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Mexico's Economy Races Ahead As Foreign Direct Investment Increases 135%

20 September, 2015

Mexico’s foreign direct investment (FDI) numbers for the second quarter of 2015 rose to an impressive $5.42 billion,which is up a whopping 135 percent compared to the same period last year,Reuters reported. The nation’s economic ministry released other preliminary figures last week showing that Mexico’s FDI also rose a staggering 41.3 percent to hit $13.75 billion during the first six months of this year,compared to the same period in 2013.

According to the report,the United States accounted for approximately 50 percent of the total FDI collected during the first half of the year,followed by Spain,Japan,the Netherlands and France,respectively,while the remaining 21.8 percent came from a wide array of 63 different countries. Mexico’s strong manufacturing sector raked in more than 41.4 percent of the FDI money during the first half of the year,followed by 19.1 percent going to media,14.4 percent to financial services,10.8 percent to retailing and 8.8 percent to construction.

The LA Times reported that Mexico’s cumulative FDI since December 2012 is up by approximately 38 percent compared to the same period of the previous administration,with a current total of $82.79 billion. In addition,the economic ministry reported that Mexico’s current FDI figures for 2015 are merely preliminary and predicted they would be “adjusted upward in the succeeding quarters.”

Mexico’s economy has also steadily outpaced the competition,attracting 366 greenfield investment projects totaling around $33 billion,compared to Brazil’s 322 projects and $18 billion in 2014,Financial Times reported.

“While Mexico is making hay with China’s declining cost competitiveness in manufacturing,Brazil is slipping behind. Mexico,meanwhile,is in a potion not only to protect but to improve its manufacturing status. ”

Mexico’s state of the art automotive facilities are the nation’s top FDI sector,where investment has doubled over the past five years to reach $12 billion in 2014. This is particularly impressive because global FDI numbers are generally falling or remaining static. 

Mexico’s close proximity to the U.S. and tight trade links thanks to the North American Free Trade Agreement have helped secure its spot among Latin American economies in recent years,giving it a cost advantage over rivals like Brazil. In addition,Mexico is benefitting from wage inflation in China and labor costs are lower in Mexico than they are in Brazil. 

Finally,Mexico’s overall economy advanced at a moderate pace during the second quarter,with gains in the services sector and a 2.2 percent expansion of gross domestic product leading the way,the Wall Street Journal reported.

“The central bank expects an improvement in the second half of the year as a result of a recovery in manufacturing,supported by growth in exports thanks to a pickup in U.S. industrial output and the weaker peso against the U.S. dollar.”