Intense debate about the impact of nearshoring on Mexican FDI

The situation of Foreign Direct Investment (FDI) in Mexico has sparked intense debate regarding the impact of nearshoring in the country. While some experts point out that current data does not show a significant increase in new investments, others argue that the nearshoring phenomenon has been manifesting in Mexico since 2019. According to preliminary data from the Ministry of Economy, FDI in the first quarter of 2024 reached $20.313 billion, a 9% increase compared to the same period the previous year. However, upon analyzing revised figures, it is observed that FDI has decreased by 13.5% compared to the first quarter of 2023, leading to uncertainty about the true impact of nearshoring in the country. Juan Francisco Torres Landa, partner at the law firm Hogan Lovells Latin America, expresses concern about the lack of investment flows towards Mexico, especially when compared to other nearshoring recipient countries like Vietnam, Indonesia, and Costa Rica. Torres Landa laments that investments in Mexico are considered "crumbs" compared to the magnitude of foreign investment that has diverted from China. On the other hand, Alberto Bustamente, president of the Automotive Committee of the Mexican Institute of Foreign Trade Executives (IMECE), argues that nearshoring in Mexico is not a recent phenomenon, as an increase in FDI in the country has been observed since 2019. Bustamente highlights that, excluding specific transactions, FDI in Mexico has maintained an upward trend, suggesting that the benefits of nearshoring are becoming evident in the country. Despite these optimistic views, the low proportion of new investments within FDI continues to raise questions. Stephan Keese, managing partner at Roland Berger in the United States, mentions that while investment flows have been observed in Mexico, the high rate of profit reinvestment within FDI raises doubts about the true extent of the impact of nearshoring in the country. The lack of internal political certainty, governance issues, and deficiencies in basic infrastructure such as electricity and water have been identified as possible factors hindering a greater increase in new investments in Mexico. Despite efforts to attract foreign investment, addressing these issues is necessary to fully capitalize on the opportunities that nearshoring presents. In conclusion, while some experts see clear signs that nearshoring is positively impacting FDI in Mexico, others raise doubts about the true dimension of this phenomenon. It is essential to carefully analyze the data and address the identified obstacles to ensure that the country can fully leverage the opportunities offered by nearshoring in an increasingly competitive global economic environment.