Mexican States Miss Out on Nearshoring Boom Amidst Declining Foreign Investment

Mexico’s states are missing out on a golden opportunity to benefit from nearshoring, as foreign investment stagnates. In the first three quarters of 2024, the 32 states attracted $35.737 billion in Foreign Direct Investment (FDI).

However, only 5.8% of this was new capital, amounting to $2.060 billion. This represents the lowest level of new foreign investment in a decade, a 45.6% drop from the previous year.

The lack of new investments signals a missed chance to capitalize on nearshoring, driven by global supply chain disruptions and market uncertainties. Instead, 86% of the FDI came from reinvested profits, indicating a lack of fresh capital inflows.

States like Baja California Sur and Quintana Roo, known for tourism, attracted the most new foreign capital, accounting for 55% of the total. This suggests that nearshoring isn’t taking root as expected.

Other states like Chihuahua, Jalisco, Nuevo León, Yucatán, and Nayarit also saw investments, but much of it went into tourism or unrelated sectors.

Nuevo León, a potential hub for business relocations, saw its largest investment in wholesale trade for trucks and automotive parts, not nearshoring.

Mexico’s Foreign Investment Challenges

Jalisco’s foreign capital focused on beverages, farming, and tourism, with minimal activity in manufacturing. Chihuahua stands out with significant FDI in auto parts and vehicle manufacturing, but overall, the trend is concerning.

States like Tamaulipas, Colima, Puebla, Aguascalientes, and Mexico City reported negative balances in new foreign investments, indicating capital flight.

Durango, Morelos, and Tlaxcala saw no new foreign investments, while eleven other states attracted less than $10 million each. This reflects a lack of interest from foreign investors, compounded by political changes in the U.S. and Mexico.

Mexico’s states must address internal challenges to seize nearshoring opportunities. The story matters because it highlights the need for better governance, infrastructure, and political stability to attract foreign capital and drive economic growth.

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