Tamaulipas reports record foreign investment in the first quarter

USMCA is crucial for value chains in Mexico
13 July, 2020

Tamaulipas reports record foreign investment in the first quarter

According to a report issued by the Ministry of Economy, Tamaulipas has received 5.63 billion dollars in foreign investment, with the manufacturing industry, oil and gas extraction having the largest share of influx from private companies, from October 2016 to the present.

Between January and March of this year, the inflow of Foreign Direct Investment (FDI) in Tamaulipas reached 467.3 million dollars, representing its third best quarter of foreign capital inflow in the last three years, with countries such as the United States and Australia standing out as the largest contributors.

Between July and August last year, actions taken by the government generated 695 million dollars, the highest amount for a period in the last five years, followed by the January-March 2018 fiscal year, when 497.2 million dollars were obtained. The first quarter of this year is ranked third, with 2017 as the benchmark.

US companies were the leaders in terms of volume (192.7 million dollars), while Australia (128.2 million dollars), Spain (95.7 million dollars) and China (almost 11 million dollars), contributed more as a result of the exploration work carried out by companies such as BHP, Repsol, Cnooc, before the start of the Covid-19 pandemic.

Growth of foreign investment throughout the country

The aforementioned figures were added to the total amount of FDI that Mexico received in the first quarter of the year, which amounted to 10.334 billion dollars, 1.7% more than the same period in the previous year.

The Ministry of Economy also reported that the result is based on a net income of 15.601 billion dollars and the outflow of 5.267 billion dollars. However, as previously mentioned, these figures still do not show the impacts of the coronavirus pandemic that are expected for the rest of the year worldwide.

In view of the foregoing, the government agency reported that a reduction of approximately one third in foreign capital is expected worldwide, as the outbreak and spread of Covid-19 will cause a considerable drop in FDI flows, resulting in a decrease of approximately 30% to 40% during 2020 and 2021, so it is expected that 5 thousand multinationals in the world will have a 30% decline in profits, with the greatest impact on energy and manufacturing, with losses of up to 208%, airlines with 116% and the automotive industry with 47%, according to the United Nations Conference on Trade and Development (UNCTAD).

Decline in New Foreign investments

2.272 billion dollars, or 22% of the total mentioned above was invested by foreigners in the country. Most of it was due to profit reinvestment for 7.864 billion dollars in accounts between companies.

The main activities that attracted investment were manufacturing (44.1%), financial and insurance services (25%), commerce (8.3%), power generation, water and gas (5.1%), mining (4.8%) and construction (4.4%).

The importance of the manufacturing industry in Mexico

The Manufacturing industry generates 16% of the country’s Gross Domestic Product (GDP) and 16% of total employment in Mexico.

According to Abelardo Mariña, researcher and academic at UAM Azcapotzalco, the two most relevant manufacturing sub-sectors are the automotive and electronics industries. In addition, manufacturing is responsible for 82% of the total value of exports in Mexico, which are closely linked to maquila manufacturing.

In response, Josefina Morales, a researcher at the UNAM’s Institute of Economic Research, explained that the maquila process, which began in the late 1960s, ranges from the production of microchips, the creation of clothing, to very complex assemblies such as automobile and airplane parts.

Moreover, Abelardo Mariña explained that the manufacturing sector has been hit several times during the pandemic. In March of this year, based on data from the Monthly Survey of the Manufacturing Industry by the National Institute of Statistics and Geography (Inegi), there was a 5% decline, which represents an accumulated decrease of 7% since September of last year.

Oradel and its importance for foreign investment

Since its foundation 20 years ago, Oradel Industrial Center has sought to attract international companies with the aim of establishing their operations in the country and thereby contributing to foreign investment.

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