination of FDI flows is the industrial sector, with manufacturing being the main destination subsector (46.6%). Following these two are the financial and insurance services sector (14.6%), mining (13.9%), commerce (11.5%), energy (3.4%) and temporary accommodation services (3.2%). The remaining sectors captured 6.8%.

Pandemic reality, reshoring and expectations

The COVID-19 conjuncture has caused a deep economic crisis, which has affected global FDI. According to the Economic Commission for Latin America and the Caribbean (ECLAC), in its report “Foreign Direct Investment in Latin America and the Caribbean, 2020,” because of the pandemic, most of the world’s productive sectors were hit in a generalized way, which successively extended to cross-border investments, which could register a reduction of between 30% and 40% at the end of 2021.

According to the cited ECLAC document, among the transformations that global value chains will undergo in the next decade, the withdrawal, to varying degrees, of international production can be considered, which has as a consequence a decrease in foreign investment, while paying special attention to national relocation (reshoring).

This relocation could become very relevant for high-tech industries. But specifically, in the automotive sector, this point is ambivalent: the high amount of investments already made in the main Latin American countries that produce vehicles (Brazil and Mexico) and the degree of technical preparation achieved by their workforce generate a high level of territorial roots that make the return of these industries to their countries of origin unlikely.

But, on the other hand, according to experts in this sector, the level of FDI will not increase in 2021 as investments are already in Mexico. According to Fausto Cuevas, general director of the Mexican Association of the Automotive Industry (AMIA), it will be difficult to see large investments in the assembly plants in 2021, except for the investments that are made annually for the change of production lines, of new models or changes in the current ones. For Cuevas, although the automotive industry, having been considered an essential activity, was not totally affected by the pandemic, significant investments in the country have already been made in the last 10 years, coming from automakers such as Kia (Nuevo León) , Toyota (Guanajuato) and BMW (San Luis Potosí), which, he said, “are still in the process of maturing.”

Under this conservative economic context, “expectations regarding FDI to Mexico for 2021 are expected to recover,” according to the consulting firm Salles Sainz Grant Thornton, positioning what was reported by BANXICO in February 2021 (US$26 billion) as the average expectation for 2021.

Is there confidence to invest?

According to AT Kearney, a company that annually prepares its world FDI confidence index, in 2020 the ranking of the most reliable countries to invest is led by the United States, Canada, Germany, Japan and France, Mexico (which was in position 25 in 2019) was left out, attributing it to the prioritization of investments with low economic and social impact, changes in the energy sector and project cancellations.

In this sense, AT Kearney affirms that the recovery of the global economy after COVID-19 is fundamental for attracting FDI to Mexico; however, “internal economic conditions will also be relevant to generate greater confidence for investment in the country.”

According to ECLAC, the benefits of FDI will be obtained when the policies to attract FDI are integrated and coordinated with the development policies of a country (in this case, Mexico). “Although FDI alone does not solve the problems related to economic growth, it can assume an important role to the extent that it is aligned with their strategic objectives,” according to their report “Foreign Direct Investment in Latin America and Caribbean.”

Are we going towards new collaboration strategies?

It should be noted that the Mexican government strategy to attract FDI has been based on the creation of a regulatory framework that offers transparency for the investor, rather than on building policies based on incentives to promote it.

“The new international scenarios make it necessary for FDI and the policies to promote it to be part of a broader project that allows social inclusion, equality and growing environmental sustainability,” said Salles Sainz Grant Thornton. But, for this, it is necessary not only to offer the conditions for foreign capital to arrive, but it is necessary to create conditions for capital to become generative sources of greater productivity, innovation and technology. In other words, a scheme of greater collaboration between government and private initiative is greatly needed. Will we see it in 2021? .

Sources: MexicoNow

Prospects for Foreign Direct Investment in Mexico 2021 – MEXICONOW (mexico-now.com)

The owner of Knorr, Dove and other brands plans to increase production and exports.

Unilever has announced plans to invest 5.5 billion pesos (US $277 million) in its four Mexican plants over the next three years. The company, which owns brands such as Knorr, Hellman’s, Dove and Holanda ice cream, plans to increase production of its food, hygiene and personal care products.

The company also announced that it will begin exporting ice cream to all of North America.

“This investment will allow us to grow the production and increase the exportation of our products by roughly 20 billion pesos [US $1 billion] over the next three years to our main commercial partners, which are the United States, Canada, the Caribbean, Central and South America and some European countries,” said Reginaldo Ecclissato, president of Unilever in Mexico and Northern Latin America.

Economy Minister Tatiana Clouthier celebrated the announcement.

“It speaks to importance of the USMCA [trade agreement] as a strategic point for exports,” Clouthier said. “Unilever directly provides work for more than 6,500 people, imagine what it is generating indirectly … investors have confidence in Mexico, its economy and the labor force.”

The four Unilever plants are located in Mexico City, Morelos and México state. The British-based company said the new investment will lead to the creation of 3,000 new jobs, directly and indirectly.

