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What Does a New Foreign Investment Plan Mean for Mexico?

Mexican President Claudia Sheinbaum on Jan. 13 unveiled a new economic and investment strategy designed to curb Chinese imports into the country and promote domestic manufacturing. The plan includes increasing local supply chain capacities for industries that currently rely on Chinese imports, in addition to cutting red tape to increase foreign direct investment in Mexico. What will Sheinbaum’s plan mean for foreign investors’ outlook on Mexico? To what extent will it deter Chinese investment in Mexico, or promote investment from elsewhere? What strategy is Sheinbaum’s administration adopting in response to the new Trump administration in the United States?

Andrés Rozental, member of the Advisor board, president of Rozental & Asociados and former deputy foreign minister of Mexico: “The Sheinbaum administration has a clearly contradictory attitude toward growing Chinese trade and investment with Mexico. On the one hand, in speeches by the president herself, as well as by members of her cabinet, there have been many references to Mexico being a sovereign, independent country that has a policy of welcoming commerce from anywhere. On the other hand, measures have already been taken to reduce Chinese activity in Mexico, as well as to create obstacles for new investment or trade with China. Although it is true that Chinese trade and investment in Mexico have increased substantially over the past decade, the percentage it represents of Mexico’s total trade pales in comparison with Chinese imports into the United States, and represents a statistically very small part of the country’s total foreign trade and investment. Early in this administration, Economy Secretary Ebrard declared that Mexico would align itself ‘100 percent with the United States as regards China and its presence in Mexico.’ He has also been at the forefront of raids on ‘illegal’ Chinese markets in Mexico City and other parts of the country as a way of showing that the government does indeed act to curb Chinese activity. However, and in spite of this, there are examples of a growing Chinese presence in Mexico, especially in the automotive sector, where Chinese-made vehicles now account for more than 20 percent of total sales of new cars. In the northern states that border the United States, there are many small and medium-sized Chinese businesses that are an integral part of supply chains serving both the Mexican and the U.S. markets. In her recently released Plan México, President Sheinbaum has presented very ambitious goals to substitute imports with local suppliers. Given that Mexico fully embraced globalization when it joined the GATT, negotiated free trade agreements with the United States and Canada, as well as with dozens of other economies, I believe it is now close to impossible for the country to return to an import substitution model, such as we had in the 1970s and which turned out to be a dramatic failure.”

Mariana Zepeda, Latin America practice leader at FrontierView: “The ‘Plan México,’ presented ahead of Trump’s inauguration, is a gesture of cooperation from the Claudia Sheinbaum administration. It not only positions Mexico as an ally of the United States, but also sets up North America as a trading bloc with shared strategic interests. As the friction between the United States and China worsened in the past couple of years, China increased its presence in the Mexican market, with many companies using Mexico as a springboard to the U.S. export market, a trend that has left Washington unsettled. The Mexican government’s effort to replace Chinese imports with inputs produced within the trading bloc signals to the Trump administration that the trade relationship with the United States remains Mexico’s top economic priority, even at the cost of sacrificing a not-insignificant boost in Chinese FDI. It also suggests that the administration is willing to take a more proactive approach to incentivizing foreign investment into Mexico. While headlines would suggest that ‘nearshoring’ investment dramatically bolstered FDI into Mexico, data show a cloudier story. Regardless, excitement surrounding Mexico as a target for supply chain re-location efforts was contagious among the business community, even despite the former AMLO administration’s unwillingness to focus on selling Mexico as a competitive alternative to other markets. Sheinbaum’s effort to make Mexico an even more attractive investment destination could bear fruit; however, it comes at a time when investors are still reeling from the constitutional reforms driven by the Morena party, particularly the judiciary and autonomous institutes reforms. Although the move may appease Trump, Sheinbaum may come to find that for investors, the ‘Plan México’ is too little, too late.”

Tapen Sinha, professor of risk management at the Instituto Tecnológico Autónomo de México and professor at the University of Nottingham Business School: “U.S. goods and services trade with Mexico totaled $855.1 billion in 2022. Exports were $362 billion and imports were $493.1 billion. The United States’ goods and services trade deficit with Mexico was $131.1 billion in 2022. The deficit is around 30 percent. This trend continued well into 2024. Meanwhile, Mexico quietly overtook China in total trade with the United States in 2023. On Jan. 14, Mexican President Claudia Sheinbaum announced Plan México—a set of tax and financial incentives to encourage nearshoring. The plan is a range of ambitious goals for 2030. The first is to increase the national content in the global value chain of the automotive, space and electronic industries by 15 percent. Second, it aims to increase foreign direct investment to $100 billion per year by 2030. It will allow for an immediate deduction of new fixed assets of between 59 percent and 89 percent. In an attempt to curb cheap Chinese imports, Mexico imposed 35 percent import tariffs on the textile sector. There is no clear indication how Mexico will tackle the fiscal fallout of all of this in the short run. In the long run, if Mexico indeed manages to reduce imports from other regions to Canada, Mexico and the United States by 10 percent, it would raise Mexico’s GDP by more than 1.2 percent along with smaller boosts to the United States and Canada. Meanwhile, President Trump declared he would impose a 25 percent tariff on all imports from Mexico. But he made it continent on management of illegal migration and drug trafficking. Whether he would do so—and contravene the USMCA—remains to be seen.”

Arantza Alonso Berbotto, senior analyst for the Americas at Verisk Maplecroft: “Plan México faces implementation in an uncertain legislative context. Since September, when the new Congress took office, more than 60 changes to constitutional articles have been approved—not to mention pivotal constitutional reforms, chief among which is a move toward direct public elections for the judiciary. This has created substantial investor concern about the future stability and predictability of the rule of law—and has already created tensions within the USMCA. A fundamental restructuring of the way the state works is taking place under the ruling Morena party. Uncertainty around the business operating and legal environment is reflected in FDI data. Though the headline figure was impressive at $39 billion in 2024 (making Mexico the third largest OECD recipient after the United States and Brazil), new investments were low—at barely 6 percent of the total, against an OECD average of 23 percent. Despite President Claudia Sheinbaum’s claims to have delivered important security gains, public insecurity is still extremely high. Many industrial and/or transit cities key to Plan México, including in the Bajío and Northern regions, are among the most violent. This will continue to raise operational and financial risks for investors. The geopolitics of the strategy are clear, with Sheinbaum heavily emphasizing the importance and ‘uniqueness’ of the USMCA (due for review in 2026) and at pains to demonstrate to the new U.S. administration that Mexico is committed to clamping down on unfair trade practices emanating from China and elsewhere in Asia. This, however, must still convince Donald Trump, with the question of migrant deportations looming large.”

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