MEXICO Trends and Developments Contributed by: Javier Domínguez, Santiago Carrillo, Gabriel Torres and Diego Rodríguez, Ritch Mueller
Attracting foreign investment In this scenario, local governments and the fed - eral government have sought to design strate - gies to attract as much foreign investment as possible, although in most cases there has been no effective co-ordination, resulting in delays and increased time and costs for investors and developers. The federal government’s main strategy has been to grant tax incentives, in order to encour - age foreign capital investment. Specifically, on 11 October 2023 the President issued a decree granting tax incentives to certain sectors. These incentives consist of (i) an immediate deduction for investments in new fixed assets used for export activities, and (ii) a deduction for addi - tional personnel training expenses. The first tax incentive benefits ten industries, including food, medical-pharmaceutical, electronic components (computers, software) and automotive, and is granted to companies involved in the produc - tion, processing or industrial manufacture of goods that are intended for export. The second tax incentive is subject to certain limitations. This strategy has been criticised by organisa - tions with expertise in public policy. For instance, according to the Public Policy Research Center of the Mexican Institute for Competitiveness ( Centro de Investigación en Política Pública del Instituto Mexicano para la Competitividad , IMCO), the tax burden is not one of the main concerns of companies seeking to relocate their production chains to Mexico. Although tax costs are an important issue to consider when decid - ing to invest in Mexico, IMCO states that the main concern of investors is the availability of modern industrial space with a sufficient supply of all necessary production supplies.
Analysts from financial institutions such as Intercam Banco and Banco BASE concur with IMCO’s analysis. In several interviews, experts from these institutions stated that for Mexico to benefit from nearshoring, the government must increase public investment to develop infrastruc - ture for public services such as water, electricity, and education, to create adequate conditions to attract foreign investors. In order to secure investment, the country must increase the sup - ply of available space and services at the same rate as the increasing demand. Infrastructure and other challenges As discussed above, in order to capitalise on the unique opportunity offered by nearshoring, both the Mexican government and the private sector must focus their efforts on addressing the deficiencies that potential investors identify as obstacles to locating their production chains in Mexico. As part of the survey mentioned above, BBVA Research and AMPIP asked industrial parks what they considered to be the main obstacles that could limit foreign investment. Of the parks surveyed, 91% reported problems with the supply of electricity, and 63% reported problems with water availability. Fitch Ratings’ analysis is in line with AMPIP’s finding that the main hurdle Mexico is facing concerning the nearshoring boom is the lack of access to electricity. Changes in legislation and public policy related to the electricity market over the current presidential term have limited the growth of the industry by restricting the entry of private capital. With regard to water, officials from the Nation - al Water Commission ( Comisión Nacional del Agua ) have stated that the imbalance in the dis - tribution of rainfall, combined with the lack of hydraulic plans at the state level that are prop -
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