MexECON Blog

Foreign Investment Falls in 2009

The Mexican government has reported that foreign direct investment (FDI) into Mexico fell by 50.7% in 2009, reaching its lowest level in ten years.  In U.S. dollar terms, FDI fell to $11.4 billion, versus $23.2 billion in 2008.  The report indicates that more than half of the FDI into Mexico in 2009 came from the United States and Puerto Rico, followed by the Netherlands and Canada.

Comment:  The steep drop in foreign investment helps explain the painful 6.5% contraction in the Mexican economy in 2009.  Another key factor was the sharp decline in remittances from Mexicans living in the United States.  Finally, weak U.S. demand led to a big drop in Mexican exports last year.  This illustrates how dependent Mexico has become on the strength of U.S. economic activity.  On the positive side, that suggests that the budding economic recovery in the United States is likely to continue having an out-sized positive impact on Mexico in 2010.

Patrick Fearon, CFA
Vice President, Fund Management

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