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Mexico FDI Hits $5.82 Billion in 1st Quarter; Fitch Ratings Affirms "Outlook Stable"

26 May, 2014

The old saying “the numbers don’t lie” is an excellent analogy for what has been happening in Mexico’s economy,with preliminary figures showing at least a 17 percent rise in the total amount of foreign direct investment (FDI) during the first quarter this year,compared with the same period in 2013. 

“This is the highest preliminary figure released for a first quarter since 2007 and exceeds the average of the preliminary figures for the first quarters of the past six previous years,” Mexico’s Economy Secretary told the Global Post.

The investment money came from more than 1,670 companies based around the world,with upwards of 60 percent involving reinvestment of profits,31 percent coming from new investments and about 8 percent resulting from transfers between corporate entities. Manufacturing attracted the most FDI at 43 percent of the total,followed by financial services at 25 percent,construction at 11 percent,mass media at 10 percent and mining at 8 percent,according to the secretary.

In 2013,Mexico’s total FDI hit a record $35.2 billion,rising close to 180 percent from the previous year. The nation’s first quarter figures for 2014 were based on filings by foreign investors with Mexico’s National Foreign Investment Registry and could be revised to include additional funds in the near future. The U.S. contributed the largest amount to this year’s figures so far,hitting around 47 percent of the total,followed by Spain at 34 percent,the Netherlands at 7 percent and Japan at 4 percent,with the rest coming in smaller increments from 53 different countries. 

In other positive news regarding Mexico’s economy,Reuters reports that Fitch Ratings says the outlook is “stable,” after reviewing Banco Santander (SAN Mexico) and its subsidiaries. Santander Mexico is the third largest bank in the Mexican banking system according to its total assets and deposits as of March 2014,and Fitch cited the financial institution’s ability to prevent the abrupt increase of operating costs,maintaining solid and efficient service,adequate profitability,an increasing customer deposit base and a stable funding and liquidity profile as the main reasons for its findings. 

Also of note,Bloomberg reports that the Mexican peso gained on steady rate bets as analysts predict that policy makers will delay raising borrowing costs to farther boost demand for the nation’s debt in the coming months. The nation’s currency increased in late May to 12.8562 per dollar,which is the strongest level on a closing basis since December of last year. In addition,Mexico’s exports grew more than 4 percent this year in February and March,compared to the same period in 2013,while manufacturing output increased by 6.8 percent – the largest jump since February 2012.

“What we see ahead for the next three quarters are factors that strengthen the view that Mexico is entering a faster growth cycle,” shared Deputy Finance Minister Fernando Aportela at a news conference in Mexico City. “Economists expect growth to accelerate in each quarter this year to about 4 percent in the final three months.” 

Finally,the unemployment rate in Mexico is hovering at 4.84 percent and is substantially lower than the U.S. (which is at 6.3 percent as of April 2014). According to TradingEconomics.com,more than 95 percent of the nation’s economically active population is employed,with the labor force hitting close to 60 percent of the total. Previously,some analysts predicted that Mexico’s unemployment rate would have already risen to more than 5 percent by this point in time,which means the actual number has increased less than expected.

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