Mexico Breaking away on U.S. trade dependency


Only 9 states where the U.S. is not the country with the largest share in Direct Foreign Investment

Only in 9 entities EU is not the country with the largest share in Direct Foreign Investment

The uncertainty caused by the renegotiation of the North American Free Trade Agreement did not cause a reduction in US investment in Mexico; on the contrary, it increased it in the first quarter of 2018 with respect to the same period of previous years (2013-2017).

The increase in the number of Mexican states in which US capital prevails as the main contributor to total investments reflects a growing degree of commercial dependence. In previous years there were more states with diversification of commercial partners; the highest figure was for 2014 with 18 entities in which there was majority participation from other countries and the lowest in 2015, with only eight.

For the first quarter of 2018 only in nine entities of the country (Campeche, Durango Oaxaca, Puebla, Sinaloa, Sonora, Tabasco, Veracruz and Zacatecas) the total capture of Foreign Direct Investment (FDI) did not have as main country of origin the United States .

“Despite the fact that the renegotiation of the North American Free Trade Agreement (NAFTA) has created uncertainty due to the possibility that the United States may abandon the commercial union, there has been a process of recapturing US investments, because, because of the proximity to Mexico, the transportation costs are lower, “said Kristobal Meléndez Aguilar, an analyst at the Center for Economic and Budgetary Research (CIEP).

For Campeche and Tabasco, the oil sector is of the utmost importance, its commercial diversification is also due to the fact that many other countries are betting on oil extraction and especially the commercialization of hydrocarbons. On the other hand, the economic situation faced by Campeche in recent years has caused many US capitals to withdraw, Meléndez Aguilar said.

FDI in Spain, in second place

According to data from the Ministry of Economy , during the first three months of 2018, Spain had the highest participation in FDI in five states: in Veracruz, it received 89.3 million; in Sonora, 53.5 million; in Oaxaca, 48.1 million; in Durango, 35.9 million, and in Campeche, 8.10 million dollars from the European country.

France was the country with the greatest presence in the poblano territory with 40.07% of the total FDI; in Tabasco, Germany ranked first with 85.38% of the total and in Sinaloa and Zacatecas, the largest investments came from Canada, with 54.60 and 85.43% respectively.

In 2017, the commercial diversification was greater: there were 11 entities that had as main investor a country other than the United States; Canada was present in Colima, Guerrero, Hidalgo, Sinaloa and Zacatecas; in Aguascalientes and Morelos highlighted Japan, in Tlaxcala, Oaxaca and Puebla was Spain and in the State of Mexico, Australia.

For 2016, the highest percentage of investments did not come from the United States in 16 territories;Countries such as Canada (Colima, Durango, Guerrero, Hidalgo, Sinaloa and Tlaxcala), Spain (Morelos, Oaxaca and Quintana Roo), Germany (Puebla and San Luis Potosí), Malaysia (Campeche), Japan (Aguascalientes), Israel, had greater participation. (Jalisco) and, Brazil (Veracruz) and Italy (Zacatecas).

The only year that registered a lower number of states with major investments not coming from the United States was 2015; Spain was the most important contributor in Colima, Morelos and Oaxaca; Germany in Querétaro, Canada in Sinaloa, Brazil in Veracruz and Belgium in Zacatecas.

In 2014, 18 diversified entities were reported; Canada ranked first in investments over the total in Colima, Durango, Guerrero, Nayarit, Sinaloa and Zacatecas; Spain in Chiapas, Mexico City, Hidalgo and Oaxaca; Japan in Aguascalientes, Morelos, Guanajuato and San Luis Potosí, The Netherlands in Michoacán, Germany in Puebla, Brazil in Veracruz and Belgium in Yucatán.

In 2013, Belgium was the country from which greater investments were made in 10 of the 17 territories in which the main partner was not the United States (State of Mexico, Guanajuato, Guerrero, Hidalgo, Jalisco, Morelos, Oaxaca, San Luis Potosí, Tlaxcala and Yucatán) and the Canadian territory stood out in Durango, Sinaloa and Zacatecas; Japan in Aguascalientes; Philippines in Colima; United Kingdom in Michoacán and Germany in Puebla.

“It seems to me that the dependence on the United States has grown in recent years due to the importance of the commercial relationship our country has with that country, particularly in the manufacturing sector where more than 80% of these export goods have as a destination to our northern neighbor. Given the above, in order to maintain competitiveness in international production chains, large amounts of resources must be allocated through direct foreign investment, a scenario that has been in force in our country in recent years, “said Héctor Magaña Rodríguez, director of the Center for Research in Economics and Business (CIEN) of the Tecnológico de Monterrey.

Greater dependence

In the first months of the current year, ten states entered more than half of the total FDI from the United States, reflecting an increase in the existing dependence.

San Luis Potosí topped the list with investments from the neighboring country that reached 130.3 million dollars, which represented 91.8% of the total FDI in the entity; followed by Baja California Sur, 96.30 million (71.7%); Aguascalientes, 53.9 million (70.0%); Jalisco, 254.1 million (67.2%), Baja California, 285.6 million (66.7%); Guanajuato, 379.3 million (65.4%); Tlaxcala, 45.5 million (57.0%); Yucatán, 27.4 million (54.7%);Chihuahua, 213.4 million (54.0%) and Coahuila, 257.2 million (52.9 percent).

Magaña Rodríguez said that “San Luis Potosí is one of the entities that bases its economic activity on processing activities, particularly export manufactures. In recent months, total manufacturing exports have exhibited favorable growth rates, with SLP being one of the most benefited entities. The foregoing is a reflection of the investments from the United States that the entity has received not only in recent months but also in previous periods. Low production costs and geographic location have been some factors that have contributed successfully in SLP to attract US investment. ”

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