The “bottom-line” for Peter G. Hall, vice-president and chief economist of Export Development Canada, is that Mexico is a foreign direct investment “magnet,” and will remain as such for the forseeable future.
In his weekly analysis of global issues that affect Canadian Exporters, Hall commented on the factors that have contributed to Mexico’s stellar performance in attracting investment dollars from outside of its borders.
Hall points out that, although Mexico did not meet its GDP growth projections in 2013, it was eminently successful in attracting foreign direct investment totaling approximately USD $30 billion over the calendar year. The Export Development Canada economist cited a number of factors that contributed to achieving this near record performance. They included:
- A steady rise in wages over the last several years in China, causing a return of industry to the North American continent.
- Supply chain considerations that favor proximity to NAFTA region consumer markets
- A Mexican labor force that is increasingly more competitive in terms of availability, cost and range of skill sets
A fourth consideration that Peter G. Hall cites as being, perhaps, the most important consideration that will keep Mexico in the global vanguard of FDI recipients is its recent execution of an aggressive reform agenda. In his most recent weekly commentary, Hall pointed to reforms in the telecom and the financial sectors, as well as those dealing with labor, educational and structural fiscal issues as among those that are boosting the confidence of foreign capital as regards Mexico’s prospects for future economic growth and stability.
The Export Development Canada official pointed explicitly to the reform of the once closed Mexican oil and gas industry as being critical for Mexico’s development going forward.
According to Hall, reform measures related to energy production are “expected to generate fifteen billion dollars in new oil sector investment over the coming six years.” By 2025, oil production increase is expected to be by one million barrels daily. This expanded supply will eventually drive down the cost of power and power generation in Mexico, which will, in turn, create a positive ripple effect throughout the Mexican economy.
Read the primary source for this post at Export Development Canada.