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 State, Provincial and International Reviews 
Tuesday, January 07 2020
2020: A Turn Around for the Mexican Economy?

Over the last few decades, Mexico has grown to become recognized globally as a powerhouse for diverse industries, including high-labor content sectors, and also high-value industries like aerospace and automotive, including manufacturing, R&D, and business services activities.

Various global competitiveness studies conducted in recent years have shown that Mexico ranked favorably − whether based on CEO surveys or operational cost analyses. Project investment is evidence of these findings − such as GE’s Engineering Center (where airplane turbines are designed), or Germany’s Continental automotive R&D Center in Queretaro, or any of the brand name automotive, aerospace, appliance, and other sector manufacturers who have arrived (along with their many suppliers).

Economic incentives are another decision factor that are highly contingent on industry, location, project size, and method of engagement with government officials. Companies often wonder if they are getting the best proposal by working with the development agencies directly, and the answer is generally no.

In Mexico, there are two types of incentives: those that are Statutory and that all development agencies should be aware of, and those that are Discretionary and are sometimes not even well-understood by senior and local authorities that change with political elections. To understand these opportunities, investors must be aware of who has the authority to offer and provide each type of incentive for specific project types.

As of September 2019, Mexico's current administration presented the 2020 Economic Program. Similar to the 2019 budget, the 2020 plan is consistent with AMLO’s campaign promise of fiscal discipline. The new proposal calls for a primary surplus equivalent to 0.7 percent of GDP, which is lower compared to the estimated primary surplus of 1.0 percent of GDP in 2019. As for 2020, Mexico's economy is estimated to increase 1.1 percent.

The United States Signs a Stronger Trade Agreement with Mexico and Canada

"This new deal will be the most modern, up-to-date, and balanced trade agreement in the history of our country, with the most advanced protections for workers ever developed." -- President Donald J. Trump

A REBALANCING TRADE RELATIONSHIP: President Donald J. Trump kept his promise to deliver a modern and rebalanced trade deal to replace NAFTA:

  • In Argentina, the United States is joining Canada and Mexico to sign a new trade agreement that will better serve the interests of American workers and businesses.
    • This follows the President’s announcement in October 2019 that a deal had been reached.
  • The new United States–Mexico–Canada Agreement (USMCA) will replace the outdated, failed North American Free Trade Agreement (NAFTA).

REFORMING TRADE FOR THE 21ST CENTURY: USMCA modernizes the United State's trade relationship with Canada and Mexico to reflect the realities of the 21st century.

  • The new agreement includes a modernized chapter that provides stronger and more comprehensive intellectual property protections than any prior United States trade agreement.
    • These protections are vital to promoting innovation and economic growth.
  • USMCA includes the strongest digital trade and financial services provisions of any United States trade agreement.
    • New rules ensure that data can be transferred cross-border and that limits on where data can be stored are minimized.
  • USMCA will cut red tape at the border, streamline trade, and reduce regulatory uncertainty.
  • The agreement includes a currency chapter that will help reinforce transparency and stability.

Amidst low oil prices and depressed federal revenues, the government is likely to continue attracting foreign direct investment that has driven so much capital investment, employment expansion, and income growth across Mexico. In 2020 and beyond, location decision making for new investments will require even more care as economic incentives may be reduced and other policy changes will impact Mexico’s investment attraction regime.

Posted by: AT 02:31 pm   |  Permalink   |  Email
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