Source: Mexico News Daily

Unilever announces 5.5-billion-peso investment in its 4 Mexican plants (mexiconewsdaily.com)

Next.e.GO Mobile, a German manufacturer of electric vehicles and sustainable mobility systems, announced that it will build an electric car assembly plant in Mexico.

In a statement, the company said it plans to enter the country in cooperation with the industrial consortium Grupo Quimmco of Monterrey, specifically with QUESTUM, its subsidiary company.

“e.GO’s unique 5G-ready micro-factory is perfectly suited not only to serve the growing Mexican market, but also to supply spare parts to other e.GO facilities in the Americas,” the company said.

It is worth mentioning that the company successfully developed a disruptive production model based on Industry 4.0 that significantly reduces investment requirements and time to market, while ensuring highly efficient production with a low break-even point, which is known as micro-factory.

“e.GO’s decentralized production system combined with QUESTUM’s expertise will contribute to the local economy and help create employment opportunities,” the German firm highlighted.

With e.GO vehicles, Quimmco plans to enter into the automotive fleet business in the domestic market.

Source: MexicoNow

( https://mexico-now.com/next-e-go-mobile-to-build-electric-car-plant-in-mexico/ )

Kavak, the first unicorn in Mexico, makes an investment of 250 million pesos to open a new operations center in Querétaro. With this action, the company will offer 200 direct jobs to the queretanos.

Kavak, a company that became the first unicorn in Mexico, currently operates in Mexico City, Guadalajara, Monterrey, Puebla and now in Querétaro. The company dedicated to the purchase and sale of pre-owned cars will invest 250 million pesos in the opening of a new operating center in Querétaro, where direct work is expected for 200 people in the next 6 months. The operations center in Querétaro will have an area of ​​300 square meters.

” The pre-owned vehicle buying and selling sector in Querétaro is the fifth most important in Mexico, with an approximate value of 1,000 million dollars, so the arrival of Kavak offers certainty to Queretans when selling and / or buying a vehicle pre-owned without fear of being scammed, in a market that accounts for an average of 150.00 transactions per year, of which 80% occur between individuals, ‘said Alejandro Guerra, regional manager of Kavak.

Currently the platform has more than 10,000 car options of various brands and price ranges, which allows it to offer a wide portfolio for users to purchase the vehicle of their choice and receive it at home or pick it up at one of the branch offices.

And in April, Kavak raised $ 485 million in a series D funding round led by D1, Ribbit, BOND and Founders Fund. With this investment, the company achieved a valuation of 4,000 million dollars.

Source: Cluster Industrial

( https://www.clusterindustrial.com.mx/noticia/3423/kavak-invierte-250-millones-de-pesos-en-queretaro )

The United States, Mexico and Canada will next week hold their first formal talks on their continental trade deal, with particular focus on labor and environmental obligations, the U.S. government said on Friday.

Trade ministers from the three nations are set to meet virtually on Monday and Tuesday to discuss the U.S.-Mexico-Canada (USMCA) deal, which took effect in July 2020.

“The ministers will receive updates about work already underway to advance cooperation … and will hold robust discussions about USMCA’s landmark labor and environmental obligations,” the office of U.S. Trade Representative Katherine Tai said in a statement.

The United States is also reviewing tariffs which may be leading to inflation in the country, economic adviser Cecilia Rouse told reporters at the White House on Friday, a move that could affect hundreds of billions of dollars in trade.

Source: Reuters

( https://www.reuters.com/business/us-mexico-canada-hold-robust-talks-new-trade-deal-statement-2021-05-14/ )

Grupo México is reportedly planning to make a $3.1bn investment for metals refining activities in Sonora.

In an interview with Reuters, Grupo México’s executive vice-president Xavier García de Quevedo said that $2.3bn of the total investment would be used for the expansion of the smelting capacity in Sonora, which is home to the company’s top mines, over a six-year period.

Additionally, Grupo México will make an $815m investment to build power infrastructure at the Baja California peninsula.

This includes the construction of a 500km transmission line running north-south along the southern half of the peninsula.

Quevedo said that the energy plans in Baja would not only benefit the El Arco mine but the regional domestic and commercial power users.

He said: “Baja California’s huge potential can’t be developed without electricity.”

The investments form part of the copper mining firm’s wider $9bn spending plan through 2027.

This spending plan includes the firm’s previously announced $2.8bn investment plan for the proposed El Arco copper mine.

The remaining of the funds would be investment in additional infrastructure, two other mines and new zinc refining capacity, reported Reuters.

Quevedo was quoted by the news agency as saying: “We all trust that we could have all the authorisations very soon.”

Quevedo added that the company’s overall copper output could decrease by up to 1.5% this year, due to reduced output from Peruvian operations.

By the second quarter of 2023, Grupo México plans to commission 36,000tpa of copper capacity from the El Pilar mine, as well as 30,000tpa of copper production capacity from the Buenavista mine in Cananea.

Additionally, the El Arco mine is planned to commence 190,000t production from 2027.

Source: Mining Technology

( https://www.mining-technology.com/news/grupo-mexico-investment-plan-mining/ )