Nearshore Americas

Foreign Direct Investment in Mexico Falls by a Record 49 Percent

Despite a string of recent reform and a thriving auto industry, foreign investment has fallen sharply in Mexico. According to data released Wednesday by the the Economic Commission for Latin America and the Caribbean (ECLAC), Mexico received just US$22.79 billion in foreign direct investment last year, down 49% from 2013.

This sharp decline in investment brings Mexico down to the level of Chile, which received $22 billion. Chile received more foreign investment than it did in 2013, but the 2014 figure is still below the record sum it notched in 2012.

As for Mexico, the purchase of the Modelo brewery by Anheuser Busch InBev and AT&T’s disinvestment in America Movil contributed to the drop in FDI, according to the UN agency.

With more than $62 billion, Brazil continued to be the biggest recipient of foreign investment in the region. Colombia received $16 billion, while Peru grabbed just $7.6 billion, an 18% decline from 2013.

In the Caribbean, foreign inflows decreased by nearly 5% to $6 billion. In terms of sub-regions, FDI in South America and Mexico fell significantly in 2014, while flows towards Central America and the Caribbean showed a much smaller decline. Overall, foreign inflow to the region was $158.8 billion, a 16% decline.

While foreign investment is declining sharply in natural resources the good news is that it is increasing in the services sector. According to the ECLAC study, FDI in the services sector rose by 47% in 2014.

“There are still very few projects that have been announced for high-technology sectors but medium-high technology projects have increased,” the report added.

Although Chinese companies participated in some of the biggest acquisitions in the region, Europe (mainly the Netherlands) and the United States continue to be the main investors.

The UN agency cited the decreased value of commodities for the drop in foreign investment.

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“This result reverses the growth trend seen during the last decade—with the exception of declines in 2006 and 2009—since a further reduction is forecast for this year,” the agency stated.

To reverse the trend, ECLAC has urged regional countries to reform their industrial policies, keeping in mind the responsibility of protecting the environment.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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