Mexico suffered a second year of dwindling manufacturing, with the US's trade policy taking its toll. However, Mexico remains an attractive location for US companies and their suppliers.

Manufacturing FDI into Mexico has experienced its second consecutive year-on-year decline across project numbers, capital investment and job creation, according to global greenfield investment monitor fDi Markets.

Mexico consistently ranks in the world’s top 10 principal recipients of FDI, and is regarded as the fourth most attractive destination for manufacturing FDI. However, recent data shows that capital investment into manufacturing operations in the country stagnated in 2017, at around $11.43bn, which represented a drop of almost 13% compared to 2016. The trend was similar in 2018, with a further decline of almost 12%.

In 2016, half of all Mexico-bound capital investment was focused on the manufacturing industry. However, this figure has been reduced to only 40.02% in 2018. Some of the main recipients of capital over the past three years included, the beverages, automotive components and automotive original equipment manufacturer sectors. While the automotive components sector received a boost of about $2.29bn in 2018, this progression was offset by a decline of 15% in project numbers.

By the end of 2018, the main investor countries in manufacturing operations in terms of project numbers and capital investment into Mexico were the US, Germany and Japan. Although US investment has dominated over the years, project numbers have fallen from 66 in 2013 to 43 in 2018.

While Mexico is regarded as a highly attractive destination for manufacturing FDI because of its proximity to the US and special relations under the North American Free Trade Agreement (NAFTA), it appears that US president Donald Trump’s aggressive trade policies and delays to NAFTA 2.0 are weighing heavy on inward investment. Nevertheless, companies such as US-based engine manufacturer Cummins are calling for suppliers from Brazil, India and China to bring more manufacturing operations to Mexico. The vice-president of Cummins Latin America revealed that although Canada and the US are looking to attract manufacturing FDI, Mexico remains the most viable option.

This article is sourced from fDi Magazine
fDi Magazine
Credit: Jonathan Wildsmith

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