A report issued by the United Nations Conference on Trade and Development (UNCTAD), revealed that Mexico was the ninth country in the world that received the largest amount of foreign investment during 2020, which is an improvement compared to the fourteenth place obtained in the 2019 ranking).
This finding is significant because due to the Covid-19 pandemic, foreign direct investment (FDI) flows have fallen by 35 percent worldwide, from $1.5 to $1 trillion.
Despite the improvement presented in the overall ranking, the country was not immune to the adversities of the pandemic, with the outflows received by Mexico 14.7 percent lower than those observed in 2019, during which the country collected 34 billion and after A year the figure rose to $29 billion.
For Jesuswaldo Martinez, an economic researcher at the Belisario Dominguez Institute, Mexico’s entry into the top 10 is more due to the fact that other countries have experienced significant declines in their reception of foreign direct investment, and the United Nations (UN) is that Mexico has known better to contain the situation . from other countries.”
He explained that there are economies that recorded a significant decrease in the reception of foreign direct investment, “Foreign investment in Brazil decreased by about 60 percent, in the United States it decreased by 40 percent, and in China, the decline was 5 percent,” he said.
He was invited again
On the other hand, Jorge Molina Larondo, a specialist in public policy and international trade at Tec de Monterrey, explained that reading the UNCTAD report should be taken with caution, as only 22 percent of foreign investments registered with the Economics Secretariat were classified as new. While 55.4 percent of profits and another 22.6 percent were reinvested in intercompany accounts.
“During the pandemic, the federal government did not support the private sector, so foreign companies operating in Mexico faced scarce and expensive credit, and since their sales were very limited and scarce, they found the only alternative to resort to money from their own wallet and parent company abroad.”
In this way, the foreign investments received by Mexico during the pandemic year were used to maintain the operations of companies already installed in the country, Larondo added, but there was no announcement of new large projects.
However, as a point of support, the specialist added that the agreement between Mexico, the United States, and Canada (T-MEC) granted legal certainty and certainty, creating an environment of calm for companies to continue to trust the country.
Freshness at the door
Luis Gomez, professor at CETYS Graduate School of Business, noted that Mexico was attractive to receive foreign direct investment in 2020, which would be a good sign for the future, and noted that the Organization for Economic Co-operation and Development (OECD) placed Mexico among the top ten countries that It received the highest foreign direct investment during the year 2020.
“Although the Covid-19 epidemic has caused many negative effects on the global economy, the decline, high rates of inflation and even deflation, being part of these top ten is a catalyst for the country’s economic recovery, but it is a favorable ecosystem for investment and the rule of law,” Gomez pointed out.
He added that Mexico’s entry into the top ten is due to the economic crisis in light of a globalized system and large-scale financial estimates.
The countries that surpassed Mexico are the United States ($156 billion), China (149), Hong Kong (119), Singapore (91), India (64), Luxembourg (62), Germany (36) and Ireland (33). .
FDI trends in 2020 varied widely by region. Developing regions and economies in transition have been relatively more affected by the impact of the pandemic on investment in resource-intensive activities and consumption-intensive activities of global value chains.
Inconsistency in the fiscal space for the deployment of economic support measures has also given rise to regional differences.
FDI flows to Europe decreased by 80 percent, while FDI flows to North America fell less sharply (40 percent).
The decline in FDI inflows in developing regions has been uneven, with the decline being 45 percent in Latin America and the Caribbean and 16 percent in Africa.
By contrast, flows to Asia increased by 4 percent, and East Asia was the main recipient region, accounting for half of global FDI in 2020.
The United Nations Conference on Trade and Development (UNCTAD) estimated that this year’s forecast could be more encouraging, as foreign flows worldwide could rise between 10 and 15 percent. This FDI will remain 25 percent lower than the 2019 level.
“The outlook is highly uncertain and will depend, among other factors, on the pace of the economic recovery, the likelihood of pandemic setbacks, the potential impact of the recovery spending packages on foreign direct investment and political pressures,” the UN agency said.