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Cablegate: Total 2008 Fdi in Mexico Meets Predictions

VZCZCXRO8560
RR RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #0790 0781952
ZNR UUUUU ZZH
R 181952Z MAR 08
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 0969
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS MEXICO 000790

SIPDIS

SIPDIS, SENSITIVE

STATE FOR WHA/MEX AND EB/IFD/OIA
STATE PLEASE PASS TO USTR (EINSSENSTATE/MELLE)
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/GERI WORD
TREASURY FOR IA (ALICE FAIBISHENKO, ANNA JEWEL)

E.O. 12958: N/A
TAGS: EINV ECON PGOV MX
SUBJECT: TOTAL 2008 FDI IN MEXICO MEETS PREDICTIONS

REF: MEXICO 142

1. Summary: Bancomext, the Mexican export finance organization, and
the Secretariat of Economy have released total 2007 inward foreign
direct investment (FDI) flows. As predicted, total FDI was USD 23.2
Billion. First time direct investments continued to make up the
bulk of FDI inflows. The financial sector increased its share
investment while the manufacturing industry's share decreased. The
United States is still the primary investor but its overall share
decreased in favor of EU countries. End Summary

2007 Round Up
-------------

2. For the 2007 calendar year, FDI equaled USD 23.2 billion, an
increase of 22.7% over 2006 (USD 18.9 billion). Of this amount,
43.5% (USD 10.1 billion) went towards new investments, 17.7% (USD
4.1 billion) towards reinvestment, and 38.8% (USD 9 billion) towards
transfers between company accounts. New investments, 34.8% larger
than last year, accounted for the majority of the increase.
According to Gregorio Canales Ramirez, Director General for Foreign
Direct Investment at the Secretariat of Economy, this year's figures
are especially significant as they are not the result of large
acquisitions.

3. The manufacturing sector suffered last year likely due to the
U.S. deceleration and concerns about the IETU tax. The industry saw
growth of only 9% and its share of FDI inflows drop from 61.3% in
2006 to 49.7% in 2007. The financial services sector, conversely,
grew by 112% and accounted for 24.3% of inflows in 2007, compared to
its 15.4% share in 2006.

4. The U.S. was the source country for 47.3% of FDI inflows, only
the second time since NAFTA that the U.S. has accounted for less
than half of FDI to Mexico. The Netherlands accounted for 15.1%,
Spain for 9.6 percent and France for 7.2%. In total, European Union
(EU) countries accounted for 40% of FDI in 2007, compared to only
36% in 2006. Total EU investment increased by 25% over last year.

Changes Needed to Investment Law; NAFTA Good for FDI
--------------------------------------------- -------

5. Secretary of Economy Sojo used the press conference announcing
the 2007 figures to highlight the need for substantive changes to
the investment law. He said that in order to increase FDI in future
years, the legislature will need to amend the law to allow for
investment in fixed telephony, LP gas, energy, and education.

6. He also linked FDI increases to NAFTA. He said that, before
NAFTA, Mexico's yearly FDI inflow was only USD 3.7 billion. He
called on farmers' groups to meet with the government discuss ways
to increase their competitiveness now that agriculture markets are
open under NAFTA..

Conclusion
----------

7. Mexico's ability to increase FDI from non-U.S. sources will be
essential to its weathering a U.S. slowdown. The Calderon
Administration is quite aware of this and has increased its outreach
dramatically. ProMexico (the government's investment and export
promotion organization) in particular has sponsored shows on Mexican
investment opportunities in England, Spain, Italy, Brazil, China,
France, and Denmark. If Mexico is in fact able to maintain and/or
increase FDI growth from non-U.S. countries it will be better able
to north of the border.

GARZA

© Scoop Media

 
 
 
 
 
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