The rising wave of nearshoring in Mexico

A new report by UNCTAD shows that Mexico saw a 21% growth in FDI in 2023, amid a slight increase in global FDI flows.?

Figures by the United Nations Conference on Trade and Development (UNCTAD) show that Mexico was a bright spot for FDI attraction, with inflows growing by 21% in 2023.? This stands in stark contrast to the global trend of FDI flows which registered a meager growth of 3% in 2023.?

Figures by the United Nations Conference on Trade and Development (UNCTAD) show that Mexico was a bright spot for FDI attraction, with inflows growing by 21% in 2023.? This stands in stark contrast to the global trend of FDI flows which registered a meager growth of 3% in 2023.?

From a regional perspective, investments in Latin America remained flat at 0%, and Brazil, Latin America’s largest economy and the regional leader in FDI attraction, saw a 22% decrease in FDI inflows. That said, in terms of overall volume, FDI for Brazil’s large market still reached $61 billion last year, while Mexico’s annual inflow probably hovered above $40 billion.

IMCO’s recent analysis of FDI flows into Mexico underlines the unequal impact nearshoring is having across Mexican states. A key risk identified by the report is the potential for increasing economic development gaps.?

IMCO’s analysis shows that nearshoring factors led to a 47% increase in annual FDI nationally in sectors that are highly integrated to global supply chains (January-September 2023).?

At the subnational level, regional disparities repeat the already divergent economic development conditions: while Aguascalientes, Nuevo León and Mexico City observed high levels of year-on-year growth, states like Oaxaca and Veracruz have suffered from negative annual growth.

It is therefore essential to identify the key conditions and enabling factors that attract long-term investments to certain regions of the country. Policy and regulatory incentives could be leveraged to spur regional economic development and bridge geographical gaps.?

Figures released by Mexico 's Secretaría de Economía in December 2023 show that announced investments last year reached USD $106.4 billion.?

These announced investments are not yet included in the official FDI figures for 2023 and are expected to flow into the country within the next two to three years.?

Some relevant facts about announced investments in Mexico by foreign companies:

• Forty-nine percent of these investments are linked to the manufacturing sector.?
• Companies from the U.S., China, Denmark, Australia, and South Korea will bring 54% of announced FDI.
• $20.1 billion will be invested in energy projects ranging from oil production and natural gas transportation to clean energy generation.?
• States that were excluded from previous waves of FDI, such as Oaxaca, are expected to receive significant investment in the next few years, financing energy-related projects related to the Interoceanic Corridor.?