Foreign direct investment in Mexico plummets 26%

Mexico entered the ranking of the 10 countries that receive the most Foreign Direct Investment (FDI), going from 14th place in 2019 to 9th in 2020, revealed the United Nations Conference on Development (Unctad). Mexico's advance in the list occurred even though in 2020, according to data from the organization, the FDI that came to the country fell 14.7 percent on an annual basis by going from 34 billion dollars to 29 billion.

However, the United Nations agency pointed out that Mexico's fall occurred in a context in which world flows plummeted 35 percent as a consequence of the effects of the Covid-19 pandemic. "Blockages around the world in response to the covid-19 pandemic slowed existing investment projects, and the prospects of a recession led multinational companies to reevaluate new projects," Unctad explained in its report.

The 10 countries with the highest FDI reception during 2020 are the United States with 156 billion dollars, China with 149 billion; Hong Kong with 119 billion; Singapore with 91 billion; India with 64 billion; Luxembourg with 62 billion; Germany with 36 billion; Ireland with 33 billion; Mexico 29 billion and Sweden with 26 billion dollars.

Looking ahead, according to Unctad, global FDI flows are expected to bottom out in 2021 and regain some lost ground with a 10 to 15 percent increase. "This would still leave FDI 25 percent below the 2019 level. Current forecasts show a further increase in 2022 which, at the upper limit of the projections, returns FDI to the 2019 level," the agency noted.

It stressed that the outlook is highly uncertain and will depend on, among other factors, the pace of economic recovery and the possibility of pandemic relapses, the potential impact of recovery spending packages on FDI, and political pressures. "The relatively modest recovery in global FDI projected for 2021 reflects lingering uncertainty about access to vaccines, the emergence of virus mutations, and the reopening of economic sectors," it said.

The agency said that increased spending on both fixed assets and intangibles will not translate directly into a rapid rebound in FDI, as confirmed by the stark contrast between the optimistic forecasts for capital spending and greenfield investments, which are still depressed.