Exploring Investment Trends: A Deep Dive into Mexico's Economic Landscape

Amidst the economic landscape, investment stands out as the primary driver of growth, capital accumulation, and consequently, as the main source of quality formal employment. At one point, it was suggested that sustained economic growth above 4% required an investment equivalent to 25% of the GDP.

However, historically, such a result has only been observed twice: in 1981, when it represented 26.1%, and in 2012, when it reached 25.03%. The most recent data, from 2023, places investment at 24.9% of the GDP, following an upturn in the first part of the year. Despite the historic achievement of foreign direct investment in 2023, totaling just over 36 billion dollars, it only represented 2.1% of the GDP, its lowest percentage in the past eleven years.

According to the Business Coordinating Council (CCE), productive investment, regardless of its origin, whether private or public, domestic or foreign, is essential for establishing a panorama of sustained long-term growth. However, this requires a business environment that is attractive and secure enough for investors and entrepreneurs.

"We have already pointed out that this should be based on an environment of clear rules, a solid rule of law, where there is minimal corruption and impunity, efficient regulation, and above all, sufficient levels of security," experts from the CCE asserted.

The World Justice Project (WJP), an independent and multidisciplinary organization working to promote the rule of law worldwide, defines it as "a system of laws, institutions, norms, and community commitment, in which four universal principles are met: accountability, fair laws, open government, and accessible and impartial justice."

According to the most recent World Justice Project's Rule of Law Index, in 2023, Mexico ranked 116th out of 142 countries, signifying a loss of 24 places during the six-year term.

However, global events such as the trade war between the United States and China in 2016, the U.S. policy "Make America Great Again," which through tax incentives encouraged the return of companies located in Asia, as well as the effects of the Covid-19 pandemic, led countries to consider the issue of relocation or "nearshoring" as the best alternative to address the problems caused by the aforementioned events.

Reducing transportation costs, limiting supply chain disruptions, lower production costs, but most importantly, proximity to the world's largest market (the United States), positioned Mexico as a privileged country and one of the prime targets for investment.

"Undoubtedly, the current situation has put our country in an invaluable position, one that is rarely accessed without greater efforts than simply being there.

The benefits of nearshoring alone have significantly offset the perception of the negative effects of the aforementioned factors. This is exceptional since companies considering relocation may be weighing whether simply setting up in the country would be much more profitable than facing the costs of insecurity or violence, which are not minor issues," experts noted.

Possibly, the perception generated solely by the benefits offered by the relocation process has been sufficient for Mexico to return to the ranking of the top 25 most attractive countries for investment in 2023, according to the foreign direct investment confidence index compiled by consulting firm Kearney.

While this marks a favorable environment for the country, it could also be counterproductive, as this perception could relax the actions of the authorities or delay, in a context of electoral contest and an upcoming new government, the consolidation of a business environment in line with the needs of a solid rule of law and lower corruption, insecurity, and impunity.