Wednesday, December 6, 2023

Mexico remains out of top 25 attractive economies for investment

For a second consecutive year, Mexico is not among the 25 most attractive countries in the world for foreign investors, according to an index developed by the global consulting firm Kearney.

Mexico increased its score on the Kearney Foreign Direct Investment (FDI) Confidence Index – an annual survey of global business executives that ranks the markets likely to attract the most investment in the next three years – but was still unable to break into the top 25 countries.

Mexico ranked 25th on the 2019 index but dropped off the list last year for just the second time in more than 20 years.

Ricardo Haneine, a partner with Kearney and director of the company’s Mexico office, said the benefits brought to Mexico by the new North American free trade agreement, the USMCA, and the relocation here of companies that supply the United States market were insufficient for executives to see the country among the world’s most attractive investment markets.

The top three positions were unchanged on this year’s index with the United States remaining in first place followed by Canada and Germany. The United Kingdom rose two spots to fourth while Japan dropped one place to fifth.

Among the factors that affected the attractiveness of Mexico as a destination, according to Kearney, were: low economic growth (the economy contracted 8.5% in 2020); moves to wind back the previous government’s energy reform; a proposal to ban subcontracting or outsourcing of jobs by private companies without prior government authorization; the cancellation of the previous government’s Mexico City airport project; and the prioritization of projects that will have limited social and economic impact, such as the new Pemex refinery on the Tabasco coast, the Santa Lucía airport and the Maya Train.

Haneine specifically cited the government’s energy sector measures – the Congress recently passed a law that gives CFE-generated power priority on the national grid over that produced by private and renewable energy companies only to see it struck down by numerous court rulings – as a barrier to foreign investment.

However, ongoing trade tensions between the United States and China provide an opportunity for Mexico to attract new companies and increase exports, he said.

Kearney said there is currently “a clear predisposition for larger, more advanced markets” among investors.

(Foreign investment in Mexico declined almost 12% last year as the coronavirus pandemic caused a sharp contraction in money flows around the world.)

“… This year marks the third time in the 23-year history of the index—and the third consecutive year—in which the top five spots are all held by developed economies,” Kearney said.

“This continued strong showing of advanced economies likely stems from conducive regulatory environments coupled with skilled workforces, advanced tech infrastructure, and economic stability.”

France, Australia, Italy, Spain and Switzerland rank sixth to 10th on the index. The only three developing economies among the 25 most attractive countries are China (12th), the United Arab Emirates (15th) and Brazil (24th).

Source: El Economista (sp) 

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