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Mexico’s Economy Boosted by Foreign Direct Investment

19 July, 2013

Mexico’s foreign direct investment (FDI) soared an impressive 14 percent to reach its highest point in six years during the first quarter of 2013,according to the nation’s Economy Ministry,with nearly $5 billion pouring into Latin America’s second largest economy. And this trend is showing no signs of slowing down.

In fact,the New York Daily News reported that Mexico’s economy is expected to grow at an even faster pace in 2014,while the nation’s finance Minister announced this June that he expects Mexico to post second quarter growth this year of at least 3.5 percent. This increased growth is due in large part to the nation’s booming manufacturing sector,as well as to Mexico’s strong position in the face of potential future market volatility. In addition,future growth throughout 2014 and beyond will likely be boosted even further by bank lending reform,which will only help to increase the value of Mexico real estate.

Also of note,Mexico’s gross domestic product (GDP) grew during the first quarter of this year and the nation reported a budget surplus of more than $3.3 billion,while the free-market direction of current President Enrique Peña Nieto’s administration has also helped to boost the nation’s FDI. Mexico’s gross domestic product is projected to grow by at least 3.4 percent this year and inflation will reportedly also hit 3.4 percent,dropping down from 4.1 percent in 2012.

“The new government’s structural reforms in the areas of telecommunications,energy and budgeting will improve long-term growth prospects,” writes the New York Daily News. “The country’s strong reserves and moderate inflation outlook provide officials with a solid foundation for taking action if necessary.”

The growing amount of FDI in Mexico is further proof of investor confidence worldwide in the direction Mexico is taking. Most of the recent investment dollars came from the United States and went into the nation’s booming manufacturing sector,but the peso was also boosted in recent months following talk of even greater economic reforms. In addition,Gross reserves in Mexico rose by $4.2 billion to reach a high of $171.3 billion,prompting respected Goldman Sachs economist Alberto Ramos to state that the nation’s “external accounts are at this juncture resilient enough to deal with potentially large negative external shocks.”