Wednesday, June 19, 2024

Is this the Mexican moment? US $106B of investment announced this year

Over US $100 billion in investment is expected to flow into Mexico in the next two to three years based on announcements made by foreign companies in the first 11 months of 2023.

The Economy Ministry (SE) said in a new report that 363 investment announcements were made between Jan. 1 and Nov. 30. The total of the combined investment announced in the period was just under $106.42 billion, the SE said.

Economy Minister Raquel Buenrostro
Economy Minister Raquel Buenrostro predicted in March that there will be a “significant wave” of investment in the next two years. (Secretaría de Economía/X)

“It’s expected that said amount will enter the country in the next two or three years,” the ministry added.

The SE said on the X social media platform that the 2023 investment announcements could lead to the creation of almost 227,000 new jobs. It also said that the combined investment amount is equivalent to 6.4% of Mexico’s GDP in 2022.

The announcements made by the foreign companies “confirm the #MexicanMoment for relocation,” the ministry said, referring to the growing nearshoring phenomenon.

Which companies made the largest investment announcements in 2023?

Economy Ministry top 10 investments
The Economy Ministry lists the top 10 investment announcements this year, as well as the recipient sectors. (SE)

The SE listed the 10 largest investment announcements between January and November.

The ministry used estimates in some cases as the companies themselves haven’t confirmed how much they intend to invest in their Mexico projects.

1. Mexico Pacific Limited 

This United States company is set to invest $15 billion in a natural gas pipeline and liquefaction plant in Sonora.

The SE noted that the monetary figure comes from the office of President López Obrador.

2. Tesla 

The SE listed a $10 billion investment for the U.S. electric vehicle manufacturer’s gigafactory in Nuevo León, although it acknowledged that the government of the northern border state has estimated a $5-10 billion range.

Construction of the first phase of the project will start in early 2024, according to Tesla CEO Elon Musk.

3. Copenhagen Infrastructure Partners (CIP) 

This renewable energy-focused Danish investment firm intends to invest $10 billion in a green hydrogen plant in the Ishtmus of Tehuantepec region of Oaxaca.

López Obrador cited the $10 billion figure last month, although he didn’t specifically mention CIP at the time, only calling it a “Danish fund” and a “Danish company.”

4. Woodside Energy 

The Perth, Australia-based company said in June that it would contribute $4.8 billion to a project to develop a large Gulf of Mexico oil field it jointly owns with Mexico’s state-owned oil company Pemex.

Woodside, Australia’s largest oil and gas producer, said that the forecast total capital expenditure to develop the ultra deepwater field is $7.2 billion. The SE listed that figure in its report.

5. Kia Motors

The South Korean automaker is set to invest $6 billion in Mexico. The company has a plant in Nuevo León, and the governor of that state, Samuel García, has mentioned a $6 billion investment to expand it.

6. LGMG Group

In a statement in October, this Chinese construction machinery company revealed plans to invest $5 billion in the development of a 10-hectare industrial park in Nuevo León.

The park is slated to have three clusters of activity: processing and manufacturing; warehousing and logistics; and business support services.

7. Ternium

The Argentine steel manufacturer announced in June that it would build a new steelworks and cold rolling facility in Nuevo León. The company’s total investment will be just over $3.8 billion, according to the SE.

8. CloudHQ

This United States IT company intends to invest $3.6 billion in a data center project in Querétaro.

9. Jetour

The Chinese state-owned automaker announced in April that it was planning to invest around $3 billion in a plant in Mexico.

“[The plant] will be in a strategic place, maybe the Bajío [region] or Aguascalientes. There are several options, it’s not decided yet,” the company’s Mexico director said at the time.

10. Pegatron and Wistron

These two Taiwanese electronics companies intend to invest $2 billion in Mexico, according to the SE.

Collectively, the companies listed above are planning to invest $65.6 billion in Mexico, the Economy Ministry said. That amount represents 61% of the total investment announced by foreign companies in the first 11 months of the year.

President Biden and President López Obrador
The U.S. is the source of about 40% of the announced investments in Mexico in 2023, followed by China. (Lopezobrador.org.mx)

Which countries will the $100 billion + come from?

Just over $42 billion, or around 40% of the $106.4 billion in investments announced this year, is set to come from the United States, the SE said. Based on 2023 investment announcements, the United States (via U.S. private companies) will easily be the biggest investor in Mexico in the coming years.

The following countries rank second to 10th, according to the SE.

2. China  

$12.61 billion or 12% of the total.

3. Denmark 

$10.17 billion or 10% of the total.

4. Australia

$7.29 billion or 7% of the total.

5. South Korea

$6.96 billion or 7% of the total.

6. Argentina

$5.47 billion or 5% of the total.

7. Germany

$5.1 billion or 5% of the total.

8. Taiwan

$3.5 billion or 3% of the total.

9. France

$2.42 billion or 2% of the total.

10. The Netherlands

$2.12 billion or 2% of the total.

Investment announcements made by companies from those 10 countries account for $97.76 billion or 93% of the total.

Which sectors will receive the most investment?

Almost $51.9 billion or 49% of the announced investment total is slated to go to Mexico’s manufacturing sector, which includes the booming automotive industry.

Ternium steel plant in Nuevo León
The manufacturing sector, including plants like Ternium Steel’s in Nuevo León, will receive the biggest inflow of foreign investment according to SE data. (Ternium)

The next biggest winners are set to be the energy sector ($20.1 billion); the transport industry ($17.28 billion); the construction sector ($9.29 billion); and the retail industry ($4.26 billion).

The lion’s share of total announced investment – almost 97% – will go to those five sectors.

Investment announcements this year cover all 32 federal entities 

Investment announcements in Mexico by state
The announced investments in Mexico by state. (SE)

The SE said that the 363 investment announcements between January and November are for projects in all 32 federal entities – Mexico City and the 31 states.

The ministry said that a “redistribution of investment” is taking place, emphasizing that there is a “progressive advance of companies toward the south of the country.”

A map included in the SE report shows where a range of companies intend to invest in Mexico in the near future. Those companies include Heineken (Yucatán), Bosch (Querétaro) and Foxconn (Chihuahua).

Mexico News Daily 

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