What makes Mexico an exciting place to invest?

◊ Mexico is part of the largest economic block in the world in economic terms, NAFTA, a market worth over US $19 trillion.

◊ According to UNCTAD’s  2014 World Investment Report, Mexico is world’s 10th largest recipient of foreign direct investment (FDI).

◊ The country’s official language is Spanish, which is the second-most spoken language in the world (400 million native speakers in 21 countries).

◊ Mexico has close proximity to the United States, the world’s biggest outbound investor and top exporter of manufacturing jobs.

◊ It ranks first for exports amongst Latin American and Caribbean countries.

◊ Alongside its Latin American counterparts Chile and Peru, Mexico will be part of the Trans-Pacific Partnership (TPP) that will open new markets and trade prospects between 12 economies.

◊  In 2014, Mexico attracted over 360 greenfield investment projects,  totalling US$33 billion.

◊ To attract FDI, the Mexican government has been conducting significant infrastructure development, in the the form of industrial centers, airports, etc.

Manufacturing

Mexico is attractive for both high-end manufactured goods, made in northern Mexico, and low-end manufactured goods, made in southern Mexico. High-end sectors include automotive and aerospace (see below), electronics, and plastics. Electronic exports increased 75% to US $74.9 billion between 2002-2012. The plastics industry has averaged 13.5% export growth since 2010. For low-end goods, exports of textiles and clothing have grown 9% and 3.5% respectively since 2013. Overall, Mexico’s manufacturing sector will add between US $20-60 billion by 2018. There are a number of reasons why Mexico is so attractive for manufacturing. Mexico is closely linked to the huge U.S. market and its 10 free-trade agreements help Mexican products stay cost-competitive. Due to rising wages in China, average manufacturing labor costs in Mexico are now 20% lower than in China. Additionally, electricity and industrial natural gas prices are lower in Mexico than in other manufacturing-oriented countries.

Automotive & Autospace

Since the 2000s, auto manufacturers in Mexico have begun producing more sophisticated car parts. 7 out of the 10 largest car manufacturers now have plants in Mexico and US$25 billion in new auto investment has been pledged to the country in the past few years. In 2014 alone, car production in Mexico rose by 10%. Mexico has built up a huge supplier base for the auto industry, plus over 100,000 annual engineering and technology graduates have the necessary skills for automaking and auto R&D. On a similar path, Mexico’s aerospace sector has logged an annual growth rate of 20% since 2004. Mexican aerospace plants already make a variety of parts for big-name aero companies like Bombardier, Boeing, and Honeywell. By 2013, 30,000 Mexicans were employed in aerospace factories in 16 Mexican states, with Querétaro, Baja California, and Chihuahua where the majority of aerospace production occurs. Low wages, skilled professionals, good geography, and free-trade agreements all make Mexico competitive for auto and aero.

Pharmaceutical technology

In 2015, the top emerging economies (China, Russia, India, Brazil, Mexico, Russia, Indonesia, and Turkey) will account for more than one-fifth of global pharmaceutical sales. Mexico has the 2nd-largest pharmaceutical market in Latin America, after Brazil. Biotechnology products will become more important as Mexicans age, with nearly half the Mexican population to be over age 45 in 20 years. Research and technology, which is crucial to the biotech sector, is not yet prevalent among pharmaceutical companies operating in Mexico, creating huge opportunities for foreign companies and investors. In line with this, many Mexican states are incentivizing research and develop as they create Technology Parks.  The country is also just entering the scene of clinical research trials (a key part in developing medicines), for which it is ideal due to its huge and diverse population. With improved regulation and government support (especially of patents), pharmaceutical biotechnology will see growth in Mexico.

Finance

Mexico has one of Latin America’s most open and liberalized financial sectors. Still, the government has reforms aimed at increasing competition, strengthening controls of financial authorities, and creating incentives to provide cheaper loans and access to credit, among others. Providing easier access to finance is one of the main opportunities, with only 25 million out of 120 million Mexicans having a bank account at the start of 2013. In addition, many local Mexican companies are looking for financing to expand in Mexico and internationally, but lack reasonably prices financing. Thus, there is high demand for loans and credit yet few options available, with an estimated US$60 million credit gap for Mexican businesses. With 97% of Mexican adults having a mobile phone, there is also a huge opportunity for mobile-based financial systems and products, which allow for quicker access and greater safety. Mutual funds have been expanding rapidly in Mexico and the country’s stock market, with a US$700 billion value in 2010, is growing.