Foreign Direct Investment Outlook 2021

2020 has proved to be a very difficult year for almost all economies of the world. The global economic activities will halt and decrease for about 4.5% this year 1 , and there are consequences for corporation´s Foreign Direct Investment (FDI) as well! FDI in 2020 is expected to decrease in 40% with respect to 2019 2 . It is also expected to have a moderate recovery in 2021. Investment normally acts cautiously after an economic contraction, and the bounce back is tame by a loom forecast of potential recovery.

Enough of bad news! We had been hearing them for the past 8 months. Is there any good news? The short answer is, yes! There is an undergoing economic change in the global arena, but specially in the river of technology/innovation communicating markets and consumers. The emerging way to do business like e-commerce, distant working, sharing economy, and distant payment systems, has create new avenues of creating wealth.

Moreover, the increasing regionalization among the global economic blocks; Asia, North America & Europe, is creating new value chains and relocation of production site per region, or nearshoring. This is expected to attract FDI to counties with a potential advantage to supply either one of these markets. Mexico is a preferred site for it, but the work is not done! Mexico need to facilitate further the incoming FDI to its territory and foster a business environment for newcomers.

FDI stats for the first 3 quarters of 2020 report a fall of 9%, which is moderated in comparison with global data. The most important element for this year FDI inflow is the one corresponding to profit reinvestment, that signalized confidence in the country and give Mexico a stronghold in the North American market. Export for the 3 rd . quarter are almost at pre-pandemic level following USA important market recovery. So, the value chain is working and we, adapting to the new environment and creating or recovering momentum.

Therefore, it is expected FDI will have recover its pre-pandemic level by next year. But Mexico cannot wait and see, it needs to act aggressively to make it happen, with aggressive policies to welcome new investors.

 

1 World Economic Outlook Report, FMI Oct. 2020

2 World Investment Trends and Prospects 2020

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