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ProdensaJul 1, 2024 8:20:40 AM4 min read

Confidence and Opportunities: The Winning Recipe Driving FDI in Mexico

Confidence and Opportunities: The Winning Recipe Driving FDI in Mexico

Despite global economic challenges, Mexico is solidifying its position as a strategic destination for nearshoring and foreign direct investment (FDI). This growth is propelled by a robust manufacturing sector, a burgeoning skilled workforce, and the confidence of major foreign investors. 

Amidst global economic uncertainty, Mexico stands out as a beacon of stability and opportunity for multinational companies looking to reconfigure their supply chains and bring operations closer to target markets. 

Recent data from the Ministry of Economy reveals 127 public investment announcements by the private sector in the first five months of 2024, totaling an expected investment of $39.157 billion USD over the next two to three years. This influx promises significant boosts to economic growth and job creation. 


To put these figures in perspective, total FDI in 2023 amounted to $36 billion USD. Thus, investments announced in just the first five months of 2024 already exceed the previous year's total. These announcements are expected to generate 54,347 new direct jobs, a welcome relief amidst economic challenges in Mexico. 


Manufacturing Sector: The Driving Force 

The numbers speak volumes: the manufacturing sector in Mexico leads the FDI, attracting 56% of public investment announcements. Key industries include beverages (48%), auto parts (16%), iron and steel (12%), automobiles (9%), electronic components (2%), and others (12%), highlighting the diversity and strength of Mexico's manufacturing sector. 


The automotive industry deserves special mention, projecting to create 49% of total expected job generation with 26,673 new direct jobs. This aligns with the global nearshoring trend, where companies seek to optimize supply chains and leverage Mexico's competitive advantages such as skilled labor, strategic location, and trade agreements. 

Alfredo Coutiño, head of Latin America Economic Research at Moody's Analytics, acknowledges this trend: 

"The series of announcements from foreign companies about their plans to invest in Mexico confirm the reality of this nearshoring trend. The automotive sector is a key player in the expressions of interest to expand in Mexico by companies like Tesla, BMW, Ford, GM, as well as Asian manufacturers like BYD and KIA." 

This influx of investments not only boosts direct job creation but also triggers multiplier effects in the Mexican economy by strengthening local supply chains and fostering the development of related services and suppliers. 

Read more about the history of the manufacturing industry in Mexico in this blog made by Robin Conklen.


Geographical Diversification of FDI 

Beyond manufacturing, FDI in Mexico is diversifying geographically. In 2024, there is a noticeable shift in announced investments by state, reflecting broader distribution across the country. States like Querétaro and Estado de México lead as attractive destinations for foreign investors, surpassing traditionally favored states like Nuevo León, Coahuila, and Sinaloa. 


This geographic diversification indicates that foreign investors see attractive opportunities throughout Mexico, beyond traditional industrial centers. This trend could lead to more balanced economic development and the creation of new growth hubs nationwide. 

Do you know which are the main industrial corridors in Mexico that shape the North American manufacturing and industry sectors’ future? Find out here.


Confidence from Major Foreign Investors 

Notably, 87% of total investment announcements in early 2024 originate from 9 out of the top 10 countries investing in Mexico. This underscores private sector confidence in continuing to invest and expand in Mexico, despite global economic challenges. 

This confidence is bolstered by Mexico's robust economic fundamentals, open trade policies, and skilled workforce. Political stability and consistent economic policies have created a predictable business environment for foreign investors. 

Countries such as the United States, Germany, and Argentina lead as top investors in Mexico, highlighting the country's strategic importance as a trade partner and investment destination for both developed and emerging economies. 



The road ahead looks positive 

We can conclude that the latest data on foreign direct investment announcements in Mexico are a testament to the country's strength and attractiveness as a destination for nearshoring and FDI. 

"What we are seeing in Mexico is the convergence of three phenomena that is creating historic opportunities and challenges for manufacturers in North America. As part of the nearshoring effect, production lines located in Asia are coming closer to the North American market in order to meet customer demands, and to minimize operating costs or avoid import duties. The North American vehicle footprint is undergoing a transformation from ICE (internal combustion engine) to EV (electric vehicles), representing an enormous challenge for the region. This path, already defined by the U.S. government and endorsed by consumers, implies a huge transformation of the manufacturing capabilities of OEMs and their suppliers in the industry. Manufacturers in the United States are seeing a great challenge in staffing their operations in the era of flex time, flex space, gaming, and influencing." 

- Emilio Cadena, CEO of Grupo Prodensa 


Key takeaways: 

The manufacturing sector, especially the automotive industry, is leading the charge, driven by the global trend of restructuring supply chains and bringing operations closer to target markets. 

Furthermore, the geographic diversification of announced investments and the confidence demonstrated by major investing countries reinforce Mexico's position as a strategic partner for multinational companies seeking to optimize their operations and take advantage of the country's competitive advantages. 

As the global economic landscape continues to evolve, Mexico is positioning itself as a magnet for nearshoring and foreign investment, providing opportunities for economic growth, job creation, and strengthening its role as a key player in global supply chains. 

With its strong economic fundamentals, strategic location, and growing geographic diversification, Mexico is poised to capitalize on this wave of investments and consolidate itself as a leading destination for nearshoring and FDI in the coming years.