The preliminary results of foreign direct investment (FDI) in 2020, published by the Ministry of Economy last week, were not entirely surprising, but they do show how one of the main engines of economic growth continued with a process of decline in its dynamics.
According to this source, the receipt of FDI in 2020 was of the order of 29 thousand 79 million dollars, which meant a drop of 14.7% compared to what was observed in 2019, when 34 billion dollars were exceeded.
FDI is made up of new investments, that is, those to start operations, capital contributions and transfer of shares to foreign investors; reinvestment of profits, starting from those that are not distributed and that increase capital resources; and accounts between companies, that is, funding through debt between companies of the same corporate.
The new investment component, which has the capacity to generate new jobs, multiplier effects and is a measure of the quality of FDI, went from 13 thousand 168 million dollars in 2019 to 6 thousand 408 million in 2020, a fall of more of 51% annually.
On the other hand, the reinvestment of profits went from about 18 billion dollars to 16 thousand 95 million, falling 10% at an annual rate, while the accounts between companies doubled, going from 2 thousand 941 million dollars to 6 thousand 575 millions. This corresponds only to strategies to overcome the effects of the crisis and finance their operations at the most critical moments.
From the perspective of Consultores Internacionales, SC, the main structural determinants of FDI have been gradually fading. The conditions for the development of new businesses and investments are no longer favorable, the lack of certainty about profitability and the possibility of survival in the medium and long term are decreasing.
In a context in which the different economies of the world will restart the competition to attract new capital, promoting and facilitating the development of productive projects, in Mexico foreign investment seems to have been dismissed as a carrier of economic development and job creation , the improvement of workers’ income, the creation of companies in the value chains, among other elements.
Although it is true that Mexico has the T-MEC and access to one of the largest markets in the world, currently there are no elements that offer confidence nor is work being done to promote the image of our country as a destination for capital. On the contrary, the fall of more than 51% in new investments is a consequence of the position that has been taken against investors and projects in sectors such as the manufacture of beverages, energy and their effects on the manufacturing industry.
2021 will be a year in which, considering the political, institutional and economic conditions, we will see a further decrease in the flow of new investments and even the relocation of different projects.
It is time to rethink the investment promotion strategy, unless there is a change in perception, attitude and messages towards foreign productive capital, we could expect FDI flows for amounts less than 27 billion dollars in 2021, once again, poor in quantity and quality, compared to the potential of the Mexican economy.
* President of Consultores Internacionales, SC