Historically, Foreign Direct Investment (FDI) has been one of the most important factors for the Mexican economy. Since January 1, 1994, with the entry into force of the North American Free Trade Agreement (NAFTA), and further on with the entry into force of the Agreement between Mexico, the United States and Canada, the T-MEC or USMCA, it has been possible to observe not only a greater integration in the North American region, but also the transformation of the export sector in Mexico, the creation of jobs and the attraction of investments in the manufacturing sector.
During the 24 years of NAFTA, although Mexico was not benefited in all sectors included in the agreement, it is considered that in terms of foreign direct investment attraction especially in some economic sectors, Mexico benefited the most. This success is attributed to multiple aspects, from Mexico’s strategic geographic position, which had facilitated land, port, air and rail connectivity and logistics with North, Central and South America, to low labor costs, high availability of qualified labor, low industrial costs, developed infrastructure (according to ministry of communications and transport Mexico counts with more than 400 thousand kilometers of highways, 27 thousand kilometers of railroads, 77 airports, 117 port) ,availability of suppliers, among others.
While it is true that these are some of the reasons why Mexico became an attractive destination for foreign direct investment, Mexico is still a strategic place for trade and investment, for the additional following reasons:
- Mexico is among the countries with the largest number of Free Trade Agreements in the world. Mexico currently has a network of 14 Free Trade Agreements with 50 countries (FTAs), 30 Agreements for the Promotion and Reciprocal Protection of Investments (APPRIs) with 31 countries or administrative regions and 9 agreements of limited scope (Economic Complementation Agreements and Partial Scope Agreements) within the framework of the Latin American Integration Association (ALADI).
The free trade agreements give Mexico access to over 60% of the world´s domestic product. Furthermore, this economic opening, has been crucial to diversify Mexico’s trade relations with the world and thus boost the country’s economic growth.
2. Mexico is one of the largest countries and economies in the world. Based on data provided by the World Bank in 2021; Mexico is among the fifteen largest economies in the world and is the second largest economy in Latin America. In view of this data, the Mexican market represents a great potential market, in addition to its rich favorable geography and abundant natural resources.
3. Mexico offers programs and decrees that encourage foreign investment in the country. At the Federal level, Mexico offers programs and decrees to encourage foreign investment in the country, among which the following stand out:
- IMMEX Decree
The IMMEX program is an instrument which allows the temporary import of goods that are used in an industrial process or service , to produce, transform or repair foreign goods imported temporarily for subsequent export , without paying the general import tax , VAT and countervailing duties.
The Sectorial Promotion Programs (PROSEC) are an instrument aimed at legal entities that produce certain merchandise, through which they are allowed to import various goods with a preferential ad-valorem tariff (General Import Tax) to be used in the elaboration of specific products, regardless of whether the goods to be produced are destined for export or for the national market.
- DRAWBACK Program
The objective of the Drawback Program is to return to exporters the value of the general import tax paid for imported goods or supplies that are incorporated into export merchandise, imported merchandise for repair or alteration, or merchandise that is returned in the same state.
As can be seen, global companies can take advantage of the incentive programs offered by the Mexican government. While at the same time share the best practices of experience in other countries, as well as the values they advocate, including competition, ethics and the promotion of diversity, which is why Mexico has been committed for years to facilitate and provide the right conditions for multinational companies to benefit from Mexico´s advantages.
If your company has future plans to invest in Mexico, Contact us for a free consultation